LEVERAGING CONTRACT FARMING FOR IMPROVING SUPPLY CHAIN EFFICIENCY IN INDIA: SOME INNOVATIVE AND SUCCESSFUL MODELS

Abstract

Most of the farm operators being small and marginal farmers in India, there were problems in getting quality raw materials for processing or fresh marketing, especially in perishable high value crops. The processing and marketing firms faced issues of high cost, lack of adequate availability, poor quality and timeliness. On the other hand, there were gluts in markets for such produce and farmers realised low or un-remunerative prices. After the opening up of the Indian economy and entry of many domestic and multinational players into agribusiness sector, contract farming which was restricted, largely, to seed production earlier, spread to perishable produce and has now become the dominant and growing mode of raw material production and procurement co-ordination among the processors and fresh produce marketers and exporters including that of organic produce. This paper examines the nature and performance of such contract farming arrangements across crops (potato, mint and organic basmati paddy) and companies in different regions of India with primary evidence. It also examines the factors in the success of such models of vertical supply chain co-ordination and problems encountered by the contracting agencies. The paper concludes by outlining some important managerial and institutional lessons for organising supply chains in perishable produce by global and domestic agribusiness players.