Page 44 - BANKING FINANCE OCTOBER 2021

ARTICLE

Explanation of Model I: as an intermediaries. The scale of operations is comparatively
In this model the farmers are directly dealing with the buyer. large where arthiyas are providing extension services and
This model can be implemented for small scale of operations. other services like loans and other inputs as per the
The price of the commodity is fixed with the mutual agreement terms. However there is lack transparency for
agreement with the farmer and buyer. Generally buyer is price fixation and exploitation of farmers may be possible.
not providing any services unless and until it is agreed upon
in the agreement. Diagram-4 Contract Farming Model-IV

Diagram-2 Contract Farming Model-II Buyer

Buyer

Implementing Agency Bank

NGO / Government body

Input like seeds, Loan for asset
fertilizer, Farmer creation Asset/
Farmers working capital Life Insurance

Explanation of Model II:
In this model NGO or Government agency is involved as an Explanation of Model IV:
intermediary between farmer and buyer. Extension services In this model the buyers are corporates and they appoint
and other services are provided to the farmers at the implementing agency to conduct the overall operations
discretion of the NGO/Government body or as agreed in the effectively. The operational cost is very high due to
contract terms. There is no intention to make any profit engagement of channel partner. Wide range of extension
hence this model is considered a transparent contract services and other inputs are being provided by the
farming model. implementing agency to farmers as per the agreement
terms. Farmers are availing financial services from the banks
Diagram-3 Contract Farming Model-III for creation of assets, getting asset insurance and life
insurance (in case animal husbandry like dairy business).
Buyer Contract farming practices followed by the corporates are
quite standard however there is always a question of
transparency as many times farmers interest is overlooked
for earning the profit for corporate.

Arthiyas as facilitator Current Ordinance
Farming Agreement: The Ordinance provides for a farming
agreement prior to the production or rearing of any farm
produce, aimed at facilitating farmers in selling farm
Farmers produces to sponsors. A sponsor includes individuals,
partnership firms, companies, limited liability groups and
societies. Such agreement may be between: (i) a farmer
Explanation of model III: and a sponsor, or (ii) a farmer, a sponsor, and a third party.
In this model traditional channels like Arthiyas are working The role and services of any third party, including

44 | 2021 | OCTOBER | BANKING FINANCE