Karnataka

Tillers’ tale

Print edition : July 26, 2013

Gangappa, an agent for a gherkin-processing company, at a farm in a village in Chickballapur district.

A PROGRESS report issued by the then Bharatiya Janata Party (BJP) government before the elections earlier this year in Karnataka listed the implementation of an Integrated Agribusiness Development Policy (IADP), formulated in 2011, as one of its significant achievements. ’The IADP provides for contract farming and envisages “‘structured and pragmatic development of agri-infrastructure through PPPs (public-private partnerships)”.’ It also recommends exemptions from stamp duties and entry taxes and concessional registration charges to large and mega agro-based industries. The BJP government ’held a Global Agribusiness and Food Processing Summit in December 2011 and two Global Investors Meets in 2010 and 2012 where mega agriculture-based industries were welcomed.

The IADP also endorses the changes made to the Karnataka State Agricultural Produce Marketing Committee (APMC) Act of 1966 so that private companies can establish agricultural markets. According to the original Act, only the State government had the right to establish marketing boards for various crops. The Act was amended during the Congress-Janata Dal (Secular) coalition, which was in power between 2004 and 2007. The impetus for this came from the model Act provided by the Central government.

According to official sources, there are 146 APMCs and 342 sub-market yards to trade in notified agricultural commodities. –

A report published in Business Standard in February 2011 says that private players like Metro Cash and Carry had acquired APMC licences to trade in all 112 notified commodities. This had led to protests by traders in Karnataka.

The State’s latest ’step towards corporatisation of agriculture is the proposal to amend the Karnataka Land Reforms Act (KLRA) of 1961. In the amendment Bill (that has come close to being introduced in the Assembly several times in the past two years), the definition of “‘agriculture”’ has been extended to include agro-based industries, agro-processing industries, post-harvest operations and agri-infrastructure. The Bill also plans to allow “agro-based industries and agri-infrastructure entities to hold private agricultural land on long-term lease bases for agri-business activities subject to certain conditions”.

The Bill was slated to be tabled in June 2013 during the inaugural session of the new Assembly but was later withdrawn owing to pressure from farmers’ groups. But it is clear that there was pressure on the BJP government in the past, as is the case with the Congress government now, to amend the KLRA. Any changes in the KLRA will lead to an increase in contract farming as corporates can lease huge tracts of land from farmers. ’G.C. Byareddy, general secretary of the farmers’ group Karnataka Pranta Raitha Sangha, ’said: “Amendments to the APMC Act, the establishment of private agricultural markets, increase in contract farming, amendments to land reforms that will gradually take away land from the tiller, and finally the move to allow foreign direct investment [FDI] in retail will affect farmers, and particularly the small and marginal landholders among them.” Incidentally, Chief Minister Siddaramaiah has toed the United Progressive Alliance line by endorsing FDI in multi-brand retail in Karnataka.

Around 1 per cent of farmers in the State are involved in some form of contract farming. According to an article by S.M. Jaamdar titled “‘Contract Farming in Karnataka: Its Implications for Policy”’ (in ‘ Contract Farming and Tenancy Reforms: Entangled Without Tether’ edited by R.S. Deshpande), sugarcane was the earliest crop to be grown under contract farming. All sugar factories, be they cooperatives, or in the government, private or joint sector, are assigned a certain geographical area from where they can source sugarcane. This arrangement has been in place for several decades.

Private companies like Mahyco, Cargill, Indo-American Hybrid Seeds and Namdhari Seeds have also contracts with farmers for seed production. In the past decade, Karnataka has set up agri-export zones for crops like coffee, spices, fresh fruits, flowers, cashew, vegetables and gherkins to encourage their export. According to data provided by Jaamdar, Namdhari Fresh had 1,500 farmers involved in contract farming in 2007.

Gherkin has been grown in Karnataka under contract farming since the 1990s. According to the Indian Gherkin Exporters’ Association (IGEA), between 50,000 and 60,000 acres and approximately 100,000 farmers are involved in gherkin cultivation across 15 districts of the State. Since its local consumption is minuscule, almost all the produce is exported. The State government has set up a special Agricultural Export Zone to encourage gherkin export. The value of gherkin exports from India was Rs.850 crore in 2012-13, with around 70 per cent coming from Karnataka. According to a study done by S. Erappa of the Institute for Social and Economic Change, there were 25 companies involved in the business in 2006.

Dr Chandramouli M.R, vice-president (external affairs and agri-strategy) of Global Green and president of ’IGEA, says a pre-sowing price is fixed and a written contract is drawn up with the farmer. All input costs such as seeds, fertilizer, pesticides, farm accessories, technical supervision and transport are taken care of by the company and the farmer has to provide land, labour and water. “It is a win-win situation for both the company and the farmer,” he said.

But field agents in Bagepalli, a town 110 km from Bangalore, paint a different picture. Dr B. Srinivas was a field agent for 15 years in Bangalore-based Sterling Horticulture and Research Limited, which processed gherkins. “There are two gherkin growing seasons of three months each in a year and you can start harvesting it within a month of sowing. The companies are very particular about the size and grade of the gherkin [there are five grades on the basis of which payments are made] so if there is adequate water through the season, the crop is disease–free, and the farmer works diligently according to our guidance to get the best grade of gherkins, he will be able to pay off the input costs, which works out to around Rs.20,000 to Rs.25,000 an acre, and make a substantial profit. But almost 20 per cent of the farmers fail to pay us even the input costs when the crop fails or if the quality is not maintained, and they are classified as ‘red farmers’. Our job then is to recover money from them.”

“The payment is made on the basis of a formula. If the value of the output for an acre is Rs.25,000 and the input provided by us is Rs.20,000, we pay the farmer 75 per cent of [the profit] Rs.5,000, which is Rs.3,750. We need to keep the remainder in case we face problems with the farmer in future.”

Srinivas also pointed out how a few companies had gone bankrupt in the past and abandoned farmers midway.

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