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Era of globalization and liberalization, role of state in agricultural marketing and input supply is reduced

In this process, the processor or company provides farmers with credit, extension services and other

inputs, sometimes it provides the crop collection facilities, repaid through deductions from sales to the

processing plants, sometimes. It allocates risk between producer and contractor; the former takes the

risks of production and the latter the risk of marketing. The World Bank (1989) has identify thatcontract farming creates a dynamic partnerships between private capital and small holders, which will

lead to technology transfer, innovation and market growth. It provides for a vertical coordination

between growers of an agricultural product and processors of the product.

The contractual agreement varies from crop to crop ( perishable commodities, cotton, tobacco )MODELS

o The Centralized Modelo The Nucleus Estate Modelo

The Multipartite Modelo The Informal Modelo The Intermediary Model

Contract farming varies depending on the nature and type of contracting agency, technology,nature of crop produce and the local or a national context.

(Ref. Bharat Ramaswami, Shamika Ravi, S.D.Chopra (2003))Three type ofrisk (production, price and input) which the farmer faces in daily life

Production and price risk are two major risks in agriculture that confronts farmer faces in dailylife

Contract farming is an alternative risk management system, which reduces the risk in agriculturethrough sharing between farmer and industries Pari Bauman (2000), FAO (2001), Word Bank

(1989).

Additional source of capital, part of the risk of adverse price movement to the buyer (hill &insurgent, 1987 )

In context of India, the technology need to be transferred by having a contract with the farmersat pre-defined prices. ( farmer gets access to production services and credit as well as

knowledge of new technology.

Cost efficient inputs, such as extension advice, mechanized services, seeds, fertilizers, and creditguaranteed and profitable markets for their output

Disadvantages

Contract farming may subjugate the peasantry to increased control and exploitation by capitalleading to a peculiar from of proleterionization

Leads to self-exploitation of the farmers and the companies gain indirect control of land Low bargaining power of the farmers Land degradation, more cultivation and after 4-5 year, they are leaving the place.

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