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Inflections in Agricultural Evolution

Contemporary Commodity Complexes and Transactional

Forms in Interior Tamil Nadu


1 Introduction
This paper examines the emergence of specific
commodity complexes and transactional forms in eight
offer dichotomous views - of the sector being in a crisis,
interior districts in Tamil Nadu focusing on gherkins,
Recent and offer alsoanddichotomous discourses with
also of it prospering of itaprospering on views the trajectory - with of the a sector welcome of Indian being agriculture diversifica- in a crisis,
welcome diversifica-
marigold, broiler, cotton and papaya. Their growing
tion into high-value commodities, prompted by the growing
importance is a response to the structural
agrofood changes in
processing and retail sectors.1 Advocates of eitherthe
view offer evidence based on macro-level data and micro
larger economy and the contextual constraints on
studies focused on the predicament of the farmers in particular
agriculture in the region. It posits that this phenomenon
regions. There are few studies that focus on specific commodity
represents an inflection in the trajectory markets
of agricultural
at a meso level to understand recent agricultural
growth in the region because of three distinct features.
transformations in the country. This article is based on the
First, the new commodity complexes have strongthat links
a focus on the emergence of specific commodity
complexes and transactional forms can complement other ap-
to agribusinesses and global markets. Second,
proaches to understanding the ways in which ongoing changes
downstream players exert an unprecedented influence
shape agricultural practice within particular regional con-
and control over production practices. Third, the
texts. It need
believes this can shed light on the problems and pros-
for control over quality demands particular of these changes.
This study attempts such an analysis of agricultural markets
forms such as contract farming. The paper argues that
and transactions, focusing on five high-value commodities -
despite some economic gain, challenges ofcotton,
a different
marigold, gherkins, papaya and broiler - in eight
kind emerge and the normative implications of these
administrative districts in Tamil Nadu - Coimbatore, Nilgiris,
changes are as yet unclear. Salem, Erode, Karur, Dindigul, Tiruppur and Madurai.2 The
five commodities have very different histories in the region,
yet share a recent past in terms of their roles in shaping the
trajectory of contemporary agriculture. Three of the crops,
gherkins, papaya and marigold, were introduced to the area
recently, in the early 1990s and represent "new" commodity
complexes with strong links to the processing sector and to
This work was supported financially by the Americanglobal markets.
Institute of Cotton
Indian and broiler have occupied a prominent
Studies' Junior Research Fellowship (2006), IFPRI-New
in the Office,
agrifood the
system of the region for much longer. The
Borlaug-Leadership Enhancement in Agriculture Program
transformative elements in these sectors have been in terms of
Fellowship (2008), the AAEA Foundation's Chester McCorkle
"new" transactional
Scholarship (2008) and the Ithaca Presbyterian International Student forms such as contract farming. While
cotton's links with global garment commodity chains run
Fellowship (2007). I thank Vivek Srinivasan, M Chandrasekaran,
Mahendran Kandaswamy, Jothibasu, Subramaniam,deep, broiler is oriented to the domestic market.
M Bhoominathan,
Arun Kumar, S M Suriyakumar, J Chellakumar, S Vijayaraghavan and
This paper speculates that the emergence of crops such as
the students and faculty of Tamil Nadu Agricultural University
gherkins, papaya and marigold and the proliferation of con-
(Coimbatore), Bishop Heber's College, St Joseph's College (Trichy), and
tract farming arrangements in traditional commodities are
Urumu Dhanalakshmi College (Trichy) for their valuable assistance
during the course of my field research. I thank the editors of to theissue
this challenges posed by rapid structural changes
for their comments on an earlier draft of this paper.inInterviews
the regional economy and its contextual constraints, repre-
agribusiness representatives were conducted on the condition of
senting inflection points in the path of agricultural evolution
confidentiality, and interviewees and the firms they represent are
not named.
in the region. At the same time, it argues, this poses challenges
of a different kind and the normative implications of these
Sudha Narayanan ( is at the Indira Gandhi
changes are not quite clear. Indeed, the degree to which this
Institute of Development Research, Mumbai.
adaptation is successful and sustainable is still an open
84 December 29, 2012 vol XLVii no 52 GEE3 Economic & Political WEEKLY

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question. Cauvery
This study River w
complexes tinctlyon
drawing unattract
field r
2010. It combines interviews
tives, 3 State
field-level Govern
a systematic Against
survey of this
850 back
these commodities under
tried, in contr
the past
The word to
"new" recover
is used and c
farming as a shift to less
transactional wate
for a while, horticulture),
for a variety apa
and seed and
cotton. organic
tional (an ers
"old") and
crop, mangoes
it was inw
ties from the addition,
north andthe go
ping pattern ment
in of
parts ofhorticul
the stu
century with the
the National
ment Nadu
cotton suggests
industry t of the
claim that pulses
there is was only
or the study whereas
area, but that that
only und
relative to thein the
systemsbase year
they ha
that increases
narrative is in the
unique to
lative cashewnut,
understanding of arecan
anticipate the coconut
path of in respo
In the next trend
section, was
I alread
outline t
ture duced,
Nadu and
and inthey
the Tamil
discuss the marketing
emergence ofinitia
ing the terminal
actors involvedmarket
and h
along the improve
supply the
chain, effic
which While
represent thea entire
new ki they
tion. The lastysis, it
section is worth
and comment Market
on its Committ
bited contract f
2 Agriculture in Tamil govern
legislation Nadu
Tamil Nadu was
an any re
ample of ments
region till
that a
has polic
in its stated
economy. It the
has object
been ch
tion, with range
48.5% ofof crops
the in
2011, and a private-sector
rapid decline in sp
the state prise
gross (now
domestic know
1980s to through
21.85% in the 1990s,sta
the to
ing (te) Marketing
2008-09 Feder
While this is designated
often ("lice
associated w
case jatropha
Nadu (notand
of sw
unlike Tamil
the workforce lines.
in While
the some
similar pace, ment's
leaving intervent
about half
indirectly on maize and cotton
agriculture.3 Pro
be levelling level.
off forAmong
the oth
real estate by agribusinesses
urban investorswi
net sown toas
area ensuring
a bette
from 68.34% These
in trends
1990-91 toin T
recovering tothe backdrop
63.09% in tefor
declined from 1.19 to 1.16, befo
responding 4 Study
periods Area
years).4 This The districts
suggests that in
of use of agro-climatic
cultivable land zon
that is opment,
cultivated more and
than de
ing region
groundwater shares
tables in man
and the cribed
uncertainty in Section
Economic & Political weekly EH353 December 29, 2012 vol xlvii no 52

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from and floriculture, aided by the establishment of aezs that

of theprovidegarment
infrastructure to agricultural processing firms. Erode
has pioneered organic agriculture in the state. agr
conditions, Coimbatore
labour hosts
on some of the largest poultry
landsintegrators in the country, d
or electric pum
driving an expansion in maize for its feeder units, a trend of
the past decade.11 have h
for more
The five commodities selected for thethan
study - gherkins, mar-
igold, papaya, broiler and cotton - represent examples of
In thethese changes.
late They have different attributes
1950 but share
runner in agri
features that set them apart from other high-value field crops
ahead of
grown the
for traditional markets or mandis. First, all share g
Whitestrong links
1996; downstream to not only to local industry, but He
selected for
also beyond, to regional, national and global markets. In mostth
cases, the impetus for the emergence of theseIn
complexes orig- t
tion and indust
inated in the global context of international agriculture trade.
district (Heyer
Second, in many of these commodity complexes, the locus of
and Tiruppur
production decisions rests with downstream players, and the h
prises supply that hav
chain is built up from the buyers' end in the form of
(Heyer 2001;
backward linkages. Third, this implies unprecedented control Da
ern and influence over production processes
fringe of and demand-specific th
modes of transaction such as contractchan
farming, oral or writ-
ten, to effect such control. In all these examples, the farmer
rateofhas agency in a rural
very limited sense, even though the economic p
returns of participation insignif
these supply chains could be quite
also appears to
large. Collectively, these imply a very different configuration
small-scale and informal sectors in urban areas. The conse- of actors along a supply chain than in the mandi-centric system.
quent bidding up of wages has posed a problem for cultivators
It is in this sense that the emergence of these commodity
hiring farmhands.10 complexes represents inflections in agricultural development
in the region. The following section describes how each of
5 Genesis of Contemporary Commodity Complexes the commodities emerged in the region and conforms to one
While there is a sense that agriculture is under pressure, it isor more of the features that constitute departures from
has apparently not been stripped of its dynamism. The 1990s
pre-existing systems.
ana 2000s suggest tnat tne sector mignt De Figure 1 : Gherkins Exports from India to the Rest of the World (Prepared and Preserved)
trying to adapt to the demands of a new
dynamic. On the demand side, the growth
of urbanisation and the region's proximity
to thriving urban centres such as Coim-
batore and Bangalore, and net food-
importing Kerala, has meant strong de-
mand-led forces that have possibly influ-
enced cropping patterns. Horticultural
crops have made definite inroads here, as
in the rest of Tamil Nadu.
There has also been a shift to a few non-
traditional export crops. The development
of specific sets of crop and livestock com-
plexes with strong links to business enter-
prises, invariably mediated by contract
farming arrangements, stands out as an
important feature. Salem, for instance, has
emerged as a focal point for the seed cotton
industry and more recently, along with Na-
makkal, as a niche zone for medicinal
plants. Dindigul is now home to a gherkins
complex that evolved in the 1990s, along-
"0" implies negligible quantities.
side a distinct shift to high-value horticulture
Source: APEDA.

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5.1 Gherkin The gherkin crop is procured from farmers and processed in
small-scale plants, by washing, rinsing and preserving in
Gherkin is a non-traditional export crop with no domestic
market. Having made its entry in 1992, gherkin (a racebrine,
of the acetic acid or vinegar, based on client preferences.
species cucumis sativus) is new to the study region, as it are either bottled and labelled for international clients
is to
India. The emergence of a gherkin-processing industry in
or shipped out in barrels for bottling. The unit value of exports
India is emblematic of global shifts in agricultural sourcing,
is naturally higher for the latter and at the time of this study,
following a decline in the area under gherkins in Europe. In plants were contemplating greater value addition
less than a decade, India moved from the penumbral margins
through bottling and branding. Until recently, the raw materi-
als used in processing, including barrels and vinegar, were
of the world gherkins economy to centre stage, accounting
for as much as 15% of world exports during te 2006-07
imported, but by the late 2000s, barrels began to be manufac-
(Figure 1, p 86). The major destinations during this time werein India. So the gherkins processing industry now uses,
Russia, the European Union (eu) and the us. by and large, domestically produced inputs. All gherkins are
The study area was one of the first to induct gherkins into by processing plants through some form of contract
annual cropping patterns, emerging as a procurement shed in in the region. The firms have very similar contracts
Tamil Nadu. Over time, Karnataka, a later entrant, overtook
and pay a higher price for small fruits, with five grades of
Tamil Nadu, thanks largely to organised and focused state gov-based on size. They are also discerning about quality
and crooked and damaged gherkins are rejected, between 5%
ernment support to gherkins export industries. Nevertheless,
industry observers estimate that Tamil Nadu accountsand
for asaccording to the farmer survey.
much as 35% to 40% of India's gherkins exports.12 The epicentre
5.2 Papaya
for gherkins in Tamil Nadu is the town of Dindigul, located at
Like gherkin, papaya was introduced in the region in the 1990s
the heart of the study region, and, to a lesser extent, Tuticorin.
for extracting papain, which has wide-ranging industrial uses.
At the time of this study, in 2007-08, there were seven gherkin
plants clustered around Dindigul town, with easy access Tamil Nadu had never figured on the list of papaya-producing
to both
the hinterland that constitutes the procurement shedstates
and toin India in the 1980s and 1990s. It was neither cultivated
Tuticorin port, from where export shipments leave. Almost of widely in the region.13 As recently as te 2008-09,
them are 100% export-oriented units (eous), which make themNadu accounted for only 0.43% of India's area under

Figure 2: Cotton in Tamil Nadu

The figures tend to vary depending on the source.

Source: Ministry of Agriculture data from Indiastat.

papaya and 2.2% of the total production (Government of India

eligible for the benefits of export-promotion policies. The gher-
2010). Yet, papaya cultivation for papain extraction was almost
kins plants in Dindigul district have varying degrees of techno-
logical sophistication and labour intensity, with between 70 and to Tamil Nadu. Traditionally, papaya was common as a
150 employees on their rolls. If necessary, additional labour is
backyard tree or an intercrop. It was in this setting that the con-
hired on a contractual basis for the season. Women appear to
tracting firm in the study established a papain extraction plant,
and persuaded farmers to take up papaya (the C02 variety) as a
form the bulk of the employees. Gherkin processors coordinate
contract crop.14 The owner of the plant started as a struggling
with each other through the Gherkins Exporters' Association
(gea) and sometimes agree on pricing or trade stocks withdryland
each farmer in the region and worked his way up to setting up
other when needed. While there is not much mutual trust a modest-sized plant in the late 1980s. He started trials in 1989,
establishing operations on a commercial scale in 1994. Other
among them, they are cohesive in guarding India's international
image as a reliable gherkins exporter. firms unsuccessfully attempted operations in the late 1990s.

Economic & Political weekly raíH? December 29, 2012 vol xlvii no 52 87

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The demand for cotton in Tamil Nadu. In 2004, more than

number of half
chase of
the mills in operation inpapain
India were in Tamil Nadu, accounting
sourcesfor around 44% of sup
of the total consumption by all mills in the
Africa, with
country. Yet, according D
to industry sources, less that 15% of the
varietal requirements of the Many
mills is sourced from within the
papain state.15 This provided a strong market for cotton growers.
sale to However,
fit the cotton economyend-u
in Tamil Nadu began to splutter
ited number of
in the mid-1990s. Cotton lost appeal as a viable crop, and the
papain is
area under based
it declined gradually, mirroring the national trend
life of(Figure 2, p 87). At the all-India level,
the was not until 2003-04
for supply
that there was reversal in the acreagein t
under cotton. Two policy
measures appear to have played a role. In 2001
undertaking and 2002,
exports and imports a
were placed gest
under the open general list
fruit, (ogl),
the which meant that they were freed from licensing
tracts also
requirements. carry
As a miller put it, "Cotton, like coffee, suddenly
is became linked to international
related to markets, more than
th ever before,
thyrosine units
and price setting no longer happened within India".16 With the
incentive to export rawwith.
cotton, a higher average annual price,
and the increasing minimum support price for kapas , cotton
5.3 Marigold
reclaimed its place in the cropping pattern of farmers.
Marigold was
In Tamil Nadu, some of the i
cotton revivalism was possibly
scale due to the technology mission on Mexi
from cotton, an initiative of the
their factories
central government aimed at improving its productivity, and
has three main
the Cotton Corporation of India's (cci) integrated cotton culti-
vation programme, in
a euphemism for thepou
promotion of contract
its increased u
farming by mills. The scheme provided a nurturing umbrella
recent years
for contract-farming h
relationships between spinning mills and
against catarac
cotton farmers. The Tamil Nadu government in its agricultural
age-related eye
policy throughout the early 2000s elaborated a vision of wel-
the three plants
fare for cotton growers that gave contract farming a central
to industry exe
role. In what has come to be known as a tripartite model for
contract farming, the stateoleoregovernment brought together three
Peru cotton millsthe
is and the cci for contracts with farmers.
othe These
Rs 300mills had already begun integrating vertically in the 1990s,m
Marigold dema
covering operations starting with ginning to finishing garments
cooler for export
(Damodaran 2008). Partly because of varietal issues
confined to
and the local supply deficit, most ele
Tamil Nadu mills source
northern edge
cotton from other regions. Most mills, however, spin a wide
tion to the
range of cloth area
qualities and there is always demand for good-
In Tamil Nadu,
quality local cotton that is free from contamination. Contract
but this
farming as a strategyhas cha
was expected to substantially serve this
tivity to
need. In the study region,region
at least three large cotton mills
crop because
began to engage in contract farming around 2002. in
Mumbai there a
5.5 Broiler
market for ma
farmers and
In broiler, the integration con
process began in the mid-1980s in
with the local market. A crucial difference between the two the south, but failed to take off when large numbers of small
uses is that for crushing, flowers can be small and even dry,
and medium farmers stopped producing chicken products.
whereas size and freshness are critical attributes in the fresh- The layer industry also took a hit from an eu ban on egg and
cut flower market. egg products from India. Firms, both local and those based in
the north, restarted contract growing in the mid-1990s, draw-
5.4 Cotton
ing on the services of some of these experienced farmers, uti-
Cotton has been a prominent part of the cropping pattern
lising in
pre-existing infrastructure such as sheds, drinkers and
the region around Coimbatore since the early 20th feeders.
the southern and western parts of India (Karnataka,
ting into the larger ecology of downstream users Tamil
of cotton in Andhra Pradesh and Maharashtra), large-scale
the textile, garment and hosiery industries. There is a huge
vertical coordination has been occurring at a brisk pace ever

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Figure 3: Stock of Poultry and Cattle in Tamil Nadu Figure 4: Egg Production in Tamil Nadu

Source: Basic Animal Husbandry Statistics, 2010. Source: Basic Animal Husbandry Statistics, 2010. Tamil Nadu Statistical Handbook, 2012.

since, especially in broiler production, and poultry has are limbs of conglomerates and have been active in the region
emerged as one of the fastest growing sectors in agriculture for a long time. On the other hand, the gherkins firms com-
(Figures 3 and 4). In the south, particularly around the Palla- prise foreign-owned ones and new entrepreneurs who have no
dam area of Tamil Nadu, integrators now reportedly account prior experience in agribusiness. The scale of operations varies
for over 96% of the production in layers and 90% in broilers, widely. Gherkins, marigold and broiler are extensive, covering
the major players being Venkateswara, Suguna and Swathi. A thousands of acres and farmers. The cotton mills tend to operate
number of small firms also operate in this sector alongside on a small scale and in a contained area, and the papain
these large players. extraction plant focuses on about 100-300 farmers at a time,
Day-old chicks are provided by the firms and bought back at who are scattered across three districts. Papaya, marigold and
a pre-agreed rate per kilogram of weight gain, with an incen- gherkins are tied to place, in the sense that factories are
tive for reducing mortality or improving feed conversion rates present in the area. For cotton and broiler, this is not the case.
beyond the norm. Firms provide feed, vaccines and most other Of the five commodities, papaya and gherkins are highly
inputs and contracts are remarkably similar across them. Most perishable. Since marigold is used for crushing, perishability is
firms function as middlemen, as aggregator-intermediaries, not an issue. Broilers are not perishable but timely buy-back is
selling produce downstream to retail vendors. A few have their important from the perspective of profitability. Cotton can be
own brand of chicken in various processed forms. In general, stored and in this respect differs from the other commodities.
integrators have tended to establish wholesale and retail price Virtually all the commodities have contested markets, though
leadership in the markets where they operate by reducing the the nature of competition among buyers is different. Other
number of intermediaries or by selling directly through their processors compete for gherkin procurement; for marigold,
own retail outlets (for example, in Coimbatore). In the broiler the domestic market for fresh flowers and the oleoresin manu-

sector, there is no national organisation that looks after the facturers offer competition in two different forms. Cotton and
producers' interests. Barring a few regional organisations, broiler contracting are defined against vibrant alternative
broiler marketing is largely in the hands of big traders and markets. Only the papaya firms are in a monopsony but the
commission agents. In the study area, the broiler coordination complex contract also pays for the lacerated fruit from which
committee, based in Palladam, is a strong organisation of latex has been extracted and cannot be marketed as such. Con-
broiler integrators who set the price and control the volume of tracts within each commodity complex tend to be similar, but
supply to maintain prices in their favour. There is no compara- vary across commodities. Almost all schemes involve the pro-
ble farmers' organisation. In the study area, apart from the vision of inputs on credit, although at the time of the survey,
three big integrators, several small- and medium-scale firms no firm was engaged in supporting farmers in accessing credit
contract for broilers. While most of the country's large integra- from commercial banks. This appeared to a conscious decision
tors operate here, there have been a few instances of firms on their part.
going bankrupt in the late 2000s. Contract pricing differed from prices fixed at the time of
sowing to a price pegged to local markets (in cotton). In
6 The Commodities, Markets and Contracts broiler, an incentive was provided if the bird-weight was above
the recommended norm at the time of buy-back, for marigold,
6.1 Snapshot of Commodity Complexes a premium was paid to those who delivered greater volumes to
The nature of firms operating in these sectors is variegated.dissuade farmers from diverting to the open market. The
Some are family-owned private limited companies, foreign andparameters of quality were most transparent and rigorous in
domestic; others are sole proprietorships and partnerships. In papain, for which a Brix meter is used in the presence of farmers
the case of marigold, cotton and broiler, the contracting firmsand the price is linked to this measure. For gherkins, the quality

Economic & Political weekly [3223 December 29, 2012 vol xlvii no 52 &9

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and price were linked

process or intensity throu
of the contractual relationship. A cotton
attracting a firm
brings in a third-party inputprice
manufacturer to monitorandand
weeded out. advise
For farmers, providing
cotton,materials to store the harvested
in terms of staple
cotton, length,
and initially even arranging for credit from a bank.17 bu
impurities, The mill's role is confined
such asto coordination
soil and oversight
and of h
While there operations.
were written
A gherkins firm provides farm inputs (seeds, ferti- co
many farmers said
lisers and pesticides) their
on credit; this is later recovered from the c
Though contracts were
farmers at the time of harvest. typic
Field officers on the company's
some cases, especially in
rolls monitor crop health and advise farmers cot
a contract, but identified
Broiler contracting oth
involves a high relationship intensity with
the firm on the same contractual conditions. It is not unusual firms' officials visiting contract growers everyday to monitor
for firms that operate on a large scale to use multiple sources of the health and status of the birds. These firms provide day-old
procurement. For example, the gherkins and marigold firmschicks to the farm and have detailed protocols for quality con-
are procured not only through contract farming, but alsotrol, ranging from the feed mix to vaccination schedules. In
through agents or vendors who secured produce for them for aessence, apart from labour and an initial capital investment,
commission. These agents can be regarded as "new" kinds of
the farmer has a limited role in day-to-day decision-making.
intermediaries, usually young and armed with a diploma or For papaya, the involvement of the firm varies over the life
degree in agriculture so that they can provide extension services cycle of the crop. In the nursery stage, field officials monitor
on behalf of firms. They are also mobile and tend to travel tothe crop closely with daily visits. Once plants mature into the
fields routinely, monitoring production and enforcement. It isflowering stage, there is limited oversight, unless the situation
not unusual for an agent to have multiple firms as clients,demands it. An interesting feature is that the labour for latex
though there are some agents, especially for marigold, whoextraction is organised and trained by the firm, with the wages
work exclusively for one firm. Many of the firms also had their paid by the farmer. Latex extraction requires great skill and
own farms from where they sourced material, which smoot-the firm believes it can ensure quality and an adequate supply
hened procurement over seasons and minimised the risk ofof latex for the plant by deputing labour to contract farms.
non-availability of raw material. Marigold represents the least participation of firms in the pro-
duction process, related partly to fewer quality requirements
6.2 Relationship Intensity and Control that need only modest supervision. A marigold firm said that
over Production Processes
monitoring was required more for contract enforcement than
Virtually all the contract commodities involve production
for production. It thus restricts its interventions to providing
processes that require farmers to respond continuously high-quality
to the seeds at subsidised prices and training new con-
need to maintain quality. These quality standards aretract
oftenfarmers in the cultivation of marigold. Its field officials
established outside the production system, driven by end-user
advise farmers periodically on pest and disease control.
preferences. In gherkins, food safety concerns in importing
6.3 Geographies of Procurement
countries mean stringent norms on the use of inputs, fertilisers
and pesticides. The latter need to be on the "approved"andlistFarmer
of Participation
All the
the importing country. The firms typically provide these inputs five commodities have been able to make inroads into
to ensure that these conditions are met. In cotton, quality is patterns by fitting themselves into very specific geo-
the need for extra long staple (els) cotton that is not contami-
graphies and by offering farmers attractive alternatives to the
nated, that is, free from impurities and particulate matter.
optionsInthey had. As one field officer put it, their approach to
the case of papaya and marigold, while the varietal choice is of tracts to procure from is one where they "attack
more critical than the production process, good cultivation
the weakness", implying that these commodities offered some-
practices and care during harvesting (for papaya) are required
thing that enabled farmers to work within their constraints or
to ensure high yield. This control over production processes
to capitalise on their resources. For example, poultry expan-
extends to the varieties of the crop used. In papaya, whereas
sion has taken place in areas where water and labour are con-
Red Lady was the dominant variety, appropriate for table con- papaya, where irrigation is available but labour is a
sumption, the firm prefers the C02 variety that has problem,
higher and gherkins where family labour is abundant. Cotton
papain content. This is appropriate, but not ideal, for table con-
is confined to the areas with black cotton soils, the traditional
sumption. In marigold, the seeds supplied are imported and
cotton-growing region, and marigold is mainly in the hills or
distributed at subsidised prices, with one firm indicating that a where it fits neatly into the cropping cycle.
Peruvian variety is suited most for its higher oleoresin content.
Firms tend to be selective in picking farmers with whom to
Firms engaged in contract farming thus engage actively in and the development of these commodity complexes
the production process, not only providing critical inputs, but been even across space or people. Papaya and broiler
has not
also closely supervising from sowing to harvest andcontracting
post- is with larger farmers, while gherkins, marigold
harvest handling. The commodities and firms selected for cotton tend to be with smaller farmers. The latter follow a
represent varying degrees of involvement in the production
cluster approach, selecting clusters rather than individual
90 December 29, 2012 vol XLVii no 52 »savi Economic & Political weekly

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farmers. For papaya and broiler, farmers are identified mainly7.1 Problem of Enforcement
through personal contact, perhaps because of the larger in-In a context of weak mechanisms for public contract enforce-
vestments required. The oleoresin and marigold factories arement through the courts, firms have had to work hard to en-
close to the area where the prospects of production are thesure that farmers honour their contracts. In general, the
highest. In the case of gherkin, which is highly perishable, con-greater the interdependence between farm and firm, the
tract suppliers are chosen close to the plant. In general, papayagreater are the chances that a contracting arrangement en-
and broiler farmers are likely to be among the wealthier in thedures. The commodities chosen for the study occupy different
contract villages and better educated, whereas the opposite ispositions on a scale of interdependence. Papaya comes close to
true of cotton contract farms. This reflects the large invest- a symbiotic relationship. Committing to a contract is neces-
ments required upfront for broiler sheds and plantations,sarily a two-three year lock-in, with limited options outside.20
which pose entry barriers for less wealthy farmers. BroilerIn the case of marigold and cotton, however, the contract
contract farmers tend to have less access to irrigation, but thefarming scheme is embedded in an already existing crop com-
opposite is true for the other commodities. Gherkins are a plex that readily accommodates side-selling by farmers. For
highly labour-intensive crop and firms tend to operate incotton, contract cultivation methods are not very different
regions where family labour is available and alternative labourfrom cultivation for the spot market. Both farmer and firm can
market opportunities are limited, which tend to be the rela-resort to spot market trade at any time. Even in this case, how-
tively backward areas in the study region. The strategies that ever, the varietal differences imply that els cotton commands
firms adopt to choose both regions and farmers are tailored to a premium that would prima facie differentiate the contract
the particular demands of growing and processing the com-crop from local varieties of cotton farmers might grow.
The cotton firm selected for study has its own research
modity, so the biases of firms in choosing farmers are different
across commodity complexes. division that works with crop varieties and develops its own
hybrids. During the time of study, the variety contract farmers
7 Impacts and Challenges to Sustainability grew was a hybrid developed by the firm.21 Despite this, farmers
It appears that papaya and broiler, and to a lesser extent, gher-disgruntled over price and quality issues side-sell to their
kins have been particularly lucrative for many farmers. In customary traders. This has posed difficulties for the firm and
marigold and cotton, the experience of contracting farmersthe year in which the farmer survey was conducted marked
has been variable both over time and across firms (see Naray- the last season it contracted for conventional cotton. The com-
anan 2012a for a detailed discussion).18 At the same time, pany was proposing to explore contract farming in organic
farmers associate contract farming arrangements for high- cotton at that time. "Contract farming for conventional cotton
value produce with different kinds of risks. Some of these are ais a complete flop", said an executive.
product of perceptions (such as the fear of losing land, even The stated official estimate of area under cotton contract
when contracts do not contain such a clause) and others comefarming in Tamil Nadu for 2005-06 was 45,000 acres (Govern-
from their experience with contracting (such as the fear that ment of Tamil Nadu, Policy Notes),22 but a closer look reveals
the firm might renege on contracts), or the environmental con- that this figure is an expression of intent rather than accom-
sequences of contract cultivation. plishment. Based on personal interviews with all the contract-
Collectively, on an operational level, these render theing firms, it appears that the actual extent of contract farming
transactional interface between farmer and agribusiness ain cotton in Tamil Nadu fell well short of what was originally
highly contested space and the sustainability of operations forproposed, and was no more than a few thousand acres at its
firms hinges on their ability to maintain carefully built rela-peak. In the years since, contract farming in conventional cot-
tionships.19 Farmer agency in these settings takes very spe-ton appears to have waned and then retreated. The most
cific forms. Farmers generally do not have devices to safe-recent document of the Government of Tamil Nadu articulat-
guard against dubious operators. In the study region, thereing its agricultural policy has no reference at all to contract
have been only a few instances of this and in the gherkins farming in cotton. By the end of 2008, most mills saw con-
sector a firm became bankrupt and owed farmers paymentstracting as a corporate social responsibility initiative and the
for a whole season. In all other commodities, the contractingresponsibility of contract farming operations lay with divi-
was with divisions of established and reputed agribusiness orsions within the firms that had little to do with its main pro-
those that had invested considerable effort in building trust. curement operations. At the time of the survey, there was a
A farmer's power in the firm-farmer relationship comes fromconcerted effort by some mills to promote contract farming of
alternatives that might be available, specifically the cluster-organic cotton, rather than conventional or Bt cotton, which
ing of multiple firms in the same region without effective col-they felt was much too risky and not worth the effort. Organic
lusion. Where domestic markets for a commodity exist, farm-cotton, they believed, would differentiate adequately from
ers' ability to side-sell endows them with considerable power. traditional cotton to enable contractual relationships.
The possibility of growing a lucrative cash crop for the tradi- In gherkins, the moral obligation to sell to the contracting
tional market (such as tomato or turmeric) also empowers the firm seems high. As is often the case with export crops, there is
farmer, especially when firms seek to source intensively fromno alternative market for gherkins in India. However, over the
a small geographic area. years, the number of gherkin processors has increased and

Economic & Political weekly CEE3 December 29, 2012 vol xlvii no 52 91

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intense alternative domestic market, the firms between

competition have faced serious chal-
credible alternatives for the farmer even without domestic lenges in enforcing contracts. That the marigold growing sea-
markets. In general, firms that have been operating in the son coincides with key festivals in the study region implies the
prices for fresh flowers increases at these times to several
region for long do not "cross-purchase" or poach other firms'
times the contract price, tempting farmers to breach. Given
suppliers. However, newer firms and those from another re-
weak enforcement of contracts and that the firms contract
gion sometimes do. Interviews suggest that this happens only
with a large number of small farmers, they have struggled
in isolated circumstances and only with some "deviant farmers".
to maintain contracting arrangements, with at least one
As an executive explained, "That is why there are field officers,
they keep a very close tab and if the character is not good
firm contemplating moving some of their operations to China
and Ethiopia.
enough, we remove them from our suppliers list". Most firms
have now begun to utilise the services of vendors and agents to
manage these relationships, especially when their scale of 7.2 Consequences for On-Farm Production Conditions
operations grows. Enforcement is not the only challenge firms face. Sometimes,
relationships between farms and firms come under great
For broiler, there is tight oversight by firms. Although there
strain when there is a yield loss triggered by catastrophic risk
are competing firms, they tend to respect each other's turf and
(Narayanan 2012c). For instance, a mealy bug infestation in
farmer loyalty to firms tends to be high. In general, although
papaya throughout the region left farmers disillusioned with
relationship intensity is primarily to ensure that quality norms
are achieved, they often contribute to improved contractual
contracting for papaya. When gherkin is grown repeatedly on
a plot, without rotation, the yields taper off or decline because
performance in terms of restricting side-selling. The marigold
of soil nutrient depletion. Firms often move on to another
firms had stable contracting relations with farmers in the early
region to procure. In marigold, nematode infestation poses
years. More recently, with contracting defined against a strong
problems arter repeated seasons of
Figure 5: India's Oleoresin Exports
cultivation. The more diligent field
officers of contracting firms are care-
ful to advise farmers on appropriate
steps to prevent these outcomes. Many
firms ask farmers not to expose them-
selves to too much risk by bringing
their entire land under the contract
crop. Further, they typically advise
farmers not to replace food crops.
Firms also often go to great lengths in
shouldering financial losses to main-
tain the relationship. Despite these
efforts, catastrophic risks can under-
mine carefully built relationships.
Interestingly, notwithstanding the
Figures are for 8-digit ITC-HS from 2003 and for previous years under the older system; includes oleoresin from sources other than marigold.
Source: Directorate General for Commercial Intelligence and Services (DGCIS), various years.
decade-long presence of these com-
modity complexes, some of these
Figure 6: India's Papain Exports commodities continue to be exotic.
Gherkins are referred to as visha vellri
(poison cucumber) on account of the
high inputs used; few farmers have
even ventured to taste them. The
adoption of gherkins did not happen
overnight. Firms arranged factory
visits to acquaint farmers with the
products, and several farmers waited
six or seven years before switching to
it. Some farmers continue to perceive
high risks in production, and also
have concerns regarding declining soil
fertility and human health because of
high input use. This forces firms to
Figures are for 8-digit ITC-HS from 2003 and for previous years under the older system; for papain pharmaceutical grade.
expand coverage and balance strate-
Source; DGCIS, various years. gies for expansion in procurement on

92 DECEMBER 29, 2012 vol XLVii no 52 B3H Economic & Political WEEKLY

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the sources of produce. At the other end, the international market

and for gherkins is sensitive to general economic conditions and is
searching for the cheapest source of produce across countries.
farmers). A
This downward pressure on the selling price of gherkins
wantleaves a few of
to the gherkins processors withsca
wafer-thin margins.
The Without the state support for eous, some might not survive at
otherall. Indeed, recent years
probhave seen some firms close shop. There
has been some consolidation as
against well, with larger gherkin proc-
the c
and essors acquiring smaller ones.
shed.There is a feeling
Accor among industry observers that the gher-
had kins complex in south India
to will last another decade or so be-
fore moving to lower cost areas, perhaps elsewhere in India, or
7.3 Downstream Market Risks even other parts of south and south-east Asia. At the time of
the study, some firms were contemplating procuring in Sri
Most importantly, processors who focus on export markets
face the pressure of keeping costs of procurement low Lanka,
in the for instance. For now, it seems that gherkins have
face of global competition. The global nature of the system im-strong roots in Tamil Nadu. The embedding of these
crop complexes in the international context imply fluidity of
plies that fluctuations downstream in international markets,
these systems in terms of the scale of operations and geo-
either in the nature of shrinking demand because of economic
slowdowns or a good crop elsewhere, or the emergence graphical
of new spread, and they also involve a lot of churning of
global procurement sheds have impacts upstream. This farmers,
uncer- who move in and out of contracting schemes.
tainty is a source of perpetual stress for firm-farm relation-
8 Conclusions
ships. A small number of importing and exporting companies
This paper examined aspects of the agricultural sector in rural
working with traditional suppliers make for very thin oleoresin
and papain markets, with large inter-year fluctuations Tamil inNadu in an attempt to demonstrate that agriculture in
volume traded as well as volatile prices (Figure 5 and 6, region has reinvented itself in response to the constraints
p 92).
Firms face fluctuating fortunes. In the period 2004-06, all by changes in the larger economy and resource availa-
bility. One part of this change is the emergence of specific
firms in the region expanded marigold procurement consider-
ably and were contracting for produce across extensive commodity
swathes complexes that have strong links to downstream
of land in the northern fringe of the study area.23 Since then, in local and global markets, along with vertical coordi-
the firms have had difficulties managing the scale ofnation
opera-that enables downstream actors to exercise control over
tions, mainly because of fewer international orders. Twoproduction
of the processes. While there is evidence of economic
three temporarily stopped operations until 2009 and benefits
at the to farmers in this process, as the study suggests, the
time of the field survey, only one firm was contracting for mar- of these changes is not self-evident. The fluidity
igold. The thin papain market renders international of these new commodity systems and the ambivalent norma-
prices highly volatile, depending on the supply conditions implications
tive in of these transformations are evident only
with a
exporting countries, especially in Africa. Figure 6 shows the meso-level exploration, and they can be easily missed if
trend in exports and unit value of exports since 1997-98. It were
is to rely exclusively on micro-level studies or macro
evident that although papain exports have been growing,analysis. As far as the prognosis for agriculture in this region
there is some volatility in the volume of exports, which in concerned, despite the uncertainties associated with the
has an impact on procurement volumes from farmers. sustainability of these specific commodity complexes, the
emergence of other new commodities and transactional forms
The gherkins complex is a mature sector, but faces continu-
such contract farming will likely be a part of the essential
ous challenges. The main difficulties pertain to their predica-
ment as an intermediary between Indian farmers andcharacter
inter- of Tamil Nadu's agriculture in the future. There
national clients. Competition upstream for sourcingare likely to be similar "new" commodity complexes and a
farmers means they need to offer prices to match others persistence
in the of these "new" transactional forms and "new"
industry, especially in a context where collusion on prices or and institutions that respond to opportunities
coordination within the gae is not reliable. Also, there in global and regional markets. The efforts of the Tamil Nadu
is pres-
sure on firms to compensate farmers better to keep pace with to reshape and support agriculture are at best
instruments that reinforce this trend.
rising prices and wages, even as they compete for cheaper

notes 3 Note
See Har2
(2008) Tamil Nadu). off
1 For example
and change
6 Like elsewhere in India, holdings have become
Mishra in
Gulati smaller over time and the proportion of
Gulati smallholders among
et al all cultivators has in- (20
2 creased in the decades since
Tiruppur Independence.
per dist
merging In 2005-06,
Of 13 91.3% of landholdings was con
dark than two hectares
or and accounted for
and g

Economic & Political weekly EEC3 December 29, 2012 vol xlvii no 52 93

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Tiruppur Coimbatore,
58.72% of cultivated land (Government of Textile Tamil Nadu, between 1981/2 Regio
India, various years). actions 1996, Queen
of the Elizabeth HouseInstitut
Working Paper
7 The scheme covers 20 districts and cropsPPsuch 1475-5661. No 27, University of Oxford.
as mango, aonla, banana, cashew, cocoa, Chari, Sharad (2004): Fraternal Capital: Peasant-
chil- - (2001): The Changing Position of 'Thottam
Workers, Self-Made Men, and Globalisation in
lies, turmeric, and aromatic plants and flowers Farmers' in Villages in Rural Coimbatore, Tamil
Provincial India (Stanford, California: Stanford
that are promoted through a cluster approach. Nadu, between 1981/2 and 1996, Queen Elizabeth
It was implemented during 2007-08. University Press). House Working Paper No 28, University of Oxford.
Damodaran, Harish (2008): India's New Capitalists:
8 Joshi, Pramod K and Ashok Gulati (2003) : "From Plate
i98ç/i989TN27.pdf, accessed on 20 Sept 2012.
Caste, Business, and Industry in a Modern Nation to Plough: Agricultural Diversification in India",
9 These include, for instance, Sivanappan(New
and Delhi: Permanent Black), The New India paper presented at the JNU-IFPRI Workshop
Aiyasamy (1978), Harriss-White (1996), Heyer on The Dragon and the Elephant, 26-26 March.
(2000, 2001), Damodaran (2008), Chari East
India Cotton Association (various years): Narayanan, Sudha (2012a): Heterogeneous Welfare
10 See Carswell (2012) and Heyer (2000, 2001)Indian
for Cotton Annual, East India Cotton Asso- Impacts from Contract Farming Participation,
discussions of labour in the region. ciation, Bombay. Indira Gandhi Institute of Development
11 Namakkal district (not in the study area) is an of India (2010): Basic Animal Hus- Research, Working Paper Series, WP 2012-19.
bandry Statistics, Ministry of Agriculture, New - (2012b): Notional Contracts: The Moral Economy
important poultry hub in India with the largest
production of eggs and broiler. Delhi. of Contract Farming Arrangements in India,
12 Interview with bureaucrat, Bangalore,- March
(various years): Agricultural Statistics at a Indira Gandhi Institute of Development Research,
2007. Glance, Directorate of Economics and Statistics, Working Paper Series, WP 2012-20.
13 Interviews suggest that papaya was not con- Department of Agriculture and Cooperation, - (2012c): Safe Gambles? Farmer Perceptions of
sumed widely in the area till a sudden surge in Ministry of Agriculture, New Delhi. Transactional Certainty , Indira Gandhi Insti-
popularity when the then chief minister ex- Government of Tamil Nadu (various years): Season tute of Development Research, Working Paper
tolled its health benefits in the Tamil Nadu as- and Crop Report of Tamil Nadu, Department of Series, WP 2012-21.
sembly; 2003/05/01/ Statistics, Government of Tamil Nadu, Chennai. Patnaik, Utsa (2003): "Agrarian Crisis and Distress
st0ries/2003050i04330400.htm, accessed on - (various years): Statistical Handbook , Depart- in Rural India", Macroscan, http://www.mac-
25 September 2012. ment of Statistics, Government of Tamil Nadu, r0scan.0rg/fet/jun03/fet100603Agrarian%20
14 C02 is a Coimbatore variety developed by agri- Chennai. Crisis_i.htm, accessed on 12 September 2012.
cultural scientists in Tamil Nadu. Gulati, Ashok, Kavery Ganguly and Maurice R Rajagopal, A, Goran Djurfeldt, N Jayakumar,
15 As on 31 March 2004, Indian Cotton Annual, Landes (2009): "Toward Contract Farming in a R Vidyasagar, Staffan Lindberg, and Venkatesh
2003-04, No 84, Authority of the East Indian Changing Agri-Food System" in Contract Farm- Athreya (2008): "Agrarian Change and Social
Cotton Association, Mumbai, p 134, Section VIII, ing: A Resource Book, Mobility in Tamil Nadu", Economic & Political
Table 8, Statistics of the Textile Industry. contract_%2ofarming/, accessed on 12 Septem- Weekly, XLIII (45), pp 50-61.
16 Interview with a consultant for cotton mills, ber 2012. Reardon, Thomas and A Gulati (2008): "The Rise
Coimbatore, November 2007. Harriss-White, Barbara (1996): A Political Economy of Supermarkets and Their Development Impli-
17 At least one firm reported that when loans of Agricultural Markets in South India: Masters cations: International Experience Relevant
were waived in 2008 as part of a government of the Countryside (New Delhi and Thousand for India", Discussion Paper No 00752, Inter-
policy to provide relief to indebted farmers, Oaks, California: Sage). national Food Policy Research Institute (IFPRI),
contract farmers were a disgruntled lot since, Harriss, J, J Jeyaranjan and K Nagaraj (2010): New Delhi Office.
according to their contracts, the payments for "Land, Labour and Caste Politics in Rural Reddy, D Narasimha and Srijit Mishra, ed. (2009):
their produce were automatically adjusted for Tamil Nadu in the 20th Century: Iruvelpattu Agrarian Crisis in India (New Delhi: Oxford
loan repayments. While they could not cash in (1916-2008)", Economic & Political Weekly, University Press).
on the loan waiver benefits, both non-contract XLV(3i), pp 47-61. Sivanappan, R K and P K Aiyasamy (1978): Land and
farmers and those who contracted but side-
Heyer, Judith (2000): The Changing Position of Water Resources of Coimbatore District (Coim-
sold the crop did. According to an executive, Agricultural Labourers in Villages in Rural batore: Tamil Nadu Agricultural University).
this did great damage to the contracting mill's
relationship with farmers.
18 In relative terms, it is important to note that
the farm-gate price is about half the unit export
price and was only 3% of the retail consumer
price in 2008-09. The latter is computed as the
weighted average contract price (for various SWADESHI IN THE TIME OF NATIONS
grades) of the sample firm divided by the unit
export value multiplied by hundred, and the
retail price of gherkins in the EU, obtained October 20, 2012
through personal communication. The question
of distribution of value across the supply chain Swadeshi in the Time of Nations: Reflections on Sumit Sarkar's
is much harder to capture.
19 Narayanan (2012b) discusses the "moral" econ- The Swadeshi Movement in Bengal, India and Elsewhere - Bernard Bate
omy of contractual relationships.
20 Once the latex has been extracted, the fruit The Many Spaces and Times of Swadeshi - Dilip M Menon
does not fetch remunerative prices because of
Knowledgeable Internationalism and the Swadeshi Movement, 1903-1921 - Kris Manjapra
the lacerations on the skin. The firm buys back
the fruit, which is used to make candied fruit
Reading Sumit Sarkar through Anarchist History and Historiography - Maia Ramnath
or puree.
21 Farmers were given a choice of five types they Swadeshi Oratory and the Development of Tamil Shorthand - Bernard Bate
could grow. In the year of the survey, the farm-
ers were all growing the same variety. 'Fashioning' Swadeshi: Clothing Women in Colonial North India - Charu Gupta
22 These are available at
23 This area is only a small portion of the volume For copies write to:
of procurement, with a majority coming from Circulation Manager,
the neighbouring state of Karnataka, from
across the state border. Economic and Political Weekly,
320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg,
Lower Parel, Mumbai 400 013.
Carswell, Grace (2012): "Dalits
Markets in Rural India: Experi

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