Contract Farming

The Indian retail industry is at the threshold of exponential growth. More than 70% of retailing in India comes from Food & Grocery segment. But, penetration of organized retail in F& G segment is only around 1%. The traditional Agri-supply chain model with many intermediaries is fraught with many inefficiencies and farmers are able to realize only a fraction of what customer pays. There is need to shift from supply led production of the yore to the market led production.

The new churn in the retail scenario with many global and domestic corporates venturing in has brought the concept of "Contract Farming" to the fore which is based on a value-driven customer centric approach. This involves a contract between the farmer and the retailer whereby the farmer is required to plant a pre-determined crop on his land, and to harvest and deliver to the contractor a certain amount of produce, based upon anticipated yield and contracted acreage. This entails him to a host of benefits including access to world-class technology, superior crop varieties as well easy access to credit.

An efficient Supply chain model has been proposed that not only captures customer demands, but brings in the farmer as the most important constituent of the entire chain, with strong focus on supplier relationship management, R&D practices and Collaborative planning with easy information dissemination system. IT must be effectively deployed to procure latest market information and the production should be linked to what is demanded in the market.

Mitigation of risks is very essential with proper information dissemination and established standards of operation. Sustainablility is the key issue underlying every change in today's world. Hence, the financial, economic and environmental viability of the contract farming model has also been analysed. It can be concluded that effective Government policies aimed at equitable distribution of benefits