From the States

Growing concern

Print edition : July 26, 2013

PUNJAB

Green turns red

By Ajoy Ashirwad Mahaprashasta in Ludhiana & Jalandhar

A CASUAL visit to the farms of FieldFresh Foods, a joint venture between Bharti Enterprises and the U.S.-based Del Monte Pacific, near Ludhiana in Punjab makes you believe that all is well with agriculture in India. Spread over 300 acres (120 hectares) along the banks of the Sutlej, it has state-of-the-art greenhouses, glass houses and net houses where a diverse range of cash crops—from baby corn and lemon grass to herbs like thyme and chillies—is produced.

The farms, originally owned by Punjab Agricultural University, Ludhiana, were given to FieldFresh Foods in 2004 on a 90-year lease at Rs.300 an acre a year at a time when the market rates were around Rs.35,000 an acre. The then Punjab government doled out the land to the company to set up a research and development project of agriculture and encourage contract farming in the region.

FieldFresh Foods claims to have partnered with over 4,000 farmers across Punjab, Maharashtra and Andhra Pradesh to grow baby corn and other vegetables which are exported to the United Kingdom and other European countries. In Punjab, nearly 300 farmers work for the company. It provides seeds to farmers and claims to recommend the latest agricultural practices to them. “We give them a fixed amount for the product, which eliminates market risk. We practise sustainable agriculture, besides ensuring the usage of all the by-products of the crop. Contract farming not only promotes environmental safety but also empowers the farmer through a fair and transparent procurement system and knowledge sharing,” said Sanjeev Nigam, head of North operations at FieldFresh Foods.

In the past 10 years, there has been a substantial rise in contract farming in Punjab. With the help of the State government, companies like A.M. Todd, Pepsi, Chambal Agritech, Mahindra & Mahindra, Unilever, Escorts, United Breweries, DCM Shriram, Tata Chemicals, Monsanto, and Cargill have entered Punjab’s agrarian market. Withdrawal of state agencies from the market, at the levels of both provision and procurement, aided their expansion.

Contract farming is made to sound like a fairy tale where it is a win-win situation for both farmers and the agro-business company. The vision behind it was twofold. Firstly, it would help Punjab break away from the monoculture of paddy-wheat rotation that was proving to be economically and environmentally taxing. Secondly, it would form direct linkages between the farmer and the market through agro-business corporate houses, thereby eliminating middlemen and guaranteeing the farmer an assured income.

But the reality is different. “Around five years back, Pepsi came looking for farmers who would sow basmati rice instead of the paddy we grow. They offered Rs.950 a quintal. The company officials said they would support us in times of recession too. Many farmers from our village went ahead with the contract. However, the seeds they offered were priced higher than our seeds. They charged us Rs.200 an acre for the inspection they would do in the beginning. There was hardly any inspection. Our input cost almost doubled. At the end of the cropping season, they did not buy most of the yield as the demand for basmati had gone down. Many farmers were told that the benchmarks had not been met,” said Kulwant Singh Sandhu, a farmer of Rurka Kalan village near Phillaur town.

Said Jagjit Singh, a farmer in Laadowal village near Ludhiana: “Basmati yields are low despite the high input cost. We eventually earned less profit. Some of us made losses too. One company got us into contract farming saying it would give us Rs.1,000 a quintal, but it gave us only Rs.800 citing low quality of the crop. We could not do anything as there is no minimum support price [MSP] for basmati rice. We had to sell it to them.”

Harjinder Singh, a farmer from Jalandhar, and others in his village grew tomatoes for a company. “We earned a lot in the first two years. But the company left our village. This happened when we started demanding better prices as the market price of tomatoes had increased,” he said.

One problem for the farmers was that they did not have a written contract. Even when there was a written contract, the clauses favoured the company in every aspect. And even if the company violated the contract norms, there was nothing an individual farmer could do.

Farmers in Punjab reaped huge profits at the peak of the Green Revolution in the 1960s and 1970s because of mechanised farming. However, in the late 1980s, the same agricultural machines became a liability for them because of rising input costs, falling farm income, and environmental problems.

The S.S. Johl Committee was the response to the rising discontent in the primarily agrarian State. It was set up in 1986 to fix the problems of paddy-wheat monoculture and the resultant soil degradation, waterlogging, declining water table, and so on. The committee recommended diversification of crops as the solution to these problems. In 2002, the committee again recommended that one million hectares under wheat and paddy rotation be replaced with other crops that consume less water and are ecologically sustainable.

The Punjab government used the Johl Committee report to introduce structural changes in the agrarian sector and envisaged contract farming as a solution. Thus, agribusiness companies were given land at cheap prices, leaving the individual farmer vulnerable as he could rent land only at a higher price.

Contract farming attracted farmers in the initial few years as it earned them better profits. The companies were ready to spend more to monopolise the market. However, as the companies got a foothold in the market, farmers became vulnerable to market pressures.

The government also tweaked the technical benchmarks to favour agribusiness companies. For example, the criteria for rejection of crops are primarily based on the level of damage and the moisture content. Ten years ago, the government did not procure the crop if it was more than 8 per cent damaged and more than 22 per cent moisture-laden. The benchmark has now been lowered to 3 per cent and 17 per cent respectively.

Also, there is no independent regulatory body to oversee agribusiness in the State. The Punjab Agro Foodgrains Corporation (PAFC) is the nodal agency to facilitate contract faming, but it has no powers to penalise a company in case it is at fault.

“Contract farming is the first step towards corporatisation of farming. This could prove disastrous for small and marginal farmers,” said Sukhpal Singh, an agricultural economist in Punjab Agricultural University. “Punjab has seen heavy de-peasantisation in the last two decades. It is the only State where farm sizes have increased. This has happened because small and marginal farmers are either renting out their lands or selling them off to big farmers because of increasing costs and insecurities in farming. Big farmers are also not getting a level playing field as agro companies are getting tax holidays and other benefits from the State government. ”

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