Consensual contract farming law could transform farmers' life: CII

Interview with chairman, CII Committee on Agriculture

B Thiagarajan, joint managing director at Blue Star and chairman of the Confederation of Indian Industry's national committee on state-level coordination in agriculture, extolls the benefit to farmers and the rural economy from contract farming. Edited excerpts of talk with Kunal Bose:

Do you see in the 2017-18 Union Budget a promise of a sustainable four per cent or more annual growth rate for farm production?

For the first time, a finance minister has made an attempt to identify all the areas requiring government policy intervention for the farm sector to be put on a high growth trajectory. In framing these proposals, Arun Jaitley had two clear objectives. First, creating the ideal conditions for doubling of farmers' income in a given time frame. Second, to realise this objective, it is imperative to empower farmers not only to get more crop from a given land unit but meet post-harvest challenges. How effectively these are met will have a decisive impact on farmer income.

Of the Budget proposals, which ones will have a far-reaching impact on the sector?

We need to ensure that even in a bad monsoon year, agricultural production doesn't suffer the way it did in 2014-16. Food price inflation, which hits the common man in particular, is best avoided. In this context, doubling the corpus of long-term irrigation under the National Bank for Agriculture and Rural Development to Rs 40,000 crore and the proposal to create a dedicated micro irrigation fund, also under Nabard, will be seen as an attempt to fortify the sector when it has to contend with insufficient rain.

Whatever steps are taken to boost farm production will become meaningful if farmers manage to get good market prices even in times of bountiful supply, especially immediately on harvesting. Major expansion of the electronic National Agricultural Market (e-NAM), with cleaning, grading and packaging facilities thrown in, will prove highly rewarding for farmers. But, agriculture is a state subject and states will have to come on board when the Centre proposes any reform, such as denotifying fruits and vegetables from the ambit of Agricultural Produce Market Committees (APMCs).

What about contract farming, for which a draft model law is to be written by the Centre for states to consider?

The large investments from within and outside the country expected in agro-processing units, close to where fruits and vegetables are produced, on enactment of the law will prove transformational. The benefits to growers and the rural economy from contract farming are immediately identifiable.

First, growers stand to benefit from farm extension programmes of agro-processors, who as a regulation would insist on supply of fruits and vegetables of uniformly high quality. Second, lifting of their entire production by processing units at fair and remunerative prices will be a step to doubling their income.

Third, since the factories will be next to clusters of farms, wastages, now between 35 and 40 per cent, will be very largely eliminated, benefiting all. Fourth, contract farming will usher the best agri practices from different parts of the world, from Israel to the US. This will free growers from middlemen and moneylenders.

You are saying contract farming will be a precursor to land consolidation and modern agricultural practices. Will that encourage the new generation to take to farming instead of migrating to cities?

Contract farming promises a new deal to agriculturists. It will invest farming with dignity and guarantee an income to farmers, that will strengthen their bonding with the vocation. What is more, rural women, instead of being employed as farm labourers, will under the promised new dispensation find engagement in the more rewarding but less physically exacting jobs of sorting and grading of fruits and vegetables, adding value to the produce.

Farmers are not readily receptive of reforms, specially of the far-reaching kind. More, states remain suspicious of the Centre encroaching into their space?

Implementation of some of the proposed reforms will be a huge challenge. The existing trust deficit between millions of growers on one side and politicians, bureaucrats and corporates on the other has to be bridged. Farmers will need to be sensitised about the good to befall them from the reforms. Once the contract farming law is in place, the government will be advised to select some villages where alliances between farmers and agro-processors are to be forged. Successes there will make these the model for the rest of the country.

Some believe India has capacity to make a significant contribution to global food security.

If there are doubts on this score, it is because we are a regular importer of large quantities of pulses, and our cereal productivity doesn't stand in favourable comparison with the best in the world. I believe if the proposed reforms are pursued vigorously, improvement in crop productivity will ensure long-term food security for the country and generate enough surplus in a number of agri products for export. In fact, it is time Indian agro-based companies started buying large tracts in Africa and South America for cultivation.