80 AGRICULTURAL ECONOMICS REVIEW

FARMER’S PARTICIPATION IN CONTRACT FARMING IN INDIA: A

STUDY OF BIHAR

Dr. Deepak Kumar Behera

Assistant Professor, Department of Humanities and Social Sciences, National Institute of Technology Patna, Ashok
Rajpath, Patna, Bihar, India-800005
E-mail: dkb@nitp.ac.in

Abstract

Promotion of contract farming is to uplift farmers by providing better services while linking with
market. Thus, this paper is empirically identifying the factors that influence farmers to
participate in the cooperative (producer’s organization) led contract farming and their intensity
of participation from Bihar in India by surveying 350 contract and 250 non-contract households.
By using Logistic model for farmer’s decision to engage in contract farming, it is found that
participation in contracts is mainly driven by the landholding size, area under irrigation,
availability of workforce in the household and distance to market. Surprisingly, it is observed
that households with more number of male population are less likely to participate in contract
farming while it is opposite when it comes to female labour force.

Keyword: Contract Farming, Bihar, Logistic model, Landholding, Irrigation, Labour force.

Introduction

Contract farming is defined as “a way of organizing agricultural production whereby farmers are
obliged to supply their produce to agro-enterprises in accordance with conditions specified
in written or oral agreement”. The expansion of contract farming has taken place in all regions
across the world. It started in Latin America during 1950s, Japan in the last decades of nineteenth
century, US firms in Central America in the early decades of the twentieth century, Indonesian
government started in 1956, China since 1990 while in India contract farming began in the year
1960 (Prowse, 2012). Due to the efficiency (co-ordination and quality control in a vertical
system) and equity (small holder inclusion) benefits of this hybrid system, it has been promoted
aggressively in the developing world by various agencies (Glover, 1987).
The terms of agreement in contract farming depends on the net benefit of the project, where
cost includes both production and transaction costs (Simmons et al, 2005). A firm enters into
contract in order to ensure the supply of raw materials of desired quality and reduce the
production and transaction costs. On the other hand farmers/growers enter into contract in order
to access assured market and stable income. Thus, both parties are expected to gain from each
other. Because of heterogeneity in the nature of crop and the local institutions, terms of contract
vary. Terms of contract also vary across firms1.
By and large, firms initiate contracts. Therefore, farmer’s participation depends more on
firms’ criteria rather than farmers’ choice. Farmers’ participation in contract farming also
depends upon the nature of crop and local economy. In case of labor intensive crops, firm has
 2019 Vol 20, No 2 81
more incentive to enter into contract with the agricultural households with sufficient labor. Dev
and Rao (2005) observed that an economy dominated by small farmers might have higher
participation. Farmer participation in contract also depends upon the objectives, ownership and
the size of firm. Kumar et al. (2007) found that public agencies by and large contract with
medium and large farmers. On the other hand, private agencies contract with all categories of
farmer, irrespective of their size of holdings and economic condition. Key and Runsten (1999)
provided the evidence that foreign processing companies show preference to contract with large-
scale growers. Singh (2002) and Simmons et al. (2005) found that processing firms prefer to deal
with relatively large producers rather than small producers. However, Birthal et al. (2005) found
no discrimination against small farmer. The processing firms do not prefer to contract with small
farmers because of high transaction cost associated with providing inputs, credit, extension
service, product collection and grading. Large farmers are selected to minimize the probability of
default as they usually have better skills and more resources. In other cases, when farmers come
together and make cooperative, where the cooperative procures and sells the product to agro-
processing firms on behalf of farmers, in this case farmer’s participation in this form of contract
arrangement depends on farmer’s interest.
The recent spate of contract farming in India effectively began with the case of Pepsi Foods
Ltd (hereafter PepsiCo) which entered India in 1989 by installing a tomato processing plant at
Zahura in Hoshiarpur district of Punjab. Latter, Basmati rice cultivation under Rallis India
projects started in Madhya Pradesh, Maharashtra, Karnataka and Haryana. Other examples are
Gherkin cultivation by Global green company in Andhra Pradesh and Karnataka and rapid
spread of poultry projects in West Bengal, Tamil Nadu, Maharashtra, Andhra Pradesh and
Punjab. However, while contract farming in India benefits farmers in some aspects like better
income, better access to inputs and new technology, it is not devoid of issues. Some studies show
that firms are more likely to have a contract with large farmers (Singh 2002; Dileep et al. 2002;
Kumar 2006) to avoid transaction costs involved in dealing with many small farmers. Thus, only
a small section of farmers get to participate in this institutional arrangement, adding inequality in
the economy. In addition, some studies [(Singh 2002; Kumar 2006; Dileep 2002). Singh (2002)
and Kumar (2006)] found the problem of monopoly of firms in a contract as the quality of
fertilisers and pesticides provided by these firms are inferior and that their quantity is often
inadequate for cultivation.
From the above discussion, it can be said that many more studies have conferred about the
importance of contract farming and its benefits to the agricultural sector across states but more
confined with specific states like Punjab, Haryana, Karnataka, Gujarat, Andhra Pradesh, and
Maharashtra. It indicated that the available studies vary not only in terms of their regional focus
but also in terms their approach and method. However, very few studies have discussed about the
contract in Eastern India, while none have examined the performance and benefits of contract
farming in different major crops in Bihar which is increasing adoption of contract farming. Thus,
it becomes necessary to investigate the importance of contract farming in eastern India especially
in Bihar in wake of second green revolution in this part of country.

Agricultural Constraint in Bihar and Emergence of Contract Farming

Agriculture is the mainstay of the state’s economy. The sector holds the key of the state’s
economy by contributing more than one-fourth to GDP (i.e. 19.2 per cent of state’s GDP) and
providing employment to more than 75 percent of workforce in the state. Nearly 92.8 percent of
the farmers in Bihar are small and marginal (small holders), which is much higher than the all
India average of 83.5 percent and due to population pressure, landholdings are also declining. In

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
82 AGRICULTURAL ECONOMICS REVIEW

addition, 29% of households don’t own any land and the average landholding size is
approximately 1 acre. About 60 percent cultivated area are under the rain-fed condition and the
remaining under the irrigated condition. The principal agricultural crops are rice, wheat, jute,
maize and oil seeds. Cauliflower, cabbage, tomato, radish, carrot, beat etc. are some of the
vegetables grown in the state. Sugarcane, potato and barley are some of the non-cereal crops
grown. The state is the third largest producer of vegetables and fourth largest producer of fruits
in the country. It is the largest producer of Litchi, Makhana, Guava, Lady’s finger in India. The
state already exports Litchi, Basmati rice and snow pea to other states. It has competitiveness in
maize, rice and fruits like banana, mango, litchi and vegetables like onion, tomato, potato and
brinjal. The state is also endowed with rich biodiversity. Further, Agriculture provides ample
supply of raw materials for the establishment of Agro based industries. High, stable and regular
supply of agricultural produce provides adequate opportunity for marketing and food processing
industries. The challenge, however, is to effectively exploit the new opportunities by linking
primary producers (farmers) and agri-business firms/retailers/processors.
Several committees, working groups and scholars have extensively assessed the agriculture
sector of Bihar. Though endowed with good soil, adequate rainfall and good ground water
availability, the state has not got realized its full agricultural potentials. The reason for its
underperformance includes: (i) high risk due to concurrent twin problems of flood and drought;
(ii) small and fragmented landholdings; (iii) week institutions and poor governance; (iv) absence
of enabling agri-infrastructure; and (v) poor policy response to changing agriculture. As a result,
agricultural productivity in Bihar is one of the lowest in the country, leading to rural poverty, low
nutrition and migration of labour.
To overcome the challenges and unleash the opportunities, there is a need to reform
agriculture sector, invest in agriculture, reprioritize agricultural research, connect invention and
innovations, link farmers with markets, strengthen institutions and improve infrastructure. As
Bihar is the first state, which has taken bold step for the reform of marketing by repealing the
agricultural produce market committees (APMC) Act that was directed towards allowing private
market yards, direct buying and selling, and also to promote and regulate contract farming in
high value agriculture2, which was not conducive in modern competitive agriculture. However,
there is a need for developing alternative model. The proposal of the Committee headed by Shri
R.C.A. Jain has accepted to upgrade marketing of produce. There is need for better institutional
mechanism to exploit the gain that is being generated in market economy in one site and higher
production from farmers’ site. A suitable model of contract farming specific to crops can be
adopted to solve the problems of small and marginal farmers. There are some contract farming
models prevailing in Bihar like the milk production and marketing by COMFED, vegetable
procurement and marketing by Kaushalya Foundation in Nalanda district, seed production in Ara
district, Basmati rice cultivation in Mungur district and recent intervention by PepsiCo for Potato
cultivation. For the sustainability of these farming models and to expand them across Bihar, there
is a need for further scrutiny. The question is whether such models are suitable for Bihar
agriculture or not in era of agrarian crisis? Therefore, the present paper empirically analyses the
participation in contract farming in Bihar which is expected to provide insights for understating
the emerging agrarian dynamics driven by contract farming in Bihar.

Data Sources and Methodology

This study is based on primary data that has been collected from 600 households from the state
of Bihar where contract farming is in operation. Multistage sampling techniques have been used.

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
 2019 Vol 20, No 2 83
The first stage involved a purposive sampling of choosing Junedi Farmers Producer Company
Limited on the basis of area covered for farming. The second stage involved stratified random
sampling method. Under this company, six villages (Nanad, Bhagwanpur, Dariyasarai, Junedi,
Kadamtar and Gorma) are registered. To select the villages, a pilot survey has been conducted on
different parameters such as Household head, Gender, Total Land, Cultivated Land and crops
grown. Amongst the six villages, three villages namely Nanad (having large area and population
in Nalanda District), Junedi and Gorma are those villages where majority of farmers are
associated with the firm. It has been seen that these villages grew multiple crops such as Rice,
Wheat, Groundnut, Chilly, Potato, Cucumber, Masur, Pulse, Mung Dal, Maize and green
vegetables but only Groundnut and Green Chilly are the two crops cultivated under contract
farming.
For the purpose of the study, amongst three villages, 350 households of contract farmers and
remaining 250 households of non-contract farmers were chosen. Data was collected through a
well-structured questionnaire designed for collecting information from the farmers. Farmers
were asked to provide information like Head of the household, family members, age, gender,
caste, their assets and services, water access like irrigation, market access like distance and mode
of transportation, type and size of land, agricultural assets etc. Data on prices of different crops
and cost in different heads were collected on seeds, fertilizers, irrigation, bullocks, cartage,
manure, machinery, labor, labor for land preparation, and labor for harvesting and threshing.
Questions regarding inputs provided by firms to farmer and information regarding experience of
farming for two crops were also gathered. Each qualitative information has been assigned
different codes to quantify the data. SPSS software has been used for compiling, cleaning and
formatting the data.
Logistic regression model is considered in this paper to test the hypothesis that farmer’s
decision to engage in contract farming can be affected by different behaviour and economic
factors. There were two distinct objectives behind the analysis of determinants of farmers’
participation in contract farming. One was to recognise the two categories of farmers (contract
and non-contract) to be distinct in terms of certain characteristics such as age, education of the
farmers, family size, size of landholding and such others. The other was to identify the attributes
of farmers who were likely to be in either the contract or non-contract category.

Model Specification

Farm households choose to participate in contract farming depending on the following

explanatory variables: (1) farm households’ characteristics (Z) that are reflected by the education
level, age, and members of farm households: (2) households assets and income (I) which will be
captured by the landholding, and non-farm income: (3) production strategies (P), represented by
amount of irrigated land and total investment and (4) market attributes and information (C)
represented by the place for selling of crop, access to credit market and extension service. The
general model takes the form:
Ai= F (Zi, Ii, Pi, Ci) +  I. ……………………………… (1)
The above specification fits the range of binary Logistic model and Ai is binary choice in
which 1 denotes participation in contract farming and 0 denotes not participation in contract
farming (Maddala, 1983). Such models are specification that can be linear, logistic alternatively
or probit models. In comparing the above three models, the linear probability model suffers from
three problems. First, the estimated probabilities do not lie between 0 and 1. Second, the variance
of the error term is not constant but depends upon the explanatory variables. Third, the model

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
84 AGRICULTURAL ECONOMICS REVIEW

suffers from Heteroscedasticity problem. Because of such problems linear probability model is
not recommended for such kind of discrete choice models (Maddala, 1983). To overcome such
problems, logit and probit have been designed to model the choice between two discrete
alternatives. Because the cumulative normal distribution and logistic distributions are very close
to each other, except at the tail, the result of these models would not be different, unless the
samples are large. So a researcher could select one of the two arbitrarily. Hence, in order to
observe households’ decision to participate in contract farming, logistic distribution (Logit)
model was selected. Specification of the logit model is given in equation 2.
 P( y i  1) 
ln   C i  1   2 xi  ......  k x k i  u i …………………….(2)
 P( y i  0) 
Here Ci is the dummy taking value of 1 if the farmer participates in contract, and 0 other
wise. X i is a vector of independent variables, which includes variables like age head of

households, year of schooling of head households etc. 1, ,  2 ,..  k are the estimated parameters,
while u i is the error term which captures exogenous variables that influences the model.

Estimation and Discussion

Logistic regression is generally prone to the biasing effect of collinearity and it is essential to test
for collinearity. It is observed that when there is a perfect linear relationship between the
regressor, the estimates for a regression model cannot be uniquely computed. The primary
concern is that as the degree of multi-collinearity increases, the regression model estimates of the
coefficients become unstable and the standard errors for the coefficients can be inflated. Here,
SPSS data command has been used that can detect multi-collinearity problem. Observing the
value of tolerance and VIF (Variance Inflation Factor) tests gives idea about the problem of
multi-collinearity. As a rule, a variable whose VIF values are greater than 10 and tolerance value
are less than 0.1 may merit further investigation. It is observed that VIF values are greater than
10 and tolerance values are less then 0.1.

Tab. 1. Farmer and household’s characteristics t-test of means of variables: farmers with
contract and non-contract
Separate Variance
Means of Response Estimated
Variables
Total CF Non-CF t-value P-value
Age of the Household Head* 52.31 53.63 50.45 3.52 0.00
Caste of Household* 3.18 3.33 2.98 3.724 0.00
Working Population Male (15-59) 2.16 2.13 2.20 0.950 0.34
Female Working Population (15-59) * 1.58 1.51 2.20 2.789 0.01
Total Working Population (15-59) 3.71 3.64 3.81 1.52 0.12
Mobile (0-no; yes-1) 0.99 0.99 0.98 1.91 0.57

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
 2019 Vol 20, No 2 85
Having plough 0.99 0.99 1.00 2.00 0.45
Having tractor/power tiller 0.05 0.06 0.04 1.24 0.21
Having pump set*** 0.99 0.98 1.00 1.64 0.10
Having Bore well* 0.28 0.41 0.10 9.73 0.00
Having sprayer* 0.13 0.19 0.04 5.89 0.00
Distance to access to water point for 3.58 4.10 2.86 10.57 0.00
irrigation*
Distance to crop input market* 5.72 5.50 6.01 3.34 0.00
Distance to crop output market* 5.23 4.67 6.01 7.25 0.00
Irrigated land [ac] *** 2.86 2.47 3.38 1.64 0.10
Total land 2.55 2.48 2.65 1.55 0.12
Credit access* 0.03 0.054 0.00 -0.47 0.00
Access to technology * 0.59 0.97 0.00 114.65 0.00
Source: Author’s calculation from Field data
Note: CF = Contract farmer, Non-CF = Non-contract farmer
*Statistically significant difference in means at the 1 % level, ** at the 5 % level, and *** at the 10 % level
Separate variance estimated means of selected variables on characteristics of contract and
non-contract farmers are shown in Table 1. The results show that there are some differences in
characteristics of the households between the contract and non-contract farmers.
The descriptive statistics indicated that contract farmers are older in age than the non-contact
farmers. The average age of household head is around 53.06 years in case of contract farmers
whereas it is 50.00 years in case of non-contract farmer. It is interesting to know that the non-
contract farmers have higher number of working populations in their household compared to
contract farmers. Number of members in household between age of fifteen to sixty years, it is
observed that among contract farmers it is 3.64 years while 3.81 years in case of non-contract
farmers. However, higher number of contract farmers have mobile phone compared to non-
contract one. Similarly, higher number of contract farmers have bore well, tractor or power tiller
which helps in cultivation process compared to non-contract farmers. Coming to irrigation
facilities, it is observed that a contract farmer has to travel more distance to access water to
irrigate to their field compared to non-contact farmers –distance to irrigation source is 4.10 KM
in case of contract farmers while it 2.86 KM for non-contract farmers. However, distance to
output market where farmers can sell their agricultural produce is less in case of contract farmers
(5.50 KM) while it is 6.01 Km in case of non-contract farmers. It is also observed that contract
farmers have lower average irrigated land compared to non-contract farmers. Average
landholding size is higher among non-contract farmers compared to contract farmers. It is
important to note that contract farmers have better access to credit and modern technology
compared to non-contract farmers. For examples, higher numbers of contract farmers have
access to credit and technology, while it is negligible in case non-contract farmers.
To determine certain characteristics that influence farm households to join in contract
farming, logit model has been used. The results of estimated logistic regression on the likelihood
of farmers’ participation in contract farming are reported in Table 2.

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
86 AGRICULTURAL ECONOMICS REVIEW

Tab. 2. Probability of Farmers’ Participation in Contract Mode of Production of Groundnut

and Green Chilly
Wald
Co- P- Odds
Variables Chi-
efficient Value ratio
Square
Intercept* 2.17 13.68 0.00 8.70

Farmer
AGE  46 Years -0.060 0.80 0.77 0.94
characteristic
s
SC* -1.08 9.34 0.00 0.341
Caste ST 0.36 0.024 0.877 1.03
OBC 20.71 0.01 0.999 99.11
Household  3 Member* *
WMP -0.425 2.64 0.10 0.65
characteristic *
s WFP  2 Member* 1.59 43.41 0.00 4.90
Mobile
Yes -0.91 1.15 0.29 0.33
Phone
LAND
 2.6 Acre* 0.67 10.65 0.00 1.95

ILAND Continuous -0.22 1.02 0.31 0.98

Farm
characteristic Bore well Yes* -2.20 63.11 0.00 0.11
s
Tractor/po
Yes -064 1.48 0.22 0.52
wer tiller

Distance to
Others  6 KM*** -0.42 0.20 0.04 8.76
Market
Hosmer and Lemeshow Tests 94.26 (0.00)
Chi-Square value 164.95 (0.00)
Negelkerke R2 0.45
Actual non- Actual contract
contractor farmer
Predicted non-contract farmer 180 67
Predicted contract farmer 66 262
Percent correct 72.9 % 79.9%
Total percent correct 76.9 %
Source: Author’s Calculation from Field data
Note: *, **, and *** indicates the variables are significant at 1, 5 and 10% level.
N = 575, Contract farmer (N1) = 328, Non-contract farmer (N2) = 247
Logistic regression represents the marginal contribution of each variable, evaluated at the
sample mean, associated with t-value and the odds ratio. The results of this study are in line with
the broad argument that the decision to participate or not is influenced by the simultaneous
interaction of various demographic, socio-economic and institutional factors. Of the 10
regressors, seven are found to be statistically significant. In the case of rice seed, five out of 10
independent variables are found to be statistically significant. The value of Wald  2 indicates the

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
 2019 Vol 20, No 2 87

goodness of fit test for the fitted model. The probability exceeds the  critical value. Though sign and
2

the significance level of coefficients are the simplest way to interpret a logit model, the most useful way
is an interpretation of odds and its ratio. The estimated coefficients measure the change in predicted log
odds of participation in contract production for a unit change in independent variables. A positive
coefficient means that the odds of observing a higher participation in contract production rises with a
higher value for the independent variable. A negative coefficient has an exponential value between 0 and
1, which decreases the odds.
In earlier studies like Singh 2002; Dileep et al. 2002; Kumar 2006, size of landholding was found to be
an important factor that induced farmers to participate in contract farming. Farmer’s having large
landholdings are more likely to participate in the contract farming so as to avoid transaction costs
involved in dealing with farmers. In our study it is observed farmers those have more than 2.5 acres of
land are more likely to cultivate the crop for supplying to Producer’s Cooperative/contract firm. The odds
ratio indicated that 1 unit increase in landholding size, farmers having more than 2.5 acres of land would
like to participate in contract by 1.95 times more compared to the farmers having less 2.5 acres of land.
This outcome is in the line with Singh (2002) and Kumar (2006) that states that farmers participating in
contract farming are mostly large. Land under irrigation is found to be another important factor that
influences the farmers’ decision on contract participation. The estimated odds ratio indicates the existence
of a non-linear relationship between land under irrigation and contract participation. This particular result
is in contrast to our hypothesis that with an increase in size of irrigated land, the probability of a farmer’s
participation in contract will be higher. The result thus indicates that while a greater area of irrigated land
increases the probability of participation, this effect diminishes.
The variables related to farmers’ characteristics are found to be insignificant in both gherkin and rice
seed contract production. This could be the result of the same pattern prevailing across contract and non-
contract farmers. However, the odds ratio of farmer’s age shows that older farmers are less likely to
participate in contract farming compared to young ones. The cropping pattern of a farm depends not only
on resource endowments but also on the labour component of a particular household [Key and Rusten
(1999), Singh (2002), Dev and Rao, (2005) and Swain (2011)]. The results indicated that independent
variables like CASTE, WMP and WFP significantly influenced farmers’ participation in the contract
mode of production. The odds ratio of WMP suggests that households having higher male working
population (more than 2 members) are less likely to participate in the contract farming, while it is
opposite in case of Working female population. This could be because other opportunities are available
for the male working population compared to contract farming (Swain, 2011). The Odds ratio indicates
that households having more than 1 female working population are 4.5 times more likely to participate in
contract farming than the households having only one female working population. The odds ratio of
CASTE tells us that farmers from lower castes are less likely to participate in the contract. It could be the
case that households from SC category have resource constraints.
The Odds ratio of bore well shows that households having bore-well are less likely to participate in the
contract mode of production compared to households not having bore-well. This outcome is in contrast to
our hypothesis. It is interesting to note that households with longer distance to market are more likely to
enter into a contract compared to the households that are at a shorter distance to the market. This could be
because longer distance from the market imply more transaction cost (time and transportation cost) thus
inducing farmers to enter into contract for easy selling of output.

Conclusion
From the above discussions, it can be said that Bihar that repealed the APMC act by adopting contract
farming has seen an alternative institutional arrangement to uplift farmers by providing better services
while linking with market. The result suggests that participation in contract farming depends on different
factors i.e. landholdings, family labour, access to credit, access to technology and such others. It is more

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
88 AGRICULTURAL ECONOMICS REVIEW

likely that firm under contract farming offers many benefits for farmers including access to technology,
financial resource, specialized input market, a new market for the output and reduced price variability.
Thus, to access these facilities farmers are interested to participate in contract mode of production. It is
also observed that participation in contracts is mainly driven by the landholding size, area under
irrigation, availability of workforce in the household and distance to market. Surprisingly, it is observed
that households with more number of male populations are less likely to participate in contract farming
while it is opposite when it comes to female labour force. The comparison of farm’s and farmer’s
characteristics shows that contract farmers are better educated, hold more production assets, adopt better
production strategy and have better access to market than the non-contract farmers. The result of intensity
of land allocation for the contract crop it is observed small farmers are allocating proportionately more
land compared to large farmers. Small farmers with better education may intensively participate in
contract farming as it provides better facilities.

References

Birthal, P.S., P. K. Joshi, and A. Gulati., 2005, Vertical Coordination in High-Value Food Commodities:
Implications for Smallholders. International Food Policy Research Institute, MTID Discussion Paper
No. 85.
Dev, S. M., and N. C. Rao. 2005., Food Processing and Contract Farming in Andhra Pradesh: A Small
Farmer Perspective. Economic and Political Weekly, 40(26), 2705-2713.
Dileep, B. K., R. K. Glover, and K. N. Rai., 2002. Contract Farming in Tomato: An Economic Analysis.
Indian Journal of Agricultural Economics, 57 (2), 197-210.
Glover, D. 1987., Increasing the Benefits to Smallholders from Contract Farming: Problems for Farmers’
Organisations and Policy Makers.World Development, 15(4), 441-448.
Key, N. and Rusten, D., 1999. Contract farming smallholders, and rural development in Latin America:
The organization of agro-processing firms and the scale of out grower Production. World
Development, 27(2), 381-401.
Kumar, P., 2006., Contract Farming through Agribusiness Firms and State Corporation: A Case Study in
Punjab. Economic and Political Weekly, 41 (52), 5367-5375.
Maddala, G. S. 1983., Limited Dependent and Qualitative Variables in Econometrics (Cambridge
University Press: United Kingdom).
Prowse, Martin. 2012., Contract Farming in Developing Countries - A Review. Institute of Development
Policy and Management, University of Antwerp, February.
Simmons, P., P. Winters, and I. Patrick. 2005., An Analysis of Contract Farming in East Java, Bali, and
Lombok, Indonesia. Agricultural Economics, 33 (3), 513-525.
Singh, S. 2002., Contracting out Solutions: Political Economy of Contract Farming in Indian Punjab.
World Development, 30(9), 1621-1638.
Swain, B.B. 2011., Contract Farming in Andhra Pradesh: A Case of Rice seed and Gherkin Cultivation.
Economic and Political Weekly, 46(42), 60-68.

1
Take an instance of PepsiCo model of contract farming, which is different from Appachi Model of Integrated
Cotton Farming. Pepsi model of contract farming is a two party contract model. The stakeholders are company and
firm only. Price fixation in this model is done directly between farmer and company. There was informal agreement
to manage production with input provision and ties loans/advances. In Appachi Model of Integrated Cotton Farming

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions
 2019 Vol 20, No 2 89

is a multipartite model. In this model, the Appachi Care Foundation acts as the acts as the coordinating agency
between small farmers and other stakeholders such as input suppliers, service providers and actual user of cotton. In
this model the price of the commodity is not pre-determined and depends on the market price. Further, farmer has
the option not the obligation to sell his produce to the contracting agency. For more details see Kumar et al, (2007).
2
The model Act encouraged the establishment of private markets, direct purchase centers and the promotion of
consumers/farmers markets for direct sale through public-private partnerships

Downloaded from https://cabidigitallibrary.org by 114.124.213.226, on 06/07/24.

Subject to the CABI Digital Library Terms & Conditions, available at https://cabidigitallibrary.org/terms-and-conditions