Retail push to reverse farm income slide

Punjab farmers' incomes are expected to get a big push with the arrival of the corporate sector in retail.

The main factor in this is the demand created by the corporate houses for fresh fruits and vegetables, which will not only inflate farm income but will also help to contain the declining fertility of the soil and the water table in Punjab as the crops other than wheat and rice would become more profitable for the cultivators.

ITC has already joined hands with the farmers in the Malerkotla belt of Punjab. With the help of the State Bank of Patiala, the company was able to sign a tripartite agreement with the farmers for growing vegetables.

Agricultural income of the farmers in Punjab had been declining in the past due to rising input cost and divided land holdings.

The uncertainity over the availability of market for perishables also abstained the farmers from diversifying.

Now the scenario has been changing. Players like Subhiksha have started purchasing directly from the farmers. A senior official in Subhiksha told Business Standard that they gave a premium on grading to the farmers. "As there are less intermediaries between us and the farmers they get higher returns on their produce," he added.

Reliance has also decided to buy directly from the farmers. According to a company official, direct contact with the farmers for the purchase of fresh vegetables and fruits would be done once the company rolls out its operations in the state. The company has decided to launch its retail model in Punjab after the assembly elections.

Meanwhile 70 farmers in the belt of Sangrur, Hoshiarpur, Fatehgarh Sahib and Ropar have resorted to net-house cultivation to grow high-value or off-season crops to sell to the retail chains. With the technical assistance from the Punjab farmers' commission and financial support from the State Bank of India, the farmers can fetch about Rs 40,000 to Rs 50,000 of additional income from one kanal.

The Centurian Bank of Punjab Agri Head Pratap Singh told Business Standard that the bank had entered into a tripartite agreement with Chambal Fertilizers to finance 200 farmers in the Nawashahar and Jagraon belt for growing potato. They plan to replicate the same with the bigger players and are negotiating with some.

The banks in the region are keen to tie-up with the corporate houses to fund the farmers as lending through tripartite agreement is more cost-effective.

Most of the corporate officials told Business Standard that the role of financial institutions would be indispensable in the long run once they achieve the scale. It was too early to decide which bank would they zero in on to pursue their plans in Punjab.