Contract Farming, Capital and State

This chapter discusses the hitherto dominant/mainstream arguments that are made in support of promoting Contract Farming (henceforth CF) operations around the world. The chapter provides a critique of these ideas and an alternative framework has been suggested that will provide a critical analysis of contract farming as a production strategy.

Punjab has been a pre-eminent case of state-led agrarian development (through Green Revolution Technology) as well as its ‘near-opposite’: neoliberal agrarian development (through Contract Farming). The latter has opened up agriculture to international market, reducing state’s role, including in credit-provision. Punjab is therefore an interesting place to study agrarian change and development. In this chapter, political economy of Punjab’s agrarian development and the challenges it has faced since Green Revolution have been laid out. To deal with the agrarian crisis and to create space for “Punjabi farmers” to get involved with India’s New Economic Policy of the 1990s, ‘crop diversification’ strategies such as CF were introduced. In this chapter, author identifies the underlying assumptions that form the basis of ‘spread’ of CF. The uneven spread of CF operations in Punjab and India indicate that inequality and uneven development is inherent to neoliberal agrarian development, just as it was inherent to Green Revolution Technological spread.

The central argument that the author makes is Contract Farming as an agrarian accumulation process should be seen as a structure of relations of production and exchange involving productive capital (both in agriculture and industry), mercantile capital, and finance capital; so, contract farming is more than just the market-contract between farmers and industrial companies. It is a way to increase the productive consumption of technologies in rural areas produced by agri-input corporations. An agri-input corporation (seeds, crop protection chemicals, etc.) makes its profit by selling products to CF farmers, just as a CF corporation makes a profit by buying products from these farmers, and not by getting involved with actual agrarian (capitalist) production, which is land-based and which is relatively risky. Corporations receive the benefits from financial corporations in the form of loans which are otherwise meant for farmers, as direct subsidies. For instance, the banks are mandated by the Reserve Bank of India to contribute towards priority sector lending. However, banks prefer to lend to a corporation (such as PepsiCo.) than a farmer. PepsiCo. makes use of the credit and pays, on behalf of the farmers, to the seed companies for supplying seeds to the farmers. PepsiCo. then recoups its payment during its commodity-transactions with the farmers.

In this chapter, the author argues that capitalist accumulation can indeed occur without dispossession. Here, David Harvey’s theory of Accumulation by Dispossession (ABD) that has been accepted by many progressive thinkers as, indeed, the dominant form of accumulation under the mantra of neoliberalism backed by the state policies, both in developed or in developing economies, has been critiqued. Further, an alternative is provided where it is shown how a class of petty capitalist farmers (petty, in comparison to corporate capital) is encouraged to maintain its private property (land) and to enter into commercial contracts with big productive capital/industrial (multinational) companies to deliver certain farm products at a predetermined price. These companies have no intention to dispossess the farmers, and they do not have to. As a structure of multiple class actors (big business; capitalist farmers; rural labour), contract farming is a process that represents centralisation (and concentration) of capital and points to the ways in which agrarian and industrial capitals are intertwined. An important fact that emerges from this narrative is that CF is about capital accumulation without dispossession of the farmer—i.e., without disturbing the farmer–land relation. This is a previously published paper.

In this chapter the author elaborates on the idea of technology in itself and technology as a class relation and argues that CF as a relatively new political-economic project is distinctively contradictory. That is, while CF has become a conduit through which several modern mechanical and biological technologies have been introduced, such introduction of new technologies exhibits a class bias.

In this chapter, the author argued that the logic of the operation of the CF unequally affects the conditions of working peasants who are subjected to the pressure of class differentiation, as well as the wage-workers, who are subjected to heightened level of exploitation which is necessary for contract companies to make large profits.

The central arguments of the book are summarised and the question of ‘what is to be done?’ is elaborated upon.