CONTRACT FARMING IN PUNJAB An Analysis of Problems, Challenges and Opportunities

Private sector participation in agriculture is envisaged through promotion of contract farming and land leasing arrangements, which will accelerate the technology transfer process and bring more cash inflows to the cash strapped farm sector. In this paper, an effort has been made to analyze the working of contract farming in Punjab as practised by a private industrial unit, which is engaged in the agro processing. This paper also tries to find answers to many questions related to contract farming on the basis of survey of farmers contracting with private agro-industry. As there remain many unanswered questions about the rationale, performance and benefits of contract farming, as a way out from the present mess Punjab agriculture finds itself in, our concerns in this paper are the issues at the micro level rather than assessing the performance of contract farming at macro level. Contract farming provides many opportunities as well as challenges to the farmers. This is the most transient and speculative form of contract farming and it runs a high risk of default from both sides. Contract farming lends stability to the farmers income and minimizes the inter and intra year variations. On the basis of present survey, it can be concluded that adoption of contract farming is more prevalent among medium size farmers. Big farmers due to high capacity to undertake risks find open market more lucrative than the contract farming. Its adoption is also more prevalent among more educated farmers. No doubt, contract farming give farmer an assured income but there is feeling of exploitation among the farmers due to varying quality norms adopted by the company. The farmers also act dishonestly some times which leads to failure of contracts or dropping of such farmers by the firm. Though the problems faced by contracting farmers are numerous still the promotion of contract farming for other perishable commodities is recommended. In order to