Financial Daily from THE HINDU group of publications
Tuesday, May 07, 2002
Agri-Biz & Commodities
Cotton firm unveils new contract farming model
COIMBATORE, May 6
APPACHI Cotton Company, a cotton ginning and trading house in Pollachi near here, has unveiled a working model of contract farming for cotton.
The model cotton contract farming titled `Farm to fashion: A win-win formula' which was presented at the first national seminar on integrated cotton cultivation held in Hyderabad last week offers scope for a `back-to-back' agreement between cotton farmers and mills seeking specified cotton varieties, with ginning firms acting as the coordinating agency.
The ginning firm will identify and negotiate with a prospective mill on the quantity/quality of cotton they require with no price fixation, which will be decided at the time of arrival of seed cotton. Similarly, it will also identify farmers willing to take up cotton farming in an identified locality to grow the agreed variety of cotton.
The prospective farmers would be registered through an MoU after assessment of their compatibility to the task and here again, no price for their final produce would be fixed which would be kept open-ended. The price depends on the prevailing market condition at the time of arrival of the seed cotton.
The ginning firms would help the farmers coming under the contract to avail bank finance for inputs to raise cotton. The finance will be input-specific which could be drawn from only specified input shops on a `credit' basis as per the ginning firms' advices. Cotton credit card system with a pre-determined credit limits fixed to the farmer groups could be introduced.
The Appachi Cotton's contract farming formula which focuses on special cotton crop insurance to be negotiated with insurance companies will rope in farm service centres (FSC) run by leading agri-business companies at national level. These firms will act as the agencies for transfer of technology to farmers on crop management practices, pest management and farm equipment supply on a shared basis and their service charges would be negotiated.
Mr Mani Chinnaswami, Managing Partner of Appachi Cotton Company, has modelled the formula after his successful contract farming experiment with a Tibetan cotton farming group resettled in Hunsur taluk of Karnataka. He said the formula should bring in two-way 'win-win' situation to grower who gets lower credit for inputs and assured market for the produce at the time of harvest and the mills, which will get the cotton variety whose quality it had specified in a locality close to the mill premises.
To enable the contract farming acquire greater depth and acceptability among the practitioners, three essential interventions were required in areas such as a pragmatic crop insurance policy to cover cotton crop, interest subsidy up to 12 per cent to equalise the crop interest from the technology mission on cotton (TMC) and exemption of sales tax as well as the one per cent market committee cess levied by the Tamil Nadu Government.
Currently, mills making local purchases of cotton bear four per cent sales tax and ginners engaged in transacting seed cotton at the regulated market committee yards pay one per cent market committee cess. If these two levies are exempted for cotton sourced from contract farming system, Mr Chinnaswamy said, it would provide a boost to the scheme operation and promote integrated cotton crop programme in the State.
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