Cooperative farming, Contract farming and Corporate farming

1. In view of the declining average size of land holdings in India which has made agriculture non-viable for a majority of farmers, should contract farming and land leasing be promoted in agriculture ? Critically evaluate the pros and cons.(2015)

Co-operative Farming

Co-operative farming refers to a system in which each member farmer remains the owner of his
land individually, but farming is done jointly. Profit is distributed among the member farmers in the ratio of land owned by them. Wages are distributed among the member farmers according to the number of days they worked.

In other words, cooperative farming refers to pooling of land and practicing joint agriculture.

Advantages of Co-operative farming

1. It resolves the problem of land fragmentation
2. Allocation of tasks among farmers makes tasks easier.
3. Agricultural input can be purchased in bulk at cheaper rates
4. Similarly, agricultural output can be transported to markets in bulk at cheaper rates
5. Agricultural machinery such as tractors can be shared leading to lower cost of cultivation.

Co-operative farming in India:

Many national leaders agreed that co-operativization would lead to major improvement in Indian agriculture and would particularly benefit the poor. It was also one of the institutional reforms.
However, no consensus particularly among the peasantry was made in this question. Further it was made clear that cooperativization would be done through persuasion, no force will be used as was done in Russia & China.

The first five-year plan recommended that small & medium farms should be encouraged and assisted to form cooperatives & farmer societies.

The early planners had hoped that the village Panchayats activated by motivated party workers and helped by the trained workers of CDP (Community Development Program) would help implement rural development projects and bring institutional changes in Indian agriculture.
Further there were high expectations from the institutional changes like cooperatives that they would help in bringing changes to increase production.

The second plan said that it wanted to take essential steps for the development of cooperative farming so that over a period of ten years or so, a large portion of agricultural lands are cultivated on cooperative lands.

In the meantime news came from China that co-operatives had led to dramatic increase in agricultural production.

Indian sent two delegations to China to understand and study the cooperative organization of China. Both these delegations recommended a bold program of increasing cooperative farming in India. Nehru started putting pressure on the states to follow the Chinese example.

The congress in one of its resolutions stated that the organization of the village should be based on village Panchayats and village co-operatives. Both of them to be given adequate powers & resources to discharge the functions allotted to them.

A wave of opposition followed this recommendation. The Chinese repression in Tibet in 1959 and Chinese attack on India in 1962 made it difficult for the Indian government to follow anything which had its source in China.

Therefore, the idea of farming cooperatives was discarded and congress tried to set up service co-operatives. The cooperative farms could be set up voluntarily. The congress decided to set up training centers for it workers so that they could help in organizing Service cooperatives

Two types of farming cooperatives were observed

1.Bogus Co-operatives

These were formed to evade land reforms & eat up the excess incentives offered by the state. These cooperatives were formed by influential families who took a number of agricultural labourers or ex tenants as bogus members. Forming a cooperative helped the influential families to evade the ceiling laws & the tenancy laws. The lands were tilled by the bogus members who were engaged as wage labourers or tenants. Moreover, by following cooperative farming, these bogus cooperatives could take cheap credit from the bank. Also these cooperatives would get priority in acquiring inputs like fertilizers, improved seeds etc.

2.State sponsored co-operative farms

These were in the type of pilot projects where poor and uncultivated land was made available to the landless harijans, displaced persons etc.

The poor quality of land, lack of proper irrigation facilities and the fact that these farms were run like government sponsored projects made them unsuccessful experiments.

Service cooperatives are a type of \\\”consumer cooperative\\\” which help to fill a need in the community. They allow consumers the opportunity to supply their own needs, gain bargaining power, and share earnings. They are organized to give members more control over the services that are offered.

Limitations of service co-operatives
They not only reflected the unequal structure of the Indian countryside but also tried to re-enforce it. Typically, the leadership of the cooperatives i.e. the president, the secretary consisted of the leading family of the village which not only owned a great deal of land but also controlled trade and indulged in money lending.
These rich families would use all the scarce agricultural inputs for themselves. There was exclusion of the landless. Instead of promoting people’s participation, a co-operative soon became an over staffed government department with officials, clerks etc. and replicated at the higher level. This large bureaucracy was unsympathetic towards principles of co-operative movement & was influenced by local vested interests.

The co-operative credit societies failed to recover their loans and there were many NPAs. The defaulters were not only the poor farmers but also the well to do rich farmers who didn’t pay their dues intentionally. Populist measures like writing off rural debts put a heavy burden on the nation and also eroded the viability of rural credit institutions.

Positives of co-operatives

1. They provided cheap credit. Credit was provided to weaker sections as well.
2. They not only helped in bringing improved seeds, fertilizers etc. to the peasants but also guided them in using these inputs.
3. They also helped the farmers to market their produce.
4. In fact the co-operatives provided a necessary condition for the success of the green revolution.

Size of agricultural holding (as in 2010-11)
The average size of land holding in India is very small. Around 67% of operational holdings are marginal (<1 hectare) holdings. Marginal and small (<2 hectare) holdings constitute 84.9% of total agricultural holdings and 44.3% of cultivable area.

On the other hand, large (>10 hectare) holdings constitute 0.7% of the total agricultural holdings and 10.9% of cultivable area.

Critical Evaluation of cooperative farming in India

To promote cooperative farming, the government has offered a number of incentives such as financial assistance, technical assistance, supply of input etc. However, the progress of cooperative farming has been extremely slow. Only 0.38% of cultivable land is operated under

Challenges of Co-operative farming

Cooperative farming has been unsuccessful in India due to various reasons such as lack of professional management of farms, lack of trust among members etc.

The motivation behind the formation of cooperative societies in the farming sector has not been genuine. Most cooperatives are formed not on the basis of spirit of cooperation but to avoid Government laws and to gain benefits from the government.

Contract farming

Contract farming can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.
Typically, the farmer agrees to provide agreed quantities of a specific agricultural product. These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser. In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.

Advantages of Contract farming

Contract farming is looking towards the benefits both for the farm-producers as well as to the agro-processing firms. 

Producer/farmer

• Makes small scale farming competitive – small farmers can access technology, credit, marketing channels and information while lowering transaction costs
• Assured market for their produce at their doorsteps, reducing marketing and transaction costs
• It reduces the risk of production, price and marketing costs.
• Contract farming can open up new markets which would otherwise be unavailable to small farmers.
• It also ensures higher production of better quality, financial support in cash and /or kind and technical guidance to the farmers.
• In case of agri-processing level, it ensures consistent supply of agricultural produce with quality, at right time and lesser cost.

Agri-based firms

• Optimally utilize their installed capacity, infrastructure and manpower, and respond to food safety and quality concerns of the consumers.
• Make direct private investment in agricultural activities.
• The price fixation is done by the negotiation between the producers and firms.
• The farmers enter into contract production with an assured price under term and conditions.

Challenges and Disadvantages of Contract farming

• Contract farming arrangements are often criticized for being biased in favor of firms or large farmers, while exploiting the poor bargaining power of small farmers.
• Problems faced by growers like undue quality cut on produce by firms, delayed deliveries at the factory, delayed payments, low price and pest attack on the contract crop which raised the cost of production.
• Contracting agreements are often verbal or informal in nature, and even written contracts often do not provide the legal protection in India that may be observed in other countries . Lack of enforceability of contractual provisions can result in breach of contracts by either party.
• Single Buyer – Multiple Sellers (Monopsony) .
• Adverse gender effects – Women have less access to contract farming than men.

Corporate farming

Corporate farming is the practice of large-scale agriculture on farms owned or greatly influenced by large companies. This includes corporate ownership of farms and the sale of agricultural products.

Advantages of Corporate farming

advantages

Challenges and Disadvantages of Corporate farming

Family farms maintain traditions including environmental stewardship and taking longer views than companies seeking profits. Family farmers may have greater knowledge about soil and crop types, terrains, weather and other features specific to particular local areas of land can be passed from parent to child over generations, which would be harder for corporate managers to grasp