MUMBAI:
Punjab chief minister Amarinder Singh calls it the return of the native.
He is not talking about sardarjis returning to India, but about basmati
cultivation that is returning to Punjab after decades. Basmati, which
had almost vanished from Punjab due to unremunerative prices, is now
grown abundantly in the state, thanks mostly to contract farming.
Several
corporates including Hindustan Lever (HLL), the Vijay Mallya controlled
UB group, PepsiCo and Escorts are increasingly becoming involved in
the contract farming of agri-products to ensure better quality and
minimise cost. Even players like Ahmedabad-based textile major Arvind
Mills are in the process of identifying locations to start a contract
farming project to grow cotton.
"Punjab
is not an exception. Across the country, corporates are forging alliances
with state governments for contract farming. Take for instance HLL's
joint venture project with the MP government to grow wheat. The project
was started three years ago to cultivate wheat in 250 acres. The area
has now been increased to almost 15,000 acres."
"It
was just a pilot project and became successful. More and more corporates
are forging alliances with state governments for contract farming
projects," says Brahmanand Hegde, chief manager, ICICI Bank.
ICICI
Bank has funded the Madhya Pradesh project. The bank has provided
Rs 180 crore for contract farming projects in ‘00-2003. It is in the
process of signing up projects in various states.
It
is the aggressive policies of some state governments that seems to
be doing the trick. States like Punjab and UP are amending the rules
to promote contract farming in a big way. The UP government has recently
amended the Agriculture Produce Marketing
Committees'
(APMC) rule what said that the entire farm produce has to be kept
with mandis.
Because
of this amendment, corporates can now directly procure goods from
farmers. Punjab has also amended a similar rule. These measures have
resulted in more projects. The Punjab government has signed agreements
for at least five projects this year taking the total area under cultivation
to 3,00,000 acres.
These
include a project to cultivate basmati rice with LT Overseas and barley
with the UB group. PepsiCo is also expanding the scope of its basmati
rice project in the state.
"Our
intention is to transform agri-business in Punjab by diversifying
into new crops. Fortunately, corporates are showing lot of interest,"
says Amarinder Singh. While most of the projects in Punjab are
at the initial stages, the UB group has already harvested 1,000 acres
of barley.
It
is not just large Indian corporates that have joined the bandwagon.
Multinationals like Cargil, Frito-Lay and small companies like Supersales
have also forayed into contract farming. For example, Supersales,
a textile company, has invested in a cotton cultivation project in
Tamil Nadu.
Many
companies are waiting in the wings. Gujarat, Tamil Nadu, Uttar Pradesh,
Maharashtra and Karnataka are also promoting contract farming. Though
contract farming helps eliminate middlemen leading to cost-savings,
some industry observers are not too optimistic about the prospects.
"Contract farming will take sometime to really catch up in India.
Corporates are not yet convinced about the whole idea," says
a banker.
Contract
farming has triggered increased opportunities for agri-input service
providers like Rallis and Mahindra & Mahindra. Apart from generating
revenue by supplying agri-inputs like pesticides, fertilisers and
tools to farmers, these companies are providing extension support
services like logistics and consultancy.
The
state governments and lenders are, however, treading a cautious
path. States, for instance, insist on projects based on a firm
contract to prevent market fluctuations. Lenders, for their part,
route funds to farmers on a standalone basis. Some lenders are even
planning rainfall insurance packages to derisk farmers. However,
most participants in the process are cautiously optimistic.
SABARINATH
M
TIMES
NEWS NETWORK
[ MONDAY, APRIL
14, 2003 12:50:39 AM ]
