[GS 3] What do you understand by contract farming? Discuss the advantages and disadvantages of contract farming


Contract farming is a system of contractual production of agricultural raw materials or produce by the farmers for the procurement by private companies. The private companies use these raw products to further process and sell them. It is basically a way of financial incentivization of farming through private investment. It can be regarded as a support for the farming system.


This kind of farming helps farmers in supporting their produce. The raw materials that they produce are easily procured and good price is also granted for their produce. The issue of selling the products in the market which is a cause of worry is minimized to a large extent. The role of middlemen also gets decreased to a large extent.


The main disadvantage of contract farming is that it promotes monoculture farming. Farmers are not free to produce crops of their own choice. Moreover they have to depend upon the private companies for equipments and seeds as well. The perishable products or raw materials when produced in large quantities need proper storage facilities.
The main problem is faced by the small and the medium farmers who are often not able to meet the targets of production given by the private companies. Also there is a high risk factor in case of post harvest losses.

A model law

There is a need for a model law to monitor the farming methods including the quantity of the produce, proper storage facilities, etc. a uniform list of items need to be prepared across all states of the country under contract farming. The sole dependency of the farmers on private companies must be reduced and a parallel market should be provided to sell their produce. Prices of the products must be decided appropriately and should include the post harvest losses as well. With proper legislation, the disadvantages can be minimized and advantages can be increased manifold.

Source: xaam.in

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