Corporate farming in India: is it must for agricultural development?

This paper profiles cases of corporate farming practices and examines the rationale for allowing corporate farming in India in the context of its agriculture and rural sector. It points out that the rationale is weak and not supported by evidence on corporate farming.Corporate farming is promoted on the grounds that large-scale corporate agriculture is more efficient than peasant farming prevalent in the country and that it leads to better allocative efficiency, induces higher private investment in agriculture, and results in higher output, income and exports. The author challenges these claims drawing on various studies on the national and international experience of corporate farming. The author notes that: there is no conclusive evidence of farm productivity rising with increasing farm size, rather small farms have been found to have higher output per hectare there is no evidence to suggest that under the present system of peasant farming allocation of resources is inefficient economies of scale are important not at the production level but at the processing stage which can be obtained under contract farming or co-operative processing arrangements ownership of land is not a necessary condition for corporate agricultureThe author also argues that investing capital in land purchase per se does not yield profit, irrespective of the existence or absence of ceilings on land ownership. Such an investment by a business enterprise is solely for the purpose of rent-seeking and/or for unearned speculative capital gain in a situation of fast rising land prices. Corporate demand for removal of ceilings makes sense only in the presence of such a motivation.The author concludes by suggesting alternatives like consolidation of land holdings and contract farming, for making better use of corporate resources for agriculture development. Contract farming does not make small farmers landless, unlike corporate farming. Even the environmental aspects of contracting are not as damaging as small farmers maintain control over farm operations which is good for environmental sustainability.