Acid Lime Growers’ Feasibility Perception of Contract Farming

Introduction

In India, citrus is the third largest fruit industry and acid lime (Citrus aurantifolia Swingle) contributes 25 per cent of the total citrus area. It is grown on large scale especially in Andhra Pradesh, Telangana, Gujarat, Maharashtra and Tamilnadu. The total area under acid lime and lemon in India is 2, 69,000 ha with 30,20,000 tonnes of annual production.¹ The production and marketing are closely interlinked and at times owing to glut, more production brings down prices and profitability. While the green revolution era focused mostly on production, the marketing aspect was neglected for long. As a result, farmers were left to the vagaries of volatile input and output markets, leading to exploitation by middlemen. In the present situation, quality and competitiveness are gaining centre-stage. The globalization has opened up many opportunities as well as challenges for trading in domestic as well as international markets. This however has created specialized needs of growers and the private sector has also come forward to perform the task of technology transfer and marketing of produce. Under such situation, contract farming ensures a stable and reasonable income to the farmers. Contract farming is fundamentally based on three main premises:.¹ The firm commits in advance to purchase certain volume of produce and the producer commits to delivering it.² The contract rests on specific crop management practices to be followed by the farmer.³ There is an implied differential allocation and sharing of production risk. In contract farming, the companies often meet farmers to introduce them to the best orchard management practices. Many private companies; do the job of capacity building and skills transfer besides supplying the latest technology package to the farmers. Hence, to ascertain the scope of contract farming in acid lime, this research was undertaken.

Methodology

The sample of acid lime growers (200) was drawn from two districts of western and one district of the Vidarbha region in Maharashtra, covering five taluka and eighteen villages (Table A). The respondents who had previous experience in marketing of acid lime were selected. For the collection of data households were chosen from selected villages by random walk sampling technique. Using the pre-tested interview schedule the sample respondents were contacted for eliciting information, which had both close-ended and open-ended questions. The statements to ascertain feasibility of contract farming were measured on four-point continuum namely, feel strongly, feel moderately, feel neutral and not feeling with the score ‘four’,‘ three’, ‘two’ and ‘one’ respectively. The eight issues governing profitability were enlisted and against it, the responses were elicited on three point grading scale with appropriate coding. The rank based quotient for each aspect was worked out and the rank order was decided.

Table 1

Results and Discussion

The results obtained from the present study as well as discussions have been summarized under following heads.

Feasibility perception of contract farming

Perception is the ability of an individual to comprehend and interpret the situation or thing to form a coherent and unified view of an issue. The data on perceived feasibility of contract farming  presented in Table 1 showed significant relationship between occupation (t=1.596) and perceived acceptability of contract farming in citrus at 5 per cent level of significance. Similar relationship existed between annual income from acid lime (t=0.391) and perceived acceptability of contract farming in citrus. Rest of the factors did not show any significant relationship owing to the respondents’ skepticism about the launching of any such venture by the private sector.

Table 1: Regression analysis between selected independent variables and perceived acceptability of contract farming (N=200)

** Significant at 1% level   * significant at 5 % level

• Education:    Primary=1,Middle school=2,High school=3,College=4, Graduate=5,Post graduate=6
• Social Participation: President/vice president=4,Secretary=3,Member=2,Non-member=1
• Occupation: Farming only=3,Farming + Govt. service=2, Farming + business=1
• Communication behavior : Regularly=3,Occasionally=2,Rarely=1
• Average productivity: 0-5 tns=1, 5-10 tns=2,  10-15 tns=3, 15-20 tns=4,20-25 tns=5

Perceived advantages of contract farming

Table 2 specifies the prioritizations of perceived advantages of contract farming by acid lime growers. The guaranteed and fixed pricing structures was perceived as the main advantage which sought the attention of maximum respondents (RBQ=175). [2] got similar findings. It was followed by shield against market fluctuations (RBQ=173.75).It discerns that, due to more instability in prices they are getting less profit. The access to improved technology ranked to be the third (RBQ=166) important factor.³ reported similar finding in the study on contract farming in Karnataka. The provision of production management services ranked as fourth (RBQ=163.25) relative advantage followed by better quality produce (RBQ=156) and skill transfer (RBQ=153.25). The insurance based contract (RBQ=153.50), access to credit/credit linked input supply by the contract farming firm (RBQ=155.25), reduced transaction cost (RBQ=138), and reduction in pre & post harvest losses due to monitoring and advice of the contract farming company (RBQ=127.50) were rated to be the seventh, eighth, ninth and tenth in order of preference. It indicates that their cause of concern is more of marketing than the production aspect.

Table 2: Perceived advantages of contract farming (N=200)

Risk Factors in acid lime farming

With certain perceived risks, the orchardists’ treads the path ahead with optimism of remunerative prices to the produce. The data in table 3 enlists the risks factors in citrus farming and the questions were asked on three point grading scale. The rank order shows the prioritization of risk factors perceived by the growers. Inadequate water for irrigation ranked the first highest risk factor. Similar findings were reported by⁴ in a study of citrus in Jammu region. The second important risk factor was price uncertainty followed by bumper production and fewer prices (distress sale) as third.⁵ observed same in case of fruits in Uttar Pradesh. The incidence of hailstorm was the fourth and citrus canker stood to be the fifth important risk factor. The incidence of phytophthora induced gummosis considered to be the sixth risk factors whereas the bark eating caterpillar, excessive fruit drop due to unseasonal stormy weather &rains and fruit cracking relegated to the seventh, eighth and ninth positions respectively.

Table 3: Risk Factors in Acid lime Farming (N = 200) (PMS)* =600

PMS=Possible Maximum Score

Perception on issues governing profitability

Although the overall profit margin is governed by the market rate at the time of sale, there are various interlinked factors/issues that determine the profitability. Table 4 delineates all such issues of cardinal importance. Unfair market price was ranked as the number one issue (RBQ=181.33) followed by over production and less market price (RBQ=178.33) to the produce. Distress sale to pre-harvest contractors (due to immediate need of money and tradition (RBQ=175.66) rated as the third important issue and the middlemen deciding the price of the produce (RBQ=174.00) as fourth. The lack of grower’s co-operative organizations to support group marketing (RBQ=167.00) was rated to be the fifth in order of importance. It established a close connection among these five factors that govern profit margin. The lack of cold storage facilities in the market premises (RBQ=156.66) was ranked as sixth whereas the lack of government support / assistance in marketing the produce (RBQ=154.66) as seventh in order of importance. Selling the produce without proper grading and packing (RBQ=121.00) was relegated to the last position.

Table 4:  Perception on issues governing profitability (N = 200)*

Conclusion

On the basis of the above mentioned results and the discussion, it can be concluded that the acid lime growers who are getting good annual returns from the acid lime cultivation are willing to go for contract farming. As there are no regulated markets in the region, the farmers sell their produce in the unregulated markets. Due to the informal relations with the local middlemen, they are so accustomed to the prevalent transactions and find security in the usual dealings. Although the guaranteed and fixed pricing structures were appreciated by the acid lime growers, unless the relative advantages of alternative model in the form of contract farming are experienced by peers, they preferred to be status quoits.

Acknowledgements

Authors are thankful to the Director of ICAR- Central Citrus Research Institute (CCRI), Nagpur, India for the provision given to carry out this study.

References

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