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Farming out retail

business Updated: Aug 26, 2007 05:27 IST
Kumkum Dasgupta
Kumkum Dasgupta
Hindustan Times
Highlight Story

The entry of large organised players like Bharti and Reliance in food retail was supposed to revolutionise the farmer’s world by freeing him from the clutches of the middleman and getting him better prices. Has that really come about?


Surinder Singh Chawla is a happy man these days. Sitting in his spacious home in Jalandhar’s Kadiyanwala village — known for its potato farms — the septuagenarian shares with Hindustan Times how he hopes to become a part of India’s agri-retail revolution. The revolution promises to connect farmers with consumers, bypassing the traditional route controlled by multiple layers of middlemen.

In a way, Chawla is the typical Punjabi farmer: industrious and receptive to new ideas. Organised retail companies are looking for farmers like him to spearhead their contract-farming initiative that will keep shop shelves in urban India stocked with farm-fresh fruits and vegetables. In return, the companies promise them best prices, a steady market and technical information to improve productivity and quality. The legal teeth behind contract farming is the amended Agriculture Produce Marketing Committee Act (APMC), which provides for the establishment of private markets, direct-purchase centres, markets for direct sale and promotion of public-private partnership in the management of agricultural markets.

“I have signed a contract with Bharti Retail to grow baby corn,” says Chawla. “Initially, I was a bit sceptical. But I wanted to get out of paddy growing because it is becoming uneconomical. Plus, there is the headache of taking it to a mandi and negotiating with the artiyas or commission agents. Sometimes they form ‘pools’ and dictate the price.” He decided to take up the Bharti offer because the company promised to pay him Rs 950 per quintal for baby corn and also transport the produce directly from his field. In return, he promised six acres to the company. The deal was signed in June. The harvest was ready this month, and Chawla received a cheque for Rs 59,000. The company owes him Rs 2 lakh in all — so the balance should be forthcoming.

So what is the modus operandi? The company will give Chawla seeds and other inputs to grow baby corns. Their field officers will visit the farm to oversee the crop. Though there is no crop insurance in-built in the contract, Chawla is ready to take a risk.

Another person willing to take a risk is Amar Singh of Bal Nau in the same district. The ex-sarpanch owns almost 120 acres of land and unlike many others has diversified his crop basket with vegetables, aromatic crops like mentha as well as paddy and sugarcane. He has entered into a “verbal” contract with Reliance Retail and has been asked to grow radish and coriander. “Earlier, I used to send my crops to the Barnala mandi (150 kms from his farm). But now I will go to the procurement hub of the company known as Ranger Farms and sell it,” he says. However, he will not get seeds or technical help from the company.

Reliance officials say they are interested in ‘contact’ not ‘contract’ right now. The company sends field officers who tell farmers about the procurement hubs and the prices they are offering. Farmers are queuing up because weighing is done on electronic scales unlike in mandis, payment is immediate and they are saving on transport cost.

Just 25 km from Kadiyanwala, there is Hari Singh at his modest home at Bulanda village. Sitting on a charpoy, Singh points towards his 13-acre land where he grows radish, carrot, spinach and fodder. He’s not really convinced about the retail revolution. For him, he says, the old route works better, at least for the moment. Singh takes his produce to commission agents at Nakodar mandi. It is weighed and the price is decided. The agent, who takes a cut on the sale, then takes the produce to the traders. This system thrives on personal and social contacts. “My agent pays for my inputs like fertilisers and helps me out during financial crises even though the interest on credit is very high. The companies cannot do all this for me,” says Singh.

Ramji Das of Palewal village in the neighbouring district of Hoshiarpur seems to share this view. Field officers of different firms have been visiting his village to gauge the mood of farmers. But it will take some convincing to make him sign any contract.

So as the retail game unfolds in the big cities, farmers like Chawla and Amar Singh on one side, and Hari Singh and Ramji Das on the other, will decide which system — the old or the new — will work for them. In a way, they will decide the future of Indian food retail.