WHAT IS CONTRACT FARMING?

The uncontrollable devil of population growth calls for higher productivity of agricultural
products per unit of land, labor, water and other inputs in an equitable and sustainable manner.
Population has been increasing @ 1.2% per annume whereas average growth rate of total food
grain production is within the vicinity of 0.8%. Hence we have to produce more. Moreover,
Indian still predominantly remains an agriculture country with 65 to 70% of its population
dependent on agriculture. But its contribution to nation’s GDP has declined from 34.9% in 1990-
91 to barely 18.5% in 2006-07. Alarmingly annual average growth of agriculture and allied
sectors has gone down from 3.2% to 2.3% during seventh and Tenth plan period.

Structural deficiencies in agriculture sector in India are mainly responsible for this debacle.
These include the small size of land holdings, dependence on monsoons, lack of irrigation
facilities, unbalanced use of fertilizers, lack of communication and easy access to credit and
scarcity of improved seed varieties notwithstanding the large number of intermediaries in the
channel of farm produce between producer and the consumer. These shortcomings and related
problems generated the idea of contract farming.

What is Contract Farming? Contract farming is a sort of agreement between the farmer on the
one part and some contracting agency on the other part whereby the farmers of some particular
locality agree to grow some specified crop or crops and supply the produce thereof at a presented
price. The contract, therefore, includes the commitment of the farmers to grow and supply the
specified product in specified quantity of the specified quality level for some particular period.

The contractor (purchaser) on his part is committed to purchase the produced at the
predetermined price. Usually, the contracting firm also agrees to procure and provide certain
inputs such as seeds, fertilizers, technology, finances and credit facilities. Contracting is,
therefore, a means to provide a sort of insurance to the farmer whereby market risk is transferred
to the contracting firm. In nutshell, the idea of contract farming is based upon three points:

(i) Pre-determined quantity,

(ii)Pre-determined quality,

(iii)Pre-determined price.

Contract farming in India owes its origin to the installation of tomato processing plant in
Hoshiarpur (Punjab) by popsi Foods Ltd. Currently it is being practiced by some multi-national
companies as also local firms such as Pepsi, HLL, ICC, MacDonald, Cadbury, Nestle, Wimco
etc. Rallis India, a Tata group undertaking is a leading company to promote contract farming in
India. They have set up Farm Management Service to undertake contract farming. They have
arranged with ICICI Bank to provide credit facilities to the farmers and have also sought
collaboration with some leading firms to promote contract farming.

In accordance with the purpose and prevailing market conditions different models of contract
farming have been devised by the contracting firms. Mainly these are of three types:
(i) Contract under which only sale and purchase conditions are settled and there is no
responsibility of the contractor regarding inputs.

(ii) Contract under which along with sale and purchase of the produce some particular inputs are
supplied the contractor e.g. Pepsi supplies only saplings to the cultivator and purchases the
produce. They do not provide any other iputs.

(iii) Contract under which the contractor firm undertakes the responsibility to supply all the
inputs to the farmer. Under such total contract almost all the needs of the farmer are fulfilled
under one roof.

Contracting farming is gradually gaining ground among rural masses specially in the states of
Punjab, Maharashtra Gujarat, Karnataka and Andhra Pradesh. Contract farming is advantageous
to both the contracting parties. Firstly, it reduced the number if intermediaries in the disposal
chain. Secondly, it reduces the marketing and pricing risk as the purchaser is already there and
the prices have been settled. Thirdly, it provides a more reliable, regular and timely sources of
income to the farmer.

Fourthly, it ensures timely supply of good quality raw material at reasonable price to the farmer.
Fifthly, it also assures timely supply good quality raw material at reasonable cost to the
contractor firm. Finally, it has opened new vistas to the farmer who gets the option of adopting
new crops suitable to the local conditions of soil and climate and available irrigation facilities
thereby enabling him to move away from non-profitable time old traditional farming practices.

Farmers are benefited by adopting improved technology and better quality seeds, credit and
banking facilities also reach the door of the farmer as long business houses and companies are
there to cover the risk of credit. Contract farming generally promotes export oriented and cash
crops and as result the nations is benefited by getting additional foreign exchange.

The concept of contract farming is not free from demerits. So far as bargaining power is
concerned the contractor has the upper hand and the position of the farmer is comparatively
weaker. The contractor companies are always money minded and emphasize on the cultivation of
cash crops which are export oriented. Food grains like wheat and rice are of secondary
importance to them. Then, in case the farmer shall be at the mercy of the aggrieved
intermediaries. Furthermore, if the market price rises high, the farmers are bound to sell at the
predetermined price and the profit entirely goes to the contractor.

But these demerits can easily be avoided by taking some remedial and precautionary steps.
Central Ministry of agriculture has already taken some steps and has formulated a law to
popularize contract farming in order to allow accelerated technology transfer, credit flow and
assured market for farm produce. Agriculture produce Marketing Act has been amended to meet
the emerging needs. With the amendment of the Act the concept of contract farming comes with
vogue in the required scale. 15 states and 5 union territories have so far opted to derive the
advantage of market reforms. NABARD has also decided to support such arrangements. Steps
should be taken to improve the bargaining power of small farmers who far outnumber the big
farmers. Small farmers may adopt co-operative farming whereby they can negotiate with the
contracting firm and can engage in large scale production

Companies should develop long term relationship with farmers and should adopt such policies
which are conducive for sustained agricultural growth. There should be transparency in fixation
of prices of farmers should be very well trained and properly informed through media
programmes.

India has to establish herself as a global economic power by 2020. But this goal cannot be
achieved without accelerated and sustained growth in agriculture sector. Agriculture and industry
are correlated and interdependent. Industries should be playing more positive and effective role
in increasing agriculture production and land productively. Contract Farming can prove to be the
best medium to narrow the widening gulf of disparity and can prove to be an effective catalyst
for the process of growth of Indian agriculture.

 Is Contract Farming Really the Solution

for Indian Agriculture?

Contract farming is increasingly being presented as a solution for the problems of Indian
agriculture, by major international donor agencies, multinational companies and even the
government. It is argued that private sector participation will be promoted through contract
farming and land leasing arrangements will allow accelerated technology transfer, capital inflow
and assured markets for crop production, especially of oilseeds, cotton and horticultural crops.

The UPA government’s Approach Paper to the Eleventh Plan gave priority to the development of
contract farming. Now, a Working Group set up by the National Development Council, under the
leadership of then Punjab Chief Minister Amarinder Singh, has also made a set of proposals to
promote contract farming. In addition to suggesting greater liberalisation of laws and rules for
crop contracts, it has proposed tax rebates for food processing, duty-free imports of machinery
and equipment, exemption of market fees, etc., and liberalised imports of seed varieties for
contract farming programmes.

Contract farming is defined as a system for the production and supply of agricultural or
horticultural products under forward contracts between producers/suppliers and buyers. The
essence of such an arrangement is the commitment of the cultivator to provide an agricultural
commodity of a certain type, at a time and a price, and in the quantity required by a known and
committed buyer, typically a large company.

According to the contract, the farmer is required to plant the contractor’s 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 could be at a pre-agreed price, but need not always be so. The
typical contract is one in which the contractor supplies all the material inputs and technical
advice required for cultivation, while the farmer supplies land and labour.

This system has old historical resonances, such as the infamous contracts enforced by indigo
planters in eastern India during the early colonial period. But the more recent pattern of contract
farming has been developed especially in the United States, where corporate penetration of
agriculture is probably the most advanced. Agricultural trade globally is dominated by
transnational corporations, like Cargill, Archer Daniels Midland and Monsanto, which are
increasingly involved at each stage of the agriculture system. These corporations achieve
domination over the market through a combination of horizontal and vertical integration.

This has increased the margins for the procuring and processing firms while at the same time
reducing farm incomes and increasing the prices for the consumers. This explains the rising
spread between retail prices and the prices received by farmers and livestock breeders, which has
been so marked in the US over the past two decades. It is not generally known that US farmers
have not really gained from the continuing government subsidies to agriculture - instead large
agribusinesses have made huge and increased profits.

US farmers are financially and politically much stronger than Indian cultivators, many of whom
are already operating at the margin of subsistence. So it is important to be fully aware of the
implications and the need for adequate regulation of contracts.

The recent spate of contract farming in India effectively began with the entry of Pepsi Foods Ltd
(PepsiCo) in 1989 by installing a tomato processing plant in Hoshiarpur, Punjab. PepsiCo
followed a method whereby the cultivator plants the company’s crops on his land, and the
company provides selected inputs like seeds/saplings, agricultural practices, and regular
inspection of the crop and advisory services on crop management.

Subsequently PepsiCo and other companies have used similar methods for the cultivation of food
grains (Basmati rice), spices (chillies) and oilseeds (groundnut) as well, apart from other
vegetable crops such as potato. Until recently, this model of contract farming was considered a
success in terms of diversifying cultivation in Punjab and improving the incomes of farmers.

The Punjab government has argued that contract farming is the best means of crop
diversification, in a region where there is a real question of ecological survival and sustaining
natural resources like water and soil in a reasonably healthy state. However, since contract
farming is based on private corporate interests that are inherently profit-driven, there is no reason
why these should coincide with the ecological requirements of the region.

Indeed, much of the recent corporate interest in Punjab agriculture has been in basmati farming,
which is one of the great water-guzzlers. Crop diversification can be more effectively
encouraged through a system of changing the relative prices of crops accompanied by a
supportive system of public agricultural extension services.

Farmers in Punjab have become increasingly resentful of a system that has put them under the
total control of corporations, which will decide not only the crops grown but also the
procurement price. The growing incidents of the pre-determined prices being reduced on the
pretext of inferior quality of the grain or crop, have added to such resentment. The issue has
became so critical, that several times in recent years, the state government agency that had
designed the contract farming programme in the first place (Punjab Agro Foodgrains
Corporation) has been forced to step in and buy basmati rice that was being rejected by the
contracting companies.

Contract farming in Punjab has certainly led to more employment opportunities for some labour,
since the labour intensity of most vegetable crops, except potato, is much higher than for
traditional crops like wheat or paddy. However, wage levels have been pushed to subsistence
levels by increased competition for work through migration. Also, male labour is being displaced
by mechanisation while lower-paid women and children are increasingly employed for the more
labour-intensive activities. The problem of finding alternative employment for displaced
cultivators has become a serious concern.

The Punjab experience is generally considered to be among the more successful in India thus far,
but even this shows that contract farming holds numerous problems for agriculture in developing
countries like India. It tends to displace labour quite substantially; marginalises the direct
cultivators who lose control over the production process and often even over their land;
encourages more capital-intensive and often less sustainable patterns of cultivation; can result in
greater insecurity and lower incomes for farmers because of use of quality measures to lower the
effective output price being paid by contractors; can even deny farmers the benefits of higher
prices which could be instead absorbed by corporate contractors with local monopsonistic power;
propagates monoculture which reduces food security and the possibility of livelihood
diversification through livestock; relies excessively on the use of lower paid women workers and
child labour; and increases and accelerates the process of casualisation of labour.

Given these evident problems, why is contract farming still being promoted so assiduously? This
is really because public institutions have failed to provide farmers with the essential protection
and support required for viability on a sustained basis. What cultivators in rural India need most
of all today is the following combination: a basic price support mechanism that ensures that costs
are covered; efficient extension services that provide information about possible crops, new
inputs and their implications and new agricultural practices relevant for the particular area; and
the availability of reliable and assured credit at reasonable rates of interest.

Pros and cons of contract farming

Farmers in India [ Images ] are all set to see a sea-change in agriculture sector soon, thanks to
contract farming.

Winds of change are blowing across the Indian agricultural landscape with the advancement of
contract farming. While earlier it was limited to a certain small initiatives by the corporate
sector, it is likely to become a norm rather than exception, thanks to the entry of business giants
like Reliance [ Get Quote ] and ITC and also because of the encouraging change in the
government policies.
The size of agreements for contract farming with the farmers is also increasing manifold. The
central government is so serious about the issue that it is mulling a contract farming policy for
India.

Recently, Union Agriculture Minister Sharad Pawar [ Images ] said contract farming is emerging
as an important institutional arrangement in India that promotes coordination between production
and marketing activities.

"The main issue is to upscale contract farming. This will require both public and private sector
investments in roads, cold chains, electrification and processing," he pointed out. The minister
added that the government's main concern is that smallholders are not left out in the process. He
also asked agro-business firms to integrate farmers on their supply chains through institutions
like cooperatives, producers' associations and contract farming.

Pawar made it clear that the contract farming model that to be implemented in India will ensure
that land is permanently owned and cultivated only by farmers. "We are not encouraging a model
of leasing land and allowing the private sector to acquire it for cultivation," he said. He also
disclosed that the Centre is encouraging farmers to form grass-root level associations or informal
cooperatives owned and managed by farmers themselves or producer companies.

While the corporates will have us believe that contract farming is the panacea for all the ills
affecting the agriculture sector in the country today, it remains to be seen whether it really turns
out to be so.

Contract farming involves a pre-agreed price between the company and the farmer. The
agreement is defined by the commitment of the farmer to provide an agricultural commodity of a
certain type at a time and a price and in the quantity required by a committed buyer, mostly a
large company.

It is clear why the business sector is gunning for contract farming. They seek to integrate the
supply chain to ensure timely availability of quality and quantity of raw material. Significantly, it
also reduces the procurement cost for them by doing away with the middlemen. It leads to
significant gains for them, as not only do they get the raw material as per their specific demands,
the cost is also much less.

It is also believed that the participation of the corporate sector in the farming segment will play a
crucial role in technology transfer, capital inflow as well as lead to assured markets for crop
production.

PepsiCo was the first company in India to start contract farming of tomatoes in Hoshiarpur
district of Punjab [ Images ]. Reliance Life Sciences, ITC (agri-business division) and
McDonalds are some of the prominent business giants, which have either started contract
farming projects already or are in the process of actively discussing them with various state
governments. PepsiCo and other companies have used the contract system for the cultivation of
Basmati rice, chilli and groundnut, as well as for vegetable crops such as potato.
"PepsiCo's involvement in Indian agriculture stems from its vision of creating a cost-effective,
localised agri-base in India by leveraging its access to world class agricultural practices,"
PepsiCo spokesperson said.

Till today, PepsiCo India's project with the Punjab Agro Industries Corporation and Punjab
Agriculture University remains one of the most ambitious contracts farming projects in the
country. "The programme focuses on evolving agricultural practices to help Punjab farmers
produce crops that would make Indian products internationally competitive," says the
spokesperson.

What has been of crucial help to the business houses venturing into contract farming is the
amendment of the Agriculture Produce Marketing Committee Act in 14 states, which allows
farmers to sell their produce in open markets. This has opened the gates for the companies to
enter this segment.

The United Progressive Alliance [ Images ] government's 'approach paper' to the Eleventh Plan
gives clear priority to the development of contract farming. A working group set up by the
National Development Council has also made a set of proposals to promote contract farming.
The group suggests greater liberalisation of laws and rules for crop contracts. It has also
proposed tax rebates for food processing, duty-free imports of machinery and equipment and
liberalised imports of seed varieties for contract farming.

The model which is most popular in the country today is the one in which the contractor supplies
all the inputs required for cultivation, while the farmer supplies land and labour. However, the
terms and nature of the contracts vary according to the crops grown, the agencies involved, the
farmers themselves and technologies and the context in which contract farming is taken up.
Generally, a farmer's participation is limited to production in the fields.

However, in the present context, contract farming is clearly a win-win situation for both the
corporates and the farmers. Agriculture sector is facing a number of problems in the country and
farmers actually don't have many options in the matter of deciding whether or not to go in for
contract farming.

With rising debt and soaring seed and fertiliser costs, contract farming seems to be the only
choice left open to them. This is mainly because the company provides all the material including
seeds as well as technical know-how and there is also a guarantee of purchase of the produce
after harvest. In most cases, the minimum price of the produce is fixed in advance. In the present
scenario, the increasing number of farmers' suicides is seen as a reflection of the fact that
agriculture is no longer seen as a profitable venture.

This makes the economic security offered by the contract farming very attractive. The detractors
of the contract farming believe that far from being a panacea for agriculture sector, contract
farming is likely to increase the problems.

The main concern is that the land, which is currently used to grow staple crops like wheat and
rice, will be used to grow crops required by the food-processing industry, which also has a
significant overseas market. The switch to contract farming, therefore, leads to a rise in exports.

In fact, many corporates enter contract farming to fulfil their export obligations. It is believed
that contract farming would double agriculture exports from India to $20 billion by 2010. Many
believe that the rampant increase in contract farming will eventually lead to loss of food security
of the country, implying that the country might become dependent on imports.

"We are bound to lose food security considering the way the government is supporting contract
farming without thinking of farmers. The main thing is that farmers don't have any role to play in
contract farming except providing the corporates with labour and land. The government should
also take into account that the situation is very different in our country as compared to other
countries.

About 70 per cent of the population is dependent on agriculture. The government should involve
the farmers in policy making otherwise their concerns are likely to be left out," says Dr Kishan
Bir Chaudhary of Bharat Krishak Samaj, which claims to represent around 5,000 farmers in the
country.

There is also a belief that it might also lead to the loss of natural seeds. Many times, the crop
required by the company is not recommended for that particular area. This can also have
negative implications on the quality of soil.

There have been numerous studies to examine the impact of contract farming on farmers.
Recently, Dr Sukhpal Singh of Indian Institute of Management, Ahmedabad [ Images ],
conducted a study - 'Contract Farming for Agricultural Development: Experience of the Indian
Punjab and Northern Thailand'. He observes in his study, "Contract farming, in a political
economy, is one mode of capitalist penetration of agriculture for capital accumulation and
exploitation of the farming sector by agri-business companies."

But for farmers, this is a matter of survival. It is also because public institutions have failed to
provide farmers with the essential protection and support required for viability on a sustained
basis.

"Farming was hardly a profit making venture but thanks to the company people we also can
afford to have some self-respect now. Of course, there are problems associated with companies
also like if a crop doesn't meet their requirements they will not take it. For instance, if they want
chilli, it has to be a particular variety and it's not like anything will do," says Shirish Mane, who
owns a 3-acre farm at Loni Khand village, about 20 kms from Pune.

Certainly, not all contract farming is bad for farmers. It can lead to sustainable cultivation
practices. However, there is a need for the government to step in and monitor the contract
farming practices.

Last Updated : 18 March 2011 at 13:00 IST

India takes to contract farming in a big way

NEWS

 India rice procurement volume dips by almost 1%

 Wheat futures decline ahead of USDA crop report

HYDERABAD(Commodity Online): Asit Tripathy, Chairman of Agricultural and Processed Food Products
Export Development Authority (APEDA) has pointed out that Indian states need to promote contract
farming to ensure that farmers get remunerative prices and assured market for their produce apart from
getting freed from the clutches of middlemen.

India's national agricultural policy also envisages private participation through contract farming and land
leasing arrangements to allow accelerated technology transfer, capital inflow and assured market for
crop production, especially oilseeds, cotton and horticultural crops.

According to Asit Tripathy, contract farming is taking place in different forms in various states in the
country. Addressing a conference on ‘Agro exports from Andhra Pradesh – present emerging scenario' in
Hyderabad organised by APEDA and Confederation of Indian Industry, he pointed out that because of
small holdings, farmers are not able to invest and see surplus produce.

According to official estimates, there are 25 big and small private companies engaged in contract
farming for various commodities - it includes AVT Natural Products Ltd in Marigold caprica chilly in
Karnataka, Escorts Ltd in basmati rice in Punjab, Nestle for milk in Punjab, Cargill India Pvt Ltd for wheat,
maize, soybean in Madhya Pradesh, Hindustan Lever Ltd for wheat in Madhya Pradesh. The complete
list is available in http://agmarknet.nic.in/ConFarm.htm

Contract farming involves a pre-agreed price between the company and the farmer. The agreement is
defined by the commitment of the farmer to provide an agricultural commodity of a certain type at a
time and a price and in the quantity required by a committed buyer, mostly a large company

PepsiCo was the first company in India to start contract farming of tomatoes in Hoshiarpur district of
Punjab [ Images ]. Reliance Life Sciences, ITC (agri-business division) and McDonalds are some of the
prominent business giants, which have either started contract farming projects already or are in the
process of actively discussing them with various state governments. PepsiCo and other companies have
used the contract system for the cultivation of Basmati rice, chilli and groundnut, as well as for
vegetable crops such as potato. The amendment of amendment of the Agriculture Produce Marketing
Committee Act in 14 states, which allows farmers to sell their produce in open markets has enabled the
growth of contract farming by allowing big investment by corporates in the segment.

Benefits of Contract Farming

1) Farmer gets rid of middlemen and gets assured price
2) Farmer gets the inputs and only needs to put in land and labour as his contribution
3) National Policy assures that land will be permanently owned and cultivated only by farmers.
4)Farmer gets freed from the clutches of money lenders

Last year, Business Standard reported on 6500 potato farmers in Bamunpara in West Bengal who got a
market price of Rs 6-8 per kg when market prices crashed to as low as Rs 3-3.50 per kg on bumber
potato crop in the region. Thanks to the contract farming tie-up with Pepsi Co, several farmers escaped
the market crash.

What PepsiCo started as a pre-condition to its entry in India is today its most welcomed programme.
When it entered India in 1989, the Indian government had made it mandatory for the company to do
contract farming in the country, to help farmers improve crop yield through adoption of latest
agricultural technologies.

The company identified tomato processing as a potential activity, as tomato paste was used by Pizza
Hut/KFC/Taco Bell restaurants, part of PepsiCo at that time. The company tested this for about four
years. The efforts resulted in manifold yield improvement of tomatoes from 16 tonnes/ha to 52
tonnes/ha. The improved yields helped increase farmer incomes despite lower prices to the consumers.
PepsiCo entered into pre-agreed price contracts with the farmers. This was the beginning of contract
farming in India, The Business Standard report added.
Corporate farming is a term that describes the business of agriculture, specifically, what is seen
by some as the practices of would-be megacorporations involved in food production on a very
large scale. It is a modern food industry issue, and encompasses not only the farm itself, but also
the entire chain of agriculture-related business, including seed supply, agrichemicals, food
processing, machinery, storage, transport, distribution, marketing, advertising, and retail sales.
The term also includes the influence of these companies on education, research and public
policy, through their educational funding and government lobbying efforts.In india world
renowned companies have begun investing in agriculture for local markets as well as for
exports.Lets discuss and talk about this new development in the indian business scenario.
Contract farming: Burden on exchequer

Kuppam's failed experiment points out better options toward state supported agriculure. A report
by the Andhra Pradesh Coalition in Defence of Diversity.

July 2002 : A one page sponsored advertisement item titled "A Showcase of Appropriate
Technology and Systems" appeared in The Hindu dated 31.1.2000 under "Interface Focus - The
Kuppam Project". It was claimed in the article that The Kuppam model is expected to provide
the demonstration effect, which will enable replication of this model in other places. With rapid
globalisation and changing trade terms, efficiency of production and competitiveness will
emerge as the paradigms for success and this model may be one of the answers which Indian
agriculture is looking for. It was also claimed in the sponsored advertisement that Kuppam, after
Anand, may well be the starting point of ushering in yet another revolution centered around the
competitive efforts of small groups of farmers.

"The Large Scale Advanced Farm Project (LSFAP), which is better known as the Kuppam
Project", the above sponsored article claims, is a holistic approach to modernize agricultural
practices by involving the Agriculture and all related Departments in the process of this
technological upgradation. It revolves around Israel cooperative model of agriculture". An inset
was also included in the above sponsored article under the caption "Why Kuppam"? The reasons
stated for selecting Kuppam for the experiment are:

 Kuppam area is part of DPAP block and chronically drought affected

 Eighty-five percent of the population in the area live below the poverty line
 Only 10% of the gross cropped area is under assured source of irrigation
 Saline lands
 Soil composed of gravel and stones of varying sizes with low level of organic matter

The advertisement made some claims, which were very attractive. It gave some data on "Demo
Yield Comparison" for various crops grown in the project. The actual yield obtained for Potato,
Gherkins, Chillies, Tomato, Groundnut and Baby Corn given in the advertisement were much
higher than either the district (Chittoor), the state or the national average yield levels.

The advertisement also gave details of revenue as on 31.12.1999. This portrayed an average
gross income of Rs. 38,639 per acre (calculated from the data) for gross cropped area of 352.25
acres on which standardized crops were grown. Similarly, an average gross income of Rs. 16,089
for an area of 159.65 gross cropped acres, was also given for the experimented crops. Thus, the
overall gross income realised was Rs. 31,606 over a gross cropped area of 511.9 acres (which
totaled to an income of Rs. 61.8 lakhs). The details of either the cost of cultivation or the net
returns were not given. Therefore, it was difficult to say anything about the claims made in the
advertisement regarding the financial viability of the technology.

In all, the information given is very interesting, inspiring and attractive. Therefore the Andhra
Pradesh Coalition in Defence of Diversity, a network of voluntary development organisations
working on the issues of sustainable agriculture and natural resources management in the state of
Andhra Pradesh decided to send a team of experts and social activists, consisting of
Prof.K.R.Chowdry (Agriculture Economist), Dr.A.Prasad Rao (Soil Scientist), Dr.Venkat
(Permaculturist), Dr Uma Shankari (Tanks and Natural Resources) and Sri.Girish Khemkar
(Documentary Film Maker) to Kuppam.

The team visited Ramakuppam from February 17 to 19, 2000. Sri Narendra Kumar,
Sri.B.G.Naidu, Sri.Balavardhi Raju, Sri Nagesh all developmental activists and natural resources
managers working in Chittoor district joined the study team in collection of information and
experiences of farmers in the area.

The study team, in the course of collecting information, met a number of officials, farmers and
other workers engaged in the area. They included officials of M/S. BHC Agro (India) Pvt. Ltd. at
the project site office; the farmers whose lands have been taken over for Israeli Demo Project
and also covered under the 2KR Project sponsored by Japanese International Cooperative
Agency (JICA Project); workers engaged in the Kuppam project. M/S BHC Agro (India) Pvt.
Ltd. also handed over a note to the study team at the site office (Annexure II). The information
gathered and the impressions of the team have been incorporated in this report. Individual
sources of information have not been quoted for obvious reasons. However the study team
testifies that the information incorporated in this report is factual.
Articles in this series
At the outset, it may be mentioned that "The Kuppam Pilot
Project" i.e. "The Demo (Central Project) Project at
Chaldiganipalli Village", as indicated both in the Hindu
 •  Uncultivated foods and
advertisement and as per the note enclosed, is a demonstration
the poor
project. This obviously implies that it is a project to be seen and
appreciated by the visitors and that the information generated, in  •  Genetic security in
principle, is to be shared with others (visitors) so that the results native baskets
from the demonstration are accepted. When large sized  •  Contract farming: A
demonstrations are conducted, as in the present case, the more burden
transparent the information generated is, wider will be the  •  Fortune favours
acceptability of the results from the technology sought to be prepared farmers
demonstrated. It hardly needs any reiteration that when a  •  The crops of truth
demonstration is conducted with public money, the accessibility to
the information generated must be so much more easier for the
interested public. Contrary to this accepted principle, it was
unfortunate that transparency and readiness to share the information generated were lacking with
M/s.BHC Agro (India) Pvt. Ltd, which is involved in the actual demonstration of the Israeli
Technology.

The local development activists who work under the banner of Chittoor Consortium of Voluntary
Agencies (Chittoor Swachanda Samsthala Aikya Sanghatana) had provided advance information
to the "Demo Project officials" about the impending visit of the study team to the project on 17th
afternoon. The Team was surprised to note that its visit to the "Demo Project" was not taken in
the right spirit but with suspicion, in spite of our specific introduction that we had come to see
and learn from the demonstration. Except by way of giving a note, (Annexure II), the
Administrative Officer of the project did not provide us any further information. Mr.Isaac, the
Israeli Kuppam Project Manager appeared to be ill at ease with the Team's visit. He showed the
heavy machinery lying before his office only after we introduced our professional background
and made a plea that we had come all the way from Hyderabad to see the Demo.

One of us (Dr.A.Prasad Rao) requested Mr. Isaac for introduction to the scientific officer in the
project so that we can have information on a few scientific aspects of the demonstration. A
prompt reply came that no scientist was available to discuss with us, as they were very busy, in
spite of our request that any time suitable for them will be suitable to us during our stay from
17th to 19th February. This response was quite discouraging. The officers in charge of the Demo
were not prepared to share any more information than what was given in their note regarding
administrative and economic aspects of the demonstration. The Team had to visit the Demo farm
on its own and without being conducted. This was the atmosphere under which the Team had to
gather the information. The Team has to check and cross check the information from various
sources before arriving at the final conclusion.

The Kuppam Pilot Project

The Kuppam Pilot Project was primarily undertaken by the Government of Andhra Pradesh
through its Rural Development Department to promote and demonstrate Corporate Agriculture
as part of its new strategy for agricultural development in the State. The State cabinet approved
the demonstration project with Israeli Technology offered by M/s.BHC (India)Pvt. Ltd. in
September 1995. An agreement with the company was signed in September, 1997. But the actual
implementation of the project began in June, 1997 (as indicated in the note of the company). The
estimated cost of the project is as follows :

I year 1997 - 98 Rs. 521.09 Lakhs

II year 1998 - 99 Rs. 133.83 Lakhs

III year 1999 - 2000 Rs. 156.59 Lakhs

Sub Total Rs. 811.51 Lakhs

II year Farmer's Share Rs. 152.16 Lakhs

TOTAL Rs. 963.67 Lakhs

Out of the above amount, M/S.BHC (India) Pvt. Ltd. is charging Rs. 243.54 lakhs (Rs. 81.18
lakhs per year) for technology transfer. Of this, an amount of Rs. 387.26 lakhs was meant for
infrastructure and Rs. 157.95 lakhs for equipment. The project was originally contemplated for
about 200 acres, but the actual area covered is only170 acres. Thus the investment made by the
government works out to Rs. 4.818 lakhs per acre if we take the original plan to cover 200 acres.
On the other hand the expenditure works out at Rs. 5.668 lakhs per acre if we take into
consideration the actual area developed, which is 170 acres. It was also gathered by the Team
during discussions that no farmer has really contributed his/her share. Therefore if we ignore the
hypothetical farmers contribution, the investment made per acre works out to a whopping Rs.
4.774 lakhs. This order of investment is at least ten times more than those of even rich farmers
adopting modern intensive cultivation practices.

The note given by the company (Annexure II) clearly mentions the objectives of the project.
These include among others:

Objective g : To develop a new concept and view for agriculture production to grow new
intensive crops (based on modern agricultural methods and equipment,) bringing contract
farming familiar to area and farmers",

Objective h : Making the farm as a commercial Demo-farm which is managed by one hand" i.e.
corporate body through corporate farming.

Thus the objective clearly defines that the Demo is to prove the effectiveness of Corporate /
Contract farming. Interestingly this objective is at the core of both Vision - 2020 for Agricultural
Development, Swarnandhra Pradesh released in January, 1999 or elaborated as a strategy for
development through the Working paper on Agriculture Agriculture Department of Andhra
Pradesh released in November, 1999.

This implies that the policies envisaged through the vision and the working paper were
conceived in 1995 itself, which is much earlier than they were publicly announced by the
government. Experiment with the policies of corporate/contract farming has been grounded in
June, 1997, without any consultation with the people of AP and without any discussion in the
State Legislature, which is the highest policy making body in the State. Therefore, it is not
surprising that both the Acharya N.G. Ranga Agricultural University, which is charged with the
responsibility of development and assessment of any new technology for agriculture in the state,
and the State Agricultural Department, which is charged with the responsibility of spreading any
new technology to the farmers in the state, have been totally kept out of the experiment.

This means that the sustainability of Israeli technology was not assessed under the conditions
obtaining in the state and the demonstration on Israeli technology was straight away began
without involving competent and established technically bodies in the state. The reasons for such
important deviation from established institutions and procedures are worth an exploration.

CO-OPERATION?

To facilitate the demonstration on corporate/contract farming, "Chaldiganipalle Mutually Aided

Co-operative Joint Farming Society" was formed to enable participation of small and marginal
farmers (167) in large numbers in the demonstration. The Society bears the name Mutually
Aided Joint Farming Co-operative Society. But the members of the Society have no knowledge
of the functioning of the Society. Nor do they know that it has entered into a contract with a
corporate body for farming. The Team learnt that the Society came into existence much after the
start of the demonstration. It also learnt that all the nine directors of the Society are employees
working with the corporate body (M/s BHC Agro) Private Ltd. No general body of the Society
has been conducted with the knowledge of its members (not even a big farmer like
R.S.Madhusudhan Reddy Ex-Sarpanch who owns about 40 acre of land which were physically
taken over by the corporate body). The farmers told the Team that it was the Government which
took their lands and handed them over to the Israeli Company. They never gave their lands
voluntarily to the corporate body. None of the farmers knows the details of the contract though
the Israeli company claims that the Demo is a contract farming. It is probable that only the
Government of A. P. signed the contract with the Israeli company and the formation of Mutually
Aided Joint Farming Society was only to legitimate the dealings of the government/company
with the farmers, whose lands have been taken over for the demonstration. The members of the
Joint Farming Society were never consulted by the corporate body on any decision relating to the
operation of the demonstration fields. Thus, no element of cooperation, not even symbolic, was
involved either in the formation of the Mutually Aided Joint Farming Co-operative Society or in
signing the contract or while dealing with the corporate body.

ONLY CORPORATE FARMING

The lands taken over from the farmers were/are being managed by the corporate body (M/s BHC
Agri India Pvt. Ltd.) at all stages, right from the stages of planning, through the stages of
development and management. Every farm operation, including marketing, is managed by the
corporate body which has employed heavy mechanisation except for harvesting (which is mostly
manual since it is a hand picking operation) and cleaning of the produce. Even weed control is
done through intensive use of pesticides. It is learnt that the average cost of cultivation is about
Rs. 20,000/- per acre out of which the cost of agro-chemicals alone is about 23%. The cost of
fertilization is about 18.1%. Power and fuel cost about 26%.

Seed costs about 8 percent. The cost of labour (mostly for machine operators or for field
supervision and used only to a limited extent for harvesting and for shifting of pipes) is about
25%. Family members, whose lands have been taken over, are engaged as daily labourers. Their
wages range between Rs. 50/- for male labour and Rs. 40/- for women labour. Some educated
persons have been given supervisory/managerial role on the farm. It is not compulsory that the
labour will be employed whenever they present themselves for work. They get employed only
when there is work on the farm.

The company claimed that after an average period of 1.5 years, an income of Rs. 150 lakhs was
realised and so far Rs. 29 lakhs income was distributed to the farmers @ Rs. 17,000/- per acre.

CROPPING

Since the start of cultivation in November/December'1997 and till the time of visit (February,
2000), the company has estimated the gross cropped area by the company at 565 acres (the crop
period is for 2 years 3 months since the start of the demonstration). The average cropping
intensity was about 1.5 per annum. It is possible that this crop intensity will be raised in a phased
manner. After full development, the crop intensity could be between 2 and 3. The crops grown
were mostly vegetables like Gherkin, Onion, Tomato, Potato, Water Melon, Sweet Melons,
Capsicum, Chillies, Beans, Peas, Carrot, Okra and field crops like Groundnut, Baby Corn,
Popping Corn, Grain Corn, Sunflower and Gram (dal) were grown. The major crop was gherkins
(more than 200 acres as per the The Hindu advertisement with a net income of Rs. 12,000 -
15,000 per acre). The local food crops have almost been eliminated. The main guiding principle
in deciding the crop was maximisation of crop income. The requirements of the members of the
Mutually Aided Cooperative Society, which is supposed to be the contracting body were not at
all taken into consideration. Farmers were never consulted while deciding on the crops to be
grown. The crops chosen were only of short duration. This is an important aspect of the
demonstration.

SUSTAINABILITY, PRODUCTION AND ENERGY

Any system of production (in this case a living agricultural system) is a process of
transformation of various forms of energy, categorised broadly as inputs and outputs for a
desired purpose.

Only those systems can be sustainable which satisfy two conditions: in the first place, the energy
(inputs) needed for production must be generated by and within the system itself. In the second
place, since the system has to support and provide for those maintaining it, such a system must
be able to generate more energy (outputs) than what it needs for its own growth. Only under
these two conditions can living systems of production (like agriculture) be sustainable.

In the Kuppam Project the claims made are only in monetary units. This masks the reality of
energy transformation. For, when we have to consider energy inputs and energy outputs, the
currency we should use can only be ENERGY UNITS and not monetary. Only then can
sustainability be correctly assessed.

This being so, if we take into consideration the use of heavy machinery; electrical energy and its
infrastructure for use of deep underground water, use of external inputs like seeds, nutrition for
plants, pest-weed control methods, we see that all these are not only external to the system but
also are very high congealed energy. And these have to be used for every cropping season.

If we convert all these (inputs) into energy units, and even taking the claims of production
(outputs) as per the advertisement in monetary units, the ratio of this production output in energy
terms will only be a small fraction of the energy that has gone in as inputs. This system is a net
consumer of energy and not a net producer of energy. Under these conditions the Kuppam
project is not sustainable in net energy terms.

PAYMENTS TO FARMERS

It is only the government and not the company, which is making payments to the farmers for the
lands taken over for the demonstration and it, is being done through DRDA officials. The
payment for the land is , surprisingly not uniforms. At the time of taking over lands, farmers
were promised a heavy payment of Rs. 30,000 to 50,000/- per annum. In practice, this was never
paid. In the first year, the small farmers, specially dalits, were paid only Rs. 3000/- per acre. In
the second year, Rs. 4000/- per acre was paid. In the third year, farmers were promised a
payment of about Rs. 10,000/- per acre. Some have been paid this amount and some others were
not yet. It is learnt that the vocal farmer members were paid additional amounts. Farmers were
not happy with the payments because of the big gap between what was promised at the time
taking over the lands and the actual payment.
The company has claimed an income of about Rs. 1.50 crores from a cropped area of 565 acres
i.e. Rs. 26,549/- gross income per acre. An income of Rs. 17000/- per acre of net cultivated areas
was paid to the farmers, as claimed by the corporate body, though in reality this has never been
paid directly to the farmers. Some of those interviewed indicated that the Government was
diverting DRDA funds to pay the farmers [this needs clarification from the concerned
department]. Over a period of 2 years and 8 months, an average of Rs. 6,367/- per annum was
claimed to have been paid to the farmer, which is not tallying with the actual payments received
by the farmers. If the interest component on the investment alone is taken into consideration,
which works out to about Rs. 52,000 per acre per annum @ 11% interest per annum, the
economic viability of the project becomes questionable. Further, the data on 'returns' from
farming claimed by the company needs a critical appraisal before confirmation. This is due to the
fact that precise information on the cost of cultivation and the methodology adapted in
computing the same, have not been spelled out anywhere.

LACK OF SOUNDNESS IN THE TECHNOLOGY

The adopted Israeli technology broadly consists of intensive irrigated cultivation, use of heavy
machinery and high input. Initially, the soils were ploughed deep (upto about 50 cm depth) and
heavy dose of DAP at about 7.50 quintals per acre, was applied i.e. about 135 kg nitrogen and
345 kg of phosphorous. Deep ploughing, with or without turning the soil is being continued
before every cropping. Agro chemicals, both pesticides and weedicides worth Rs. 4600 are
applied for every crop. These are expected to leave considerable residues in the soil raising
serious environmental concerns. No organic manures are being applied. Farmers are very much
worried about the sustainability of productivity of their lands under the above circumstances.

Long term fertilizer experiments throughout India or abroad, clearly establish the need for
conjunctive use of organic manures (Farmyard Manure) and chemical fertilizers for sustained
higher crop productivity. These data also clearly establish that use of chemical fertilizers
continuously in an imbalanced form (in this particular case only N, P and K are being used)
reduce the soil productivity or efficiency of utilisation of applied N, P and K.

There is enough scientific evidence to show that this type of intensive cultivation is not
sustainable from the point of productivity.

Seventeen borewells have been dug upto a depth of about 600 feet as against 250 ft borewells
dug by the farmers in the neighbouring fields. There was no provision for groundwater re-
change. Under intensive cultivation, there is steep depletion of ground water. Already the bore
wells of neighbouring farmers have dried up or are drying up. Irrigated agriculture with such
rapid depletion of ground water with no provision for its re-change can never be sustainable.

Ploughing or sowing has been done along the slope apparently to provide enough hydraulic
pressure for flow of water in the laterals of drip pipes. This is already causing serious erosion
even with little rains this year (eroded spots were video graphed). Ploughing along the slope is
against the very basic principle of soil and water conservation.
It has been observed that even simple run off without erosion causes soil loss of 4 tonnes per
hectare. Erosion-causing run off may lead to a soil loss of about 40 tonnes per hectares. Erosion
of the type noticed in the demonstration will cause much higher soil loss. These soil losses will
also lead to nutrient losses. It may be mentioned here that to buildup a soil of one inch thickness,
it takes million of years. This fine topsoil, to be more specific, is crucially important from the
point of crop production.

In conjunction with drip irrigation, where soils are kept under near saturated conditions, heavy
machinery is operated for inter cultivation. This is causing heavy compaction of the soil leading
to hardening. This is necessitating deep ploughing before every cropping. Such continuous deep
ploughing will lead to mining of nutrients from the deeper soil layers, specially which are not
applied regularly through fertilizers, and is highly deleterious from the point of sustainable
production. Coupled with addition of no organic manure, continuous deep ploughing will
adversely affect the physical environment of the soil, leading to unsustainable production

The Team observed that cultivation and planting were not even on grade except where
multidirectional slope existed. No waterways were observed by the Team for safe disposal of
excess run off, in case of run off causing rains.

No grounding of any Rain Water Harvesting measures were observed. Any efforts to increase the
TREE COVER were not visible either. Both these strategies are essential components for
recharging of the depleting water table and for drought proofing the lands. Any sustainable
agriculture needs to pay attention to these two strategies, which unfortunately do not seem to be
conceived by the project.

The use of machinery, the non-integration of the animal in agricultural practices, the heavy use
of chemicals for fertilization and for pest-weed control, growing of only crops meant for market
needs-all these agricultural practices in the Kuppam project have inborn potentials for depletion
of the fertility of sols in the long term. Because, market oriented agriculture only mines whatever
natural resources are there but never attempts to build assets of natural resources. Soils fertility
will be the causality in such projects through these land use patterns.

The only positive point of the Israeli technology is increased water use efficiency with drip
irrigation. This of course, is a well known technology and many farmers are already using drip
irrigation with Government assistance at a much cheaper cost (Rs. 17,000/- to Rs. 25,000/- per
acre) Compare this to the investment of about Rs. 4.80 lakhs per acre in the present
demonstration!

SOCIAL IMPACT

Social impact of the present corporate farming is very adverse. Firstly, farmers tilling their lands
have been driven out from their profession and only some are able to work as hired labourers on
the demonstration farm. The benefit of subsidiary occupation like dairying with the use of crop
residues, which is a byproduct of mixed farming, is lost. If the model is replicated everywhere,
alternate employment of such displaced family members of the farmers becomes a serious
problem. Some of the members of dalit families from the village, whose lands have been taken
over, however, are able to work as hired labourers on the demonstration. Labour employment is
only for 60 - 70 women along with 7 - 10 male members per day while the total membership of
the society is 167.

Lands of many farmers were taken against their will (e.g. lands of S. R. Madhusudhan Reddy, -
Ex- Sarpanch, who owns 40 acres of land on which he had grown huge mango and tamarind
trees giving him regular income). Good cultivated lands, which were supporting cultivation of
sugarcane, rice and other food crops, were also taken over. Farmers became totally dependent for
a living on the corporate body losing their earlier independent livelihoods.

The land, labour and natural resources are being harnessed for the needs of an external market
since all the products are market oriented.

What about the staple food needs of the local people? Locally needed cereals and pulses do not
form a major portion of the targeted production. On this count of project does not provide
agricultural production for sustenance of the local population and hence adversely affects local
food security.

Foodgrain production has almost ceased. Only vegetables and other similar crops are being
cultivated. This will adversely affect foodgrain supply to the people living in the area. Unlike in
the past, dependency of the people on the market which in turn is controlled by the corporate
bodies, is total. Subsidiary occupations like dairy were totally lost in the absence of any fodder
by way of bye product from optimum produce.

Another important social aspect of the project will be the alienation of the lands of small and
marginal farmers. This alienation will be reflected in the form that the owners will not have any
say or control on how their lands and labour are going to be used. Title may formally rest with
them but products of their labour and resources of their land holdings will be alienated. Result
will be that they become insecure wage-labourers on their own lands. Such alienation will only
increase phenomenally the poverty of rural households.

As it is the boundaries of the individual fields have been ploughed without leaving any trace of
them. Now, farmers do not know where their lands are located. Farmers now cannot resume their
own cultivation, even if they want due to boundary problems. This is going to be the biggest
problem for restoration of peasant farming when once corporate farming has been established.

Though at the first sight, payments to agricultural workers on the corporate farm, appear high
(Rs. 50/- for men and Rs. 40 per women), they have to put in grueling and hard work is for
longer hours (8 ½ hours) spread over from 7 a.m. to 6 p.m. They get a break of 30 minutes for
breakfast and 60 minutes for lunch. But compare this to the payment they receive when they
work for the neighbouring farmers. There they get Rs. 25/- plus meals with a shorter working
period of about 7 hours. Further, work on the corporate farm is more intensive compared to the
work in the other farmers fields. Therefore if we calculate a 60 hour week on the Demo farm the
workers earn Rs. 350 for men and Rs. 320 for women. That is a wage of Rs. 5-83 for men and
Rs. 5-30 for women per hour. If we compute the cost of the lunch they receive at Rs. 15, the
labourers earn Rs. 280 at the private farmers field for a 42 hour week. This works out to Rs. 6-62
per hour which is 12% more than the wage the corporate body offers.

Absentee landowners, who do not actually participate in tilling their lands, appeared to favour
corporate farming. However, farmers who were actually tilling their lands are opposing the
corporate farm. They are very much worried about the excessive use of agro-chemicals, lack of
use of organic manures and use of heavy doses of fertilizers. They are also worried that the
productivity of their lands will be lost totally if the same chemicalisation of their fields
continues, and they want to have their lands back.

On the other hand, they are worried that boundaries of their lands have been disturbed beyond
recognition. They do not know how to retrieve their lands. Such farmers are expecting the
Government to intervene and help them to resume their cultivation. These farmers are confident
that they can get good yields from their fields if the Government can help them with 'drip system'
for irrigation. At present, corporate farm is getting continuous power supply. Farmers want that a
similar benefit should also be extended to them to ensure higher crop yields.

THE CLAIMS STAND REFUTED

It was claimed in the sponsored ad feature (The Hindu dated 31-1-2000) [Annexure I] that
"Kuppam, after Anand, may well be the staring point of ushering in yet another revolution
centered around the competitive efforts of small groups of farmers". Probably, there cannot be a
greater fallacy than this. There is no comparison between what is happening under the "Anand"
model and in the production system in the Kuppam model. In Kuppam farmers are displaced and
their work is substituted by machinery. There is not even a trace of an element of 'cooperation' in
the Kuppam model, while in the Anand model, members and their representatives are activley
involved in decision making. Secondly, Kuppam model is full of duplicity and farmers have been
totally eliminated from their profession. They can participate in the farm operations only as hired
labourers.

The Kuppam type of farming cannot even be called as contract farming. If it was really so,
parties to the contract (farmers) should know in advance the obligations and privileges they are
entitled to as members of the Mutually Aided Joint Farming Society. In the case of Kuppam not
even well to do farmers like Madhusudhana Reddy, Ex-Sarpanch, leave alone poor dalit farmers,
were supplied with a copy of the 'contract form' or the bye-laws of Chaldiganipally Mutually
Aided Joint Farming Society. Finally, the hold of the farmers on their lands was totally lost in the
Kuppam model, while in the Anand model, no such thing happened.

It was further claimed that "The Large Scale Advances Farm Project, which is better known as
the Kuppam project, is a holistic approach to modernise agricultural practices by involving the
agriculture and all related departments in the process of this technological upgradation. It
revolves around Israel corporative model of agriculture". This is another biggest fabrication.
Both the A P Agricultural University (Acharya N.G. Ranga Agricultural University), which has
the main responsibility to evolve, test/assess any new technology for agricultural development
and the State Agricultural Department which is charged with the responsibility of spreading any
technology in the State for advancement of agriculture have been carefully kept out of the
Kuppam experiments. The data generated through the demonstration has not been assessed by
any technically competent person(s) or body(ies). This claim, thus, is totally inaccurate.

It was claimed that the lands were saline. It is also not correct. Though no data has been shown
to the visiting Team, knowledgeable persons in the area are completely disagreeing with this
assessment of the local soils. The Soil Scientist in the Team, from his visual observation, also
does not feel that this claim could be correct. This claim has been apparently made in order to
show that very good crops are being raised now while no worthwhile crops were raised earlier.
The Team learnt from the interviews with farmers that even crops like Sugarcane, Rice, Orchards
(Mango and Tamarind), a variety of food crops, groundnut and even many variety of vegetables
were being grown earlier by the farmers. In the neighbouring lands, very good crops are being
grown even now.

Drip irrigation which is a hallmark of the Demo farm is not totally new to the area. In fact the
rainfall is not that unfavourable in the area compared to many other districts in the State. Well
irrigation has been quite prevalent in Chittoor district. Therefore it must be understood that
whether in agronomical or irrigation practices or in terms of soil fertility and rainfall this area has
not been at the bottom of the ladder.

It was finally claimed that in the the Hindu advertisement feature that "Kuppam model is
expected to provide the demonstration effect, which will enable replication of this model in other
places. With rapid globalisation and changing trade terms, efficiency of production and
competitiveness will emerge as the paradigms for success and this model may be one of the
answers which Indian agriculture is looking for". This is the epitome of falsehood designed to
'market' unsaleables in the market with an aggressive salesmanship through collaborators.

In our report, it has been clearly shown how the Kuppam model is technically unsound, low in
agricultural sustainability, environmentally destructive and economically unviable. The model is
denying food production and balanced food to the people. Farmers are enslaved to the corporate
farm managers. Rights of the farmers are totally suppressed. If the model is really replicated, it
will raise a host of social problems and unrest of uncontrollable nature, if the emerging social
problems are unresolved.

Unless someone gives grants or heavily subsidise upto about 90% of investment and its cost, the
Kuppam model cannot be replicated. In the present atmosphere of cutting subsidies to the
farmers under the impact of world bank conditionalities coupled with liberalization or
globalization, giving this much subsidy to the agriculture sector in beyond imagination.

Therefore, the question of Kuppam model becoming one of the answers, which Indian
agriculture is looking for, does not arise. Except the drip component, there are no positive
aspects of the technology which can be advocated in the present social milieu. Hence all core
claims made in the sponsored article are specious and not substantiated by any of the facts on the
ground.

An amount of Rs. 243.54 lakhs was paid to the Israeli experts in the name of expenses for
technology transfer for the demonstration. In the present demonstration no technology transfer is
involved as no farmer member of the Chaladganipally Mutually Aided Cooperative society was
trained by the Israel corporate body in the demonstration. Therefore, the claims of technology
transfer is false. The amount charged only replicates the cost of Israeli experts.

CONCLUSION

The only positive point of Israel technology is the drip component, which costs about Rs. 17,000
- 25,000 per acre. The technology being already used by farmers, and provided by the
government agencies including that of Karnataka Government in the neighbouring villages,
works out to be much cheaper and feasible compared to the Israel technology, as shown in the
demonstration. Farmers want that the govt. should help them to install and service the drip
irrigation system. They are not in favour of all other components of Israel technology, which cost
as high as about Rs. 4.8 lakhs per acre and not sustainable technically and environmentally and
not viable economically or socially.

Corporate farming, assuming the above economic parameters to be valid in future also, will not
be economically viable unless the state supports them heavily, as in Israel, at a much higher cost.
At only a small fraction of supporting the corporate farming by the state, peasant farming can be
made viable and vibrant absorbing all modern technological development and meeting the needs
of the future. In the end, it can be said that Kuppam demonstration has miserably failed to show
us an alternate path for agricultural development in the state. It cannot be replicated on its own.
State support to peasant farming, at only a fraction of the cost of subsidy the state has to give to
the corporate farming, coupled with right mix of pricing and marketing policies can make
agriculture vibrant meeting the aspirations and the welfare needs of the people at large.

Dr Chowdry, Dr Prasada Rao, Dr Venkat and Dr Uma Shankari

July 2002