Indian agriculture has eventually faced policy changes, and one such issue is the non-viability of small holdings and the loss of global competitiveness of their commodities. In this matter, innovative programs that revamp production mechanisms get opportunities through corporate and contract farming. Many states are pitching for modification in their laws to further the system of corporate and contract farming.
What Corporate Farming Means
Corporate farming has emerged as a solution to agribusinesses’ high expenses. In this model, prime arable lands and wastelands receive permission to be leased or purchased by corporate houses engaged in agribusiness. The state shares these wastelands on an affordable lease.
This type of farming model indicates direct control or renting of farmland by enterprises to carry on the food production operations for their captive processing needs or at the marketplace. Captive processing refers to a business framework where a company establishes its operation around a low-cost place to manage work remotely instead of third-party outsourcing. When carried out for captive reasons, it is also known as captive farming, though both these phrases are used mainly reciprocally.
- Corporate farming refers to food production on a vast scale. It also includes many other facilities that are key to distributing the grown foods. Therefore, this approach extends beyond the existing food production to the whole production mechanism in agriculture, such as marketing, processing, and distribution.
- In simple terms, corporate farming manages all the functioning processes, from farm-fresh produce to your dining table.
- It also encompasses corporations that do not actively manage farmland but constitute a segment of the supply chains, including agricultural equipment firms, agrochemical businesses, and information technology enterprises.
- These companies also play a big role in farm research, training, and government rules through money support, lobbying, and campaigns to convince people. We should think about all this when we look at corporate farming.
The Good and Bad of Corporate Farming
Some of the prime aspects and advantages of corporate farming are as follows:
Pros:
- A high level of expertise in specific crops, animal stock, production, or agricultural commodities results in maximum productivity, better resource sharing, and standardized manufacturing operations.
- It uses vertical integration, where one company manages different parts of the farming supply chain. This setup includes areas like processing, growing, shipping, selling, and packaging.
Such vertical integration gives access to improved administration over the whole value chain and offers a window for the corporation to garner more excellent value from its agricultural merchandise.
- Sizeable Capital Investment in acquiring and managing massive agricultural operations, infrastructure growth, and the application of advanced technologies leads to resourceful production systems and mechanized farming practices.
- This type of land farming gives way to a fruitful collaboration between companies and farmers which eventually forges a mutually profitable alliance. Farmers risk their work, land, and crop skills for the money, market access, and high-tech tools of big companies. This helps improve farm results.
- Timely crop cultivation aids in preventing food devastation and raises yields, which in turn brings about a decline in food prices. Almost 40% of the food processing and production in India is spoiled annually because of fragmented lands.
- The government’s farm subsidy, including the Minimum Support Price (MSP) for farmers, has a big impact on the budget. Corporate farming will cut down the government’s money responsibilities.
- Good at using the benefits of large-scale production when it comes to India’s many small divided farm plots.
Cons:
These are some of the downsides of Corporate farming that critics often bring up.
- Poses a threat of monopoly or exclusive ownership in the rural economy by controlling the entire value chain of the agricultural framework. Such overriding control can influence the food security requirements of the impoverished population in India.
- Dependence on industrial agriculture results in climate change.
- It can be detrimental by impacting the employment opportunities of marginal and negligible farmers, who comprise nearly 85% of the agrarian society in India.
- Big plantations may be “enclaves” that have minimal links with local economies. They may purchase farming resources from distant places and dispatch their product to international markets with no utilization of local intermediaries.
- Farmers cannot benefit from a price rise of the crops within the markets because of a pre-established price set-up,
The Legality of Corporate Farming in India
Agriculture is a state responsibility, and the state is assigned to address all types of agricultural issues. Being a state subject, several state governments in India have made efforts to liberalize such land laws, particularly land leasing and ceiling laws. States like Karnataka, Gujarat, Maharashtra, and Madhya Pradesh have permitted agribusiness industries to purchase and manage significant land holdings for export-driven production and R&D goals.
Maharashtra and Gujarat have also legislated laws that allow corporate farming on government wastelands by offering substantial tracts of such lands to companies engaged in agribusiness on a 20-year lease. Even the State Government of Chhattisgarh is putting up for lease nearly 20 lakh hectares of land for biofuel farming.
Previously, the Andhra Pradesh government had tried out corporate farming under the Kuppam project in Chittoor district during the years 1997-2002 to experiment with the viability of large-scale farming using contract farming on lands leased by firms conducting agribusiness.
Introducing these modifications in land laws can be observed to a certain extent as the globalization of agriculture, where innovative production systems and global capital are setting new trends. It is primarily a strategy headed by private sectors towards agricultural growth.
What we find is a renewed focus on leasing wastelands to private entities over a long-term period as a rural sector opening and privatization process and to draw in domestic and foreign capital investment into the agricultural industry.
Though corporate farming is not a mainstream practice in India to date, in recent times, there has been a growing demand from businesses and associations to remove the legal constraints enabling the agribusiness industries to acquire and harvest land for their primary commodity and raw material needs.
A promising example of a corporate farming business framework in India is the 1700-acre agri-forestry and horticulture farm – the Jamnagar Farms initiated in the barren land close to the RIL refinery. It has earned the reputation of being the most extensive Mango orchard in Asia. Though it started at the beginning as an environmental improvement plan, the profit proposition of the company has entitled it to allot government and community-owned lands to set up its 5000 crores export-driven farming project.
Often, the saying goes that India exports its agricultural commodities after fulfilling its domestic demands, which causes a loss in its established markets. Moreover, India also approaches the global market to import for its national consumption. In such a scenario, corporate farming gains precedence for achieving steady production and export profitability.
By accepting foreign companies’ entry to purchase and manage land, India gets a huge opportunity to harness their technology related to horticulture and food processing. In addition, when there is no ceiling imposed with regard to a corporation’s assets, why is there any need for such a regulation on farm firms or industries engaged in agribusinesses?
Final Reflections
The demand for greater participation of private providers in the agricultural industry is a certainty and will arise as a matter of course. However, the discussion hinges on the manner and the level of participation. In pursuit of higher capital generation and upgraded agriculture production and profitability, certain unproductive and non-adaptive aspects of corporate farming need to be considered. India should adopt an all-embracing policy guideline entrenched in the belief of welfare trickling down to the last man standing on the lane. Its achievement requires the involvement of requisite stakeholders committed to driving forward agriculture to unprecedented levels in India.
