In the 1960s, when India faced a food shortage, the government had a policy of promoting the growth of food grains through high yielding grain varieties, which also required high irrigation and fertilization. The government also declared a fixed price for buying that grain and then stored it in warehouses—to be distributed later through the public distribution system at low prices for the poorest families. This policy in later decades left us with rotting grain surpluses, a food subsidy bill, and still poor farmers. Only the middlemen benefited from that old system.
The way to change that policy was by first creating a viable alternative for farmers. This may be achieved now by contract farming, which brings together farmers and companies that provide finance and buy the crop. This solves many problems for the farmer, who previously had to find his own resources or depend on the government credit and fixed prices to earn a living.
Another variant of this system is corporate farming but that has not been so popular since it transfers land ownership to companies. Despite these experiments the old system of fixed food grain prices and the PDS will continue…probably until the last farmer has switched to contract farming.
The companies involved in contract farming are Mahindra Shubhlabh, ITC, Ikisan.com, and Tata-Rallis—they provide facilities like soil surveys, training in inter-cropping, seeds, and finance. They also arrange for end buyers who take the produce directly from the farmers instead of passing through the old chain of intermediaries and governments markets (mandis). The good thing is that this system has the blessing of the agriculture ministry and gets close cooperation from various government agencies and departments at the state and district level.
On a side note, the ITC website also lists an ingenious way of profiting further from contract farming. Next to their warehouses in the state of Madhya Pradesh they have set up shopping malls! So when the farmer deposits his crop and collects his money, his eye is drawn to the swanky mall where he can buy anything from personal essentials to farming equipment and even white goods.
The danger is that at a point when he is cash-rich the farmer may go overboard and splurge all his gains in one day! However the alternative to this would have been repeated visits to distant towns and cities around the year just to buy some items. So these malls may actually save the farmer time and money on transport costs. In the old days rural folk depended on melas (fairs) to be able to buy the products of distant places—this may still continue because those fairs are like family outings and provide cheap entertainment for the farmer’s children.
