Saturday, January 14

Caught In A Contract

Reneging MNCs are robbing farmers of their dues in Punjab, reports Rajesh Ramachandran in Outlook
A sprawling house set amidst lush farms, a four-wheeler and a tractor parked in the courtyard, workers on call, Gurcharan Singh standing in a field of blooming yellow mustard crop looks the very picture of Punjab's new-age farmer, waiting for mncs to sign contracts with him. But in reality, he is an angry man. He searches desperately for the piece of paper state PSU Punjab Agro Foodgrains Corporation (PAFC) gave him promising to buy his mustard crop. Unable to find it, he and fellow farmers symbolically burn a piece of paper to protest the dishonouring of his contract.This farmer from Ghumman Kalan in Gurdaspur had signed a contract in 2004 with the PAFC when he bought Hyola or hybrid mustard seeds for Rs 450, enough to sow three acres. The corporation had promised to lift his yield at Rs 1,700 a quintal. Early last year, Gurcharan took 27 quintals of mustard to the prescribed market at Dhariwal, where he was reminded of the fine print, the quality parameters. PAFC claimed that Gurcharan's mustard had high moisture content. He went back, dried his produce and returned. To no avail. He visited Dhariwal a third time and when the response was still the same, Gurcharan sold off his produce in the Batala market for Rs 1,500 a quintal. "The deal was one-sided, I couldn't contest their claim. I'd have put 10 acres on contract this season had they honoured it. But this small patch is all I've sown for my own use," he says.This is the state of the Punjab government's much-touted contract farming policy. The central government's Commission for Agricultural Costs and Prices (CACP) confirmed farmers' woes in a field study done in September 2005. It revealed a distinct lack of accountability on PAFC's part. When the Punjab government amended its Agriculture Produce Marketing Committee Act in 2002 to initiate contract farming, it made PAFC a nodal agency, a party to the contracts and the sole arbitrator. But the CACP noted while referring to cases of non-payment of dues by Nijjer Agro Foods Ltd, a Punjab-based company, to tomato farmers for over a year just to "force them to supply their produce to the factory" (for fear of not being paid their earlier dues), "So far, the PAFC has not taken up any case for settlement of dispute." In fact, it seems to have looked the other way when mncs like Pepsi and other agro-majors have reneged on promises. In another study commissioned by the state government in 2004, the Punjab Agriculture University (PAU) noted an alarming 60 per cent of contract farmers saying 'No' to further contracts. In an evaluation of the contract farming scheme in Punjab state, PAU scientists surveyed eight districts and spoke to farmers listed by the PAFC. Overall only 36.25 per cent farmers were satisfied with contract farming, it benefited just a minority. In comparison to conventional farming, the net losses suffered on Hyola were Rs 2,238 an acre and Rs 7,594.01 an acre for winter maize. Says economist Sucha Singh Gill of Punjabi University, Patiala, "Farmers are largely being cheated. I did a survey of contract farmers in Patiala last year and found that PAFC is working virtually like an agent of these companies." There is in fact heavy government subsidy, as Dr S.S. Johl, former chairman of CACP, points out. The mandi fee, rural development tax and purchase tax are waived off and the PAFC pays a huge amount to private companies and corporations as charges for technical services. For instance, Tata Chemicals is paid Rs 100 an acre for technical services and expertise rendered to farmers. If this is converted to the total targeted Basmati crop this year of one lakh acres, PAFC would be shelling out over Rs 1 crore for passing on technical expertise to farmers!But Ravinder Singh of Ghumman Kalan bought 10 kg of Basmati seed from Tata Chemicals for Rs 350 two years ago and shelled out Rs 100 himself for their technical advice. None came. The contracted price for his produce was Rs 1,250 a quintal. "They rejected my Basmati saying it had higher moisture content. But I got over Rs 1,300 in the market.?
Most of the farmers whose contracts were dishonoured didn't even know they could approach the PAFC for settlement. Bhupinder Singh Mann, president of the Bharatiya Kisan Union and a former parliamentarian, alleges corrupt practices. "According to official figures, the PAFC bought back just 10 per cent of the mustard yield in Gurdaspur district. Through the PAFC, private companies sold seeds to be sown in 4,400 acres, the yield should have been roughly 36,000 quintals. But the PAFC bought only 3,500 quintals." Mann even suspects an attempt by the companies to depress market rates and ensure distress sales. "If you reject 90 per cent of the produce, there would be a surplus in the open market and the very same companies could procure it indirectly.
Since the PAFC is a nodal agency responsible for the conduct of private companies, Outlook sought its managing director Himmat Singh's response to these allegations. Holding the aversion to market forces responsible for such accusations, he said, "Few people understand that this is purely a voluntary decision of the farmer to join a new way of agriculture. If he has a problem, who's stopping him from filing a criminal case against Pepsi or any of the companies allegedly duping him?" He, however, admits that no farmer has approached the PAFC yet for arbitration because, as he puts it, "the market absorbs the defects". But, as Gill points out, "Presently, it's an unequal relationship between the farmer and the companies. Since the latter are more powerful, they are arm-twisting them, and few have means for redressal."Himmat Singh argues that the PAFC wants farmers to be quality-conscious. "In the post-wto regime, farmers have to get used to quality standards," he says. Except that quality has become a convenient escape route. The CACP report cites the example of potato farmers who had signed contracts with Pepsi. A 3-4 day wait at the factory gate results in increased sugar level, rendering the produce substandard. The rejected quantity fetches just Re 1 a kilo whereas the contract price is Rs 4.50. Baldev Singh Jaldar of Bhaliapur in Amritsar district and 12 others entered contracts with Pepsi last June for Rs 1,200 a quintal of Basmati after having bought seed from it. "When I took the yield to them, the company told me it was substandard. It is like my wife telling me she doesn't like my beard wagging when I talk. Having bought the seeds and signed the contract, what option do I have," he asks.It's a vicious circle. As the CACP report points out, "Even if the market price rises above the contract price, Pepsi ensures farmers deliver their produce at the predetermined price. No concession is given. In case of default, the farmer is blacklisted." The threat of blacklisting and the uncertainty of market rates the next season force the farmer to forego the higher market rate. Since there is no official procurement of Basmati by governmental agencies, farmers are captive to the companies.Nijjer is the company that has come in for the worst criticism from the CACP for late payment, bounced cheques and non-payment. But PAFC says Nijjer Agro is not even registered with it and hence it knows nothing of its operations. Laws of the jungle rather than the farm seem to prevail in Punjab where the arbitrator is a mere spectator.

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