Corporates in agirculture

In India's agriculture sector small family farms constitute around 80 per cent of all land holdings. But they contribute only about 42 per cent of grain production and over half of all fruits and vegetables. Various land ceiling laws limit individual land holdings to 12 acres, and do not allow companies to buy farm land. Corporates have a way out in contract farming, where they either lease land from farmers or work directly with them.

"Fragmentation is environmentally destroying the farmlands," says Samar Gupta of Trikaya Agriculture. "The future is in aggregation, and it will work if farmers themselves set the pace of change." He has aggregated 125 acres of land and has leased another 120 acres from migrating farmers. By growing niche vegetables such as gherkins for local markets and hotels in Mumbai, Samar’s agro-business generates at least Rs 10 crore in revenues a year.

Jain Irrigation derives Rs 300 crore of its revenues from agri business by aggregating 7,000 acres of farmland to grow white onions and mangoes for Cargill, the global seed company. The fruits and vegetables are processed and shipped to Cargill, which in turn supplies them to retail companies around the world. “We work with 1,500 farmers, and have been working with them from the seed input stage,” says Anil Jain, MD of Jain Irrigation. But their model of contract farming has no formal signed contracts with the farmers. The arrangement is based on the strong relationship built by the company by selling drip irrigation systems to these farmers. Desai Fruit and Vegetable in Gujarat works with over 2,000 farmers aggregating over 5,000 acres of land. Most of the produce it contracts — bananas and mangoes — end up in Europe.

Because contract farming is an issue in the country, Indian companies are acquiring land in other countries, and developing alternative models. KS Oils, an edible oil refiner, has been given 50,000 acres of land by the Indonesian government to refine palm oil and create inclusive growth for 10 villages. For the majority of farmers who grow foodgrains — rice, wheat and pulses — the government offers a minimum support price, besides subsidies on fertiliser and other input. But contract farming by corporates in agriculture, offer new technologies, new agricultural produce, and new markets for agricultural products.
Businessworld
Vishal Krishna