An epoch union

In conversation with N Srinivasan, Chief General Manager, Nabard, TAJ discusses the various reforms that are vital to induce greater corporate involvement in agriculture

Given the recent interest evinced in corporate farming especially by big business houses like Tata Rallis, Mahindra & Mahindra, HLL and commercial banks like ICICI, why do you think so much buzz is being generated? Do you think it is because it is a back-end operation where these corporates possess various processing facilities, which requires a ready flow of raw agriculture produce?

I would say that there are a couple of things that are guiding this corporate interest in agriculture especially in the post harvest activities. One is the rising middle and the elite class in urban areas, which looks for convenience food, that are certified for quality, and are preferably ready to eat. So corporates find that by capitalising on this market they have a huge profit to make.

Secondly, the global demand for a variety of foods is seeing an upswing, for which India requires a greater and better harvest as it’s a different market altogether. Big business houses are consequently looking to procure quality produce. Overall I believe that Indian agriculture per se. is becoming more commercialised. The stress should be laid on trying to leverage more out of what is produced.

Do you think policy reforms need to be initiated to make this transition easier?

Yes certainly, one set of reforms that are definitely required are those that are related to the global trade in agriculture, which would make the specifications of international markets clear to all involved. They should also ensure that the strictest possible check is maintained on the consignments that are sent abroad, as today, global environs are extremely sensitive to quality.

How do you make contracts enforceable? When we spoke to Mahindra & Mahindra they said that they bring in the agricultural extension services, conduct technology transfers, and buy back most of the produce. But they also offer the farmers the right to play the market, what are your views on this arrangement?

This is an option available from the contracting end, where in case the farmer says that no I don’t want to play the market, I want the contractor to pick up the entire produce but nearer to the harvest time the farmer finds that the market prices are much better, and decides that s/he will be better off by selling it there. This is one scenario. The other is where the corporates feel that they would be far better off not buying this years crop because they will get it far cheaper if they buy it in the mandi or, sometimes, importing produce could prove to be far more economical.

So the enforceability of the contract has to be from both sides, for this we should have a watertight mechanism in place. It is not that the mechanism does not exist but that it is certainly not adequate. What is required is a district-level regulatory body. Thus, enforceability of the contract is a very critical issue as we expand the contract farming model across the country.

What are your views on the integration of the contract farming model in the Indian context?

Contract farming is best suited for India. It can.....

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