The Political Economy of Agricultural Policy Reform in India

148 CHAPTER 10 Crop Diversification and Contract Farming

Crop diversification is proposed as a solution to groundwater depletion by both the market- and the welfare-state-oriented discourse. Within the market- oriented discourse, there are differences of opinion as to whether a change in electricity pricing alone would suffice to change cropping patterns. For example, a member of the Planning Commission explained that “for a large variation in the price of water,” sugarcane would be more profitable for small farmers than alternative crops.23

Although members of the market-oriented discourse coalition argue for the reduction of minimum support prices for food grains, pointing to over- use of groundwater as one of the negative effects (World Bank 2004c, xv; xviii), members of the welfare-state-oriented discourse coalition argue that a minimum support price policy should be introduced for alternative crops to encourage farmers to take up these crops.

The market-oriented discourse proposes contract farming as one strategy to promote alternative, less water-intensive crops. A World Bank publication states: “Contract farming can serve as a mechanism to reduce the market and income risks faced by farmers when diversifying away from rice and wheat to new commodities” (2004c, xix). The publication mentions several strate- gies by which the government can support contract farming, such as changes to the legal system. In contrast, the welfare-state-centered discourse is associated with a critical view of contract farming. A member of a farmers’ focus group, asked about the group’s opinion regarding contract farming, responded: “We do not like the system. It is just a policy of the government which is not good for us.”24 A representative of a regional party stated: “Contract farming is more like a drama. It recently started. It mostly ben- efited the multinational companies, many of which have no experience in agriculture.”25 Cooperatives, which represent a community-based solution, were mentioned as an alternative by several interviewees. A representative of a farmers’ organization explained: “Farmers are against contract farming, where so many conditions are put on them. But for cooperatives, there is tremendous scope in Punjab if they are provided good opportunities. Where a good management system is there, they can be quite successful.”26 A party representative, however, expressed some concerns about the ability of coop- eratives to function in Punjab: “It is very sad that the cooperative movement is not strong there. It is very good in Maharashtra, but there is no response

23 Interview with member of the Planning Commission, February 28, 2006. 24 Interview with farmers’ group, March 19, 2006. 25 Interview with a representative of a regional party, Chandigarh, March 16, 2006. 26 Interview with representative of a farmer’s organization, April 2, 2006.

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