Crisp business

Published : Jul 10, 2013 12:30 IST

Kalpesh Mali with the LR potato variety, which is in demand from chip and frozen food companies.

Kalpesh Mali with the LR potato variety, which is in demand from chip and frozen food companies.

IN northern Gujarat, the potato crop holds a favoured position. Although farmers here have always grown potato along with groundnut and jowar (pulse) in rotation, the tuber has become a money-spinner because of the great demand from domestic and multinational companies that make chips and frozen potato products. Weather and soil conditions here ensure high yield and the quality they require.

These food majors have been buying up the bulk of the production, leading to a massive acreage in Banaskantha district going under potato cultivation. Gujarat ranks fourth in the country in potato production (5.64 per cent), after Uttar Pradesh (34.60 per cent), West Bengal (22.83 per cent), and Bihar (14.85 per cent). Banaskantha accounts for the bulk of the production in Gujarat. According to the Banaskantha District Potato Growers’ Association, close to 35,000 hectares are under potato cultivation.

“Almost 80 per cent of the area near Ambaji and Deesa is under contract farming for potatoes. This year we had a bumper crop of almost two crore packets [each packet equals 50 kilograms]. But there are many types of contract farming so a lot depends on what the farmer has opted for,” said Kalpesh Mali, a farmer and owner of GS Cold Storages in Deesa. “Nonetheless, we can say it has been successful in the area.”

The flip side is that small farmers, which is the case in most contract farming situations, do not benefit as well as they should, say agriculture experts. On visiting farms under potato cultivation in Deesa, Frontline found that it was good for most farmers, big and small, when the yield of the Lady Rosetta (LR) variety—required for chips and frozen food products—was good. If the yield was poor and the companies rejected the crop, it hit the small farmers badly. Medium and large farmers are able to sustain themselves as they cultivate the Pukhraj variety of potato, too, which is used for domestic consumption.

“The advantage of contract farming is that inputs, such as seeds and fertilizers that constitute a large chunk of the farmer’s production costs are given to him. Additionally, farmers benefit from the fixed price of the wafer variety of potato. It is usually higher than that of the domestic consumption variety,” said Mali.

“Unfortunately, the risks are also high. Sometimes we bring the entire crop to the cold storage, paying huge transportation costs, and they tell us to take it back because it does not meet their requirements. This can affect small farmers very badly,” said Mali. And the standards are exacting. The potato gets rejected if it does not measure 45mm or thereabouts or if the sugar content is too high. “They even install deep frying machines at the storage facilities to check if the potato meets the taste requirement,” said Ramesh Choudhary, a small farmer in Palanpur near Deesa. “On two acres of my land I grow LR and on the remaining one acre I grow Pukhraj. Last year, they said the size was not right and I was left with hundreds of kilos of LR, which I couldn’t sell in the open market,” said Choudhary. “Most companies are not interested if you have land less than two acres. They say it is not profitable for them,” he said.

A major issue with contract farming is the actual contract. Farmers say it is in English, which they do not understand. Contracts are loosely defined in three ways: simple procurement; inputs that may be just seeds or a total package that includes seeds, fertilizers, pesticides, storage protection chemicals; and the final off-take.

“Most of us small farmers just sign simple procurement contracts. They are not interested in giving us production materials because we are too small,” said Dinesh Mali, who owns about four acres in Deesa. Cold storage owners and farmers say that since this area is proving to be a success in contract farming, they need more encouraging measures, like procurement centres in villages and contracts in the local language.

Gujarat is a relatively new entrant into contract farming, say agriculture experts. But the State has been quick to cash in on the benefits of contract farming. A few years ago, under the amended APMC Act (2003), it introduced contract farming, allowing the direct purchase of some crops, and gave licences liberally to those wanting to set up private mandi s (wholesale markets). It also gives subsidies to build cold storages and to install drip irrigation facilities, which are essential for potato cultivation. Among the reasons why contract farming has worked in Deesa is micro-irrigation. McCain Foods, for instance, has made it mandatory for farmers to use drip irrigation, for which the government gives them a subsidy.

Additionally, the Gujarat State Agriculture Board has put together a set of regulations to protect both the farmer and the buyer. This includes arbitration procedures.

Several companies have begun to source raw materials directly from the farmer in an effort to build an end-to-end supply chain. Textile companies, for instance, have been attempting to introduce contract farming. Cotton, however, still needs to be purchased from procurement centres and it is bound by the Minimum Support Price (MSP) mechanism. This makes the end-to-end goal difficult to achieve.

The reason why potato works is that there is no MSP, and it can be sold in the open market. Moreover, the quality of potatoes coming from Deesa is what the big companies require.

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