Farmers Reject Government’s Contract Farming Plan for Tobacco

Indian tobacco farmers from the state of Andhra Pradesh and Karnataka are vehemently opposing the Union government’s recent move to introduce contract farming in the sector. Flue-cured Virginia (FCV) tobacco is produced in large quantities in the state of Andhra Pradesh and Karnataka. 

The state of Andhra Pradesh is known in India for producing the largest amount of tobacco throughout India and it’s followed closely by the state of Karnataka.

The disastrous economic losses inflicted by the Covid 19 pandemic on the FCV tobacco farming sector is also aggravating the situation for the farmers who are struggling to make ends meet. 

Foreign tobacco MNCs, who are facing lacklustre sales in global markets and are forbidden from investing in India under the strict Indian FDI restrictions, are allegedly attempting to get a backdoor entry into the nation by pushing for contract farming, according to FCV tobacco farmers. They used global examples such as Malawi and Zimbabwe, which are under rising internal pressure to abandon the contract farming system since producers are at the whim of dealers. 

Farmers in Andhra Pradesh also are vehemently opposing Contract farming as according to them their open auction methods are helping them to realize far better prices for their products compared to open contract farming‘s method of payment.  

It has also helped small and marginal farmers to realize a far better price for their produce than what contract farming could possibly provide them. 

Contract farming will introduce Monospomy or a situation in which there is only one buyer and multiple sellers this will surely decrease the price of the tobacco sold, making it more difficult for the farmers already battered by the pandemic to make ends meet. Contracting agreements are also often verbal and informal in nature and although according to Indian law verbal agreements are legally binding they are very difficult to prove to make it harder for the farmers to do anything if the contractor reneges from his promise, even written contracts often do not provide the legal protection in India that may be observed in other countries. 

This lack of enforceability of contractual provisions can and does often result in a breach of contracts by either party. 

The only thing stopping MNC’s thus far from entering into contract farming has been the absence of provisions for Foreign Direct Investment in tobaccos. However, with the union government pushing for this change, it might transform into something disastrous for the Indian tobacco farmers.