ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Nivedita SharmaSubscribe to Nivedita Sharma

Does Contract Farming Improve Farmers' Income and Efficiency?

This study compares the economics of contract versus non-contract farming of potato and basmati paddy in Punjab, and finds that on average, contract farmers have better farm returns and resource use efficiency than non-contract farmers. However, the efficiency differentials between these two categories of farmers are less significant in the case of basmati paddy. What then is the sustainability of contract farming in basmati paddy, and should contract farming be promoted only for high-value, non-cereal and horticultural crops in agricultural crisis-stricken Punjab?

Determining Growers' Participation in Contract Farming in Punjab

Small farmers' participation in global value chains is of prime importance for inclusive agricultural development in developing countries like India. However, the issue of inclusiveness of modern arrangements like contract farming and the determinants of participation in such arrangements is understudied in such contexts. This paper examines the issue of small farmers' participation in contract farming arrangements in Punjab, where farming is dominated by medium and relatively large farms. Based on a sample of contract and non-contract farmers, this paper examines the relationship between the farmers' resourcefulness and contract farming participation, selectivity bias, and its impact on farm income. It finds that the contract and the non-contract farmers differ in terms of education, agricultural machinery ownership, and owned and operational landholdings. Small farmers are not, by and large, part of contract farming practice in the studied crops and the selectivity bias exists in contract farming; however, it does not have any significant impact on farm income. Small farmers' participation can be improved through better institutional mechanisms, including group contracts and incentives for contracting agencies to work with small farmers.
Back to Top