Farmers needn’t fear agri-corporates, capital injection in agriculture is crucial to benefit from scale

January 2, 2021 7:00 AM

The role of corporates, especially in agriculture marketing, is far too significant as they can transfer a greater portion of the consumer rupee to farmers.

farm lawsEven in the US, more than 95% of the farms are family farms, and corporate farming has not entered the world’s most liberal capitalistic country.

By MG Chandrakanth

The recent agitation by farmers on the three farm laws voices the apprehension that crony capitalists will take over farms and APMCs and other markets. The eminent Gandhian scholar-activist from Karnataka, MD Nanjundaswamy, too, had similar apprehensions in 1995. However, virtually nothing happened since 1995, as far as entry of corporates or crony capitalists into agriculture is concerned. However, it remains a fact that agriculture is starved of capital today, and thus there is a need to attract capital to it.

Even in the US, more than 95% of the farms are family farms, and corporate farming has not entered the world’s most liberal capitalistic country in the way that most fear, here in India and around the world. That agriculture is a gamble on the monsoons is widely accepted; but it is also a gamble on the markets, due to increasing market imperfections and market inefficiencies. For perspective, out of 1.26 million registered companies in India, hardly 67 are purely agricultural companies, forming 0.008% of the pool. After including the existing 7,374 FPOs, it is a mere 0.59%! When Kentucky Fried Chicken entered India, there was a hue and cry among farmers that it is going to purchase the entire poultry industry. However, KFC is purchasing chicks from India, creating market for Indian poultry.

The state-of-the-art precision farm, Simply Fresh, was set up by two IT professionals returning from Australia in 2014. With an output of around 10 tonnes of organic fruit, vegetables, medicinal plants per day with an investment of `130 crore, Hyderabad-based DeHaat is offering access to quality inputs and market linkage to 4 lakh maize, wheat, banana, litchi, vegetable farmers in Bihar, UP, Jharkhand and Odisha, resulting in a 50% increase in their farm-income. Former employees of Wipro, using digital initiatives, formed Stellapps in Bengaluru to digitise the supply-chain for 20 lakh dairy farmers (mostly small farmers) from 33,000 villages, managing an output of 11million litres of milk per day.

Mahindra & Mahindra is a big corporate that produces 40% of the tractors used in farming in India. Contract farming by Namdhari’s for quality vegetables for exports in Bidadi, Karnataka, is benefiting small farmers, as income derived per acre was the highest for this group. Future Consumer, Ninja Kart, Big Basket, Milk Basket, Farm Fresh, Y-Look, More, Max-hifer, Reliance Retail, etc, are involved in procuring quality fresh fruits in Malur in Karnataka. Small farmers benefitted more than large farmers through contract farming. The farmer-sellers are first registered and are informed about the need for X quantity of vegetables of a said quality to be supplied to their outlets in advance, and the proceeds are deposited in bank account in a transparent manner. Note here, that the uniqueness of Namdhari’s stems from the fact that farmers’ produce, in addition to being marked for exports, is also sold in Namdhari’s Fresh outlets in Bengaluru.

Agriculture now oscillates between the vagaries of monsoons/markets/ institutions and equity. If the corporate world is exploitative, why not have Farmer Producer Organisations (FPOs) demonstrate the efficiency of pooling the bargaining power of farmers in price determination and show that they are a better option than having agri-corporates engaged in contract farming?

What prevents agriculture graduates from taking up farming? The answer is very clear. While production technology has progressed through R&D, agricultural marketing is still caught in the trap of inefficiencies and imperfections of APMCs. And, even if our agri-graduates do well in agriculture, they are unable to reap a higher portion of the consumer’s rupee due to the middleman, thanks to whom the marketing costs have increased. It is, therefore, crucial for the farmers to accept the three new farm laws which will benefit them by injecting competing markets.

Capital injection is crucial in agriculture for it to benefit from scale in production and marketing. The experience of opening up APMC markets has indicated that market prices can increase by at least 38% through the e-NAM. The role of corporates, especially in agriculture marketing, is far too significant as they can transfer a greater portion of the consumer rupee to farmers.

Former director, IESC, Bengaluru

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