CONTRACT FARMING OF GHERKIN UNDER AGRI- EXPORT ZONE IN KARNATAKA- AN ECONOMIC ANALYSIS

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1 CONTRACT FARMING OF GHERKIN UNDER AGRI- EXPORT ZONE IN KARNATAKA- AN ECONOMIC ANALYSIS Thesis submitted to the University of Agricultural Sciences, Dharwad in partial fulfillment of the requirements for the Degree of MASTER OF SCIENCE (AGRICULTURE) In AGRICULTURAL ECONOMICS By NETHRAYINI.K.R DEPARTMENT OF AGRICULTURAL ECONOMICS COLLEGE OF AGRICULTURE, DHARWAD UNIVERSITY OF AGRICULTURAL SCIENCES, DHARWAD MAY, 2010

2 ADVISORY COMMITTEE DHARWAD MAY, 2010 (L.B. KUNNAL) MAJOR ADVISOR Approved by : Chairman: (L.B. KUNNAL) Members: 1. (A.D.NAIK) 2. (N.M.KERUR) 3. (JAYASHREE.A.HANDIGOL) 4. (SUSHEELA.P.SAWAKAR)

3 CONTENTS Sl. No. Chapters Particulars CERTIFICATE ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES 1 INTRODUCTION 2 REVIEW OF LITERATURE 3 METHODOLOGY 4 RESULTS 5 DISCUSSION 6 SUMMARY AND POLICY IMPLICATIONS REFERENCES APPENDICES

4 LIST OF TABLES TABLE NO. 3.1 TITLE District wise area, production and productivity of gherkin in Karnataka ( ) 4.1 General features of sample respondents 4.2 Pattern of land holdings of sample farmers 4.3 Cropping pattern of sample farmers 4.4 Contractual arrangements prevailing in study area 4.5 Pattern of supply of inputs 4.6 Production function estimates 4.7 Allocative efficiency of resources in gherkin production 4.8 Details of gherkins grown on sample farmers 4.9 Transportation arrangements 4.10 Details of the prices offered by the companies 4.11 Payment settlement pattern for sample farmers 4.12 Cost involved in gherkin production 4.13 Income generation through gherkin production 4.14 Labour use pattern of sample respondents 4.15 Women participation in gherkin production

5 LIST OF FIGURES FIGURE NO. TITLE 1. Map of Karnataka showing the study district 2. Cropping pattern on sample respondents 3. Guiding operation in progress 4. Staked gherkin plant 5. Cost involved in gherkin production 6. Harvesting of gherkin 7. Harvested gherkin 8. Women participation in gherkin cultivation

6 LIST OF APPENDICES APPENDIX NO. TITLE I. Official schedule II. Area and production of gherkin in Karnataka ( to ) III. Gherkin exports from Karnataka ( to )

7 I. INTRODUCTION National Agricultural policy in 2001 established Agri Export Zones(AEZ) in order to strengthen the national economic growth through efficient marketing to accelerate foreign exports of various crops in major crop growing areas, where technical know-how and facilities for export will be provided. The Agri Export Zones are notified under Appendix 15 of the Handbook of Procedures (Volume 1) under the EXIM Policy. The objective is to take a look at an agricultural produce in a comprehensive manner right from farm to the plate so as to be able to deliver an appropriately priced and attractively packaged quality product in the international market. Agri Export Zone aims to improve the levels of food processing to reduce waste, increase marketability and help farmers to enjoy higher value of realization. It takes a comprehensive look at a particular produce/product located in a contiguous area for the purpose of developing and sourcing it as raw material for further processing/packaging, leading to final exports. Thus, the entire effort is centered on the cluster approach of identifying the potential products, the geographical region in which these products are grown and adopting an end-to-end approach of integrating the entire process right from the stage of production till it reaches the market. Units in AEZ would be entitled for all the facilities available for exports of goods in terms of provisions of the respective schemes. The Agri Export Zones are to be identified by the State Government, who would evolve a comprehensive package of services provided by all State Government agencies, State agricultural universities and all institutions and agencies of the Union Government for intensive delivery in these zones. Corporate sector with proven credentials would be encouraged to sponsor new Agri Export Zone or take over already notified AEZ or part of such zones for boosting Agri exports from the zones. Services which would be managed and coordinated by State Government/corporate sector would include provision of pre/post harvest treatment and operations, plant protection, processing, packaging, storage and related research & development etc. APEDA will supplement, within its schemes and provisions, efforts of State Governments for facilitating such exports. There are sixty AEZs in the country established for the promotion of different crops in different states. The four crops have been identified for promotion under the AEZ s in Karnataka namely gherkin, rose onion, flowers and vanilla. The gherkin AEZ, covering eight districts of Karnataka, was notified on November For gherkin AEZ the nodal agency is Karnataka State Agriculture Produce Processing & Export Corporation Ltd. (KAPPEC), Bangalore. Gherkin AEZ covers Tumkur, Bangalore urban, Bangalore rural, Hassan, Kolar, Chitradurga, Dharwad and Bagalkot districts. For rose onion AEZ the nodal agency is Karnataka State Agriculture Produce Processing & Export Corporation Ltd. (KAPPEC), Bangalore. Rose onion AEZ covers Bangalore rural, Bangalore urban and Kolar districts. For flowers AEZ the nodal agency is International Flower Auction Centre (IFAC), Bangalore. Flowers AEZ cover Bangalore rural, Bangalore urban, Kolar, Tumkur, Belgaum and Kodagu districts. Regarding vanilla AEZ the nodal agency is Department of Horticulture, Government of Karnataka. Vanilla AEZ covers Kodagu, Shimoga, Chickmagalur, Hassan, Dhakshina Kannada districts. Karnataka is one of the leading state in production of vegetables under contract farming. Around 22 companies both domestic & multinational are involved in contract farming producing a variety of vegetables. Contract farming of fresh vegetables is mainly concentrated in South Karnataka. NABARD has been supporting contract farming under AEZs by way of concessional refinance, promotional programmers like bringing out publication, organizing sensational meets, etc.

8 Export Oriented Units (EOU) has two types of contract arrangements. In the first model, a team of field workers visit the villages and explain to the farmers about Gherkin for the cultivation of which various inputs and services are offered by the EOU. They also explain the responsibilities of the farmers. Once the farmer consents to grow Gherkin on behalf of the EOU, a bipartite agreement is entered into between the company and the farmers. The EOUs provide identity card and a pass book to the farmer to record the supply of inputs, application of pesticides and fertilisers, quantities of produce procured, etc. The EOUs also depend on a second model of contract in which "Facilitators" are entrusted to procure bulk of gherkin instead of contracting with the individual farmers. The "Facilitators" agree to supply a definite quantum of Gherkin in a season and take the responsibility of supplying inputs like seeds, pesticides and fertilisers to the farmers. They act as an intermediary between the EOU and farmers. Gherkin (Cucumis anguria) belongs to family cucurbitacea. It is a cultigen derived from Cucumis longipes Hook, a native of tropical Africa. Gherkin is commonly known as West Indian Gherkin with a chromosome number 2n=24. It has occupied a place of its own in international market. The crop is slightly spiny as compared to cucumber. As for its nutritional value is concerned,gherkins are rich in calcium, iron, potash, vitamin B, vitamin B1,vitamin B2,vitamin C and Vitamin A in high calories. Gherkin plant is a creeper, which can grow upto a height of seven feet. Once considered mere animal fodder, gherkins are now an important commercial vegetable. They are grown for their edible fruit but are preferred in the pickled form. In product trade, the term gherkin refers to any immature cucumber fruit usually pickled (Walter, 1979). Gherkin was introduced to India in This vegetable crop is of 90 days duration which is harvested raw for pickling. Gherkin is not palatable with Indian taste but it is a major dietary constituent to many European countries and the USA. Hence almost the entire volume of gherkin produced is exported, with little or no domestic demand, except in some five star hotels (Acharya, 2006). Major destinations for its exports are Europe, USA, Russia, Australia and few other countries. The production of gherkins has considerably increased in India, as the crop can be cultivated round the year unlike other major producing countries like Mexico, Hungary and Madagascar, where it can be cultivated only for three months in a year. Further, gherkin is as it is a labour-intensive crop & hence the cost of cultivation is lower in labour surplus country like India. For this reason, industries engaged in marketing of gherkin abroad prefer to procure the produce from India. MANAGE (2006) defines contract farming as a system for the production and supply of agricultural/horticultural produce under forward contracts between producers/suppliers and buyers. Indian agriculture is now interlinked with world agriculture that ever before. In the context of liberalized global trade regime, among different possible avenues that could safeguard the interest of small and marginal farmers, contract farming is the most convenient and safer option (Kiresur et al, 2002). National Agricultural policy (2001) announced by the Government of India sought to promote contract farming by involving the private sector in order to accelerate technology transfer, capital inflow and assured marketing of crop production (Asokan, 2005). Contract farming under AEZ s has immense potential in India and especially, in a state like Karnataka with its varied agro climatic regions and diversified crops. Therefore, it was felt necessary to conduct a comprehensive study on contract farming under AEZ s for identification of various potentials and constraints of contract farming in gherkins. The primary focus of gherkin AEZ is pest and disease management, productivity enhancement and post harvest handling.

9 In cultivation of gherkins companies supply seeds, fertilizers, pesticides to farmers & cultivation techniques are provided by the field staffs who supervise the operations. The farmers provide land, labour and water. The produce when harvested is purchased by the company at predetermined price based on grade specifications. The globalization of trade relationships have also impression that the small and marginal farmers who are following subsistence farming could be benefited from a new and export crop like gherkin. India`s share in global exports of gherkins is around 3.4 percent, which is substantial (60,000 tonnes) worth Rs.150 Crores. The global market for gherkins is about 18 lakh tonnes of which the US imports around 50 percent followed by EU (43 percent) and Asia Pacific region (07 percent). Need for the Study Gherkin is relatively a new crop introduced in India. This crop is exclusively produced for exports purpose, as major output is exported to various countries. Gherkin cultivation is profitable to farmers, as rich employment opportunities are generated throughout the cropping period. It benefits the nation through foreign exchange contribution by promoting investments in processing and exporting units. AEZ facilitates the development of agricultural produce in a contiguous area for export. Contract farming under AEZ s has immense potential in India and especially in state like Karnataka with its varied agro-climatic regions and diversified crops. Keeping all these points in view the present study makes an attempt to understand the system of contract farming arrangement existing between gherkin farmers and exporters, the pattern of supply of inputs and technology to the farmers by firms, the resource use efficiency in gherkin production, income and employment generation through farming in gherkin and participation of women in production of gherkin. Specific objectives of the study 1. To examine the contractual arrangements between gherkin farmers and exporters of gherkin under Agri Export Zone in Karnataka. 2. To study the pattern of supply of inputs, credit, technical guidance and mechanization services to the farmers. 3. To analyse the resource use efficiency in gherkin production under the system of contract farming. 4. To study the marketing facilities, the market and the prices for gherkin under the system of contract farming. 5. To measure the income and employment generation through contract farming in gherkin. 6. To study the participation of women in production of gherkin under the system of contract farming. Hypotheses 1. Contract farming provides forward and backward linkages between farmers and marketing firms. 2. Firms provide support to farmers through inputs and technical guidance. 3. Gherkin is an input intensive crop where the resources are employed profitably. 4. Contract farming provides protection from fluctuation in market prices. 5. Gherkin cultivation provides more employment opportunities for casual labourers in the region. 6. Gherkin provides relatively more employment to women when compared to men labour.

10 Limitations of the study 1. The interview method of data collection requires the respondent to recall from their memories the operations carried out. Hence, the findings are subject to errors in memories of the respondents. However, maximum effort has been made to collect the required reliable information through cross checking. 2. Although gherkin producing companies are operating in different regions in Karnataka state, taking into consideration the time and resources available to the student researcher, this study was confined only to Tumkur district. Out of ten taluks two taluks namely Gubbi and Turvekere taluks were purposively selected because gherkin producing activities are more concentrated in these taluks.this posed a limitation to the study that all the taluks of the district were not considered through randomization. 3. This study could not be taken on comparative basis by dividing the farmers into different categories. The companies involved in supply of inputs to the farmers used to supply inputs for a plot of 0.5 acres only. Only in a few extreme cases the companies permitted the farmers to go for cultivation of gherkins up to 1 acre (2plots).Hence categorization of farmers was not possible.

11 II. REVIEW OF LITERATURE In this chapter, with a view to evaluate the objectives of the study, findings of some of the earlier research studies have been reviewed. This would enable the researcher to collect information and subject them to sound reasoning and meaningful interpretation. It was hoped that such a review of literature would provide a basis for either conforming the earlier results or contradicting them and there by suggesting the points for further improvement. Keeping in view the objectives of the study, the reviews are presented under the following headings: 2.1 Contractual arrangements between farmers and contracting firms 2.2 Pattern of supply of inputs, credit, technology and mechanization services to the farmers under contract farming system 2.3 Resource use efficiency in crop production under the system of contract farming 2.4 Marketing facilities, the market and the prices for crop produce under the system of contract farming 2.5 Income and employment generation through contract farming 2.6 Participation of women in crop production under the system of contract farming 2.1 Contractual arrangements between farmers and contracting firms The contractual arrangements vary with crops, location, customs and many other factors. Various theories prevail for the occurrence of contracts and vertical integration.a glimpse of relevant literature proposed by previous researchers are presented below. Ramesh (1999) observed the contractual farming arrangements in Indian vegetable and fruit processing industry with particular reference to gherkin crop in Karnataka. He found that the contracts were oral in nature and trust on each other was the backbone of such contracts. The crops requiring skilled labour and less government intervention were the best suited for contract farming. Further the author stressed the need for financing agencies and banks in financing the processors and growers. Arunkumar (2002) examined that written agreement was used in potato and chilli contract farming in Belgaum. The agreements were drafted in short, simple terms, clarifying the responsibilities of both farmer and firms. Breach of contract was included in order to contract the possibility of extra-contractual marketing. Shivakumar et al. (2005) studied on contractual arrangements in contract Cotton farming in Haryana state. The study revealed that there were 4 types of contract production models and Pepsi model was found the most common. The nature of contract of public and private sectors were formal and informal, respectively in the state. Public agency contracted only medium and large farmers while private agency contracted all categories of farmers. Public sector agency pays Rs.200 /q more on prevailing market price while private agency pays Rs /q more on prevailing market price.

12 Vinayaka (2005) undertook study in Raichur, Gadag and Koppal districts of North Karnataka. All the famers adopting Aswagandha contract farming were chosen. This study states that written agreement was used in Aswagandha contract farming. The technical aspect of agreement was drafted in short, simple terms, clarifying the responsibilities of both farmers and firms. Sridhar (2008) in his study revealed that Suguna made contract for feeds and Riddi- Siddi for starch extraction. Both the companies fix the price at the time of agreement. They take the maize produce within 45days from the time of harvest. Both the companies agreed to pay the bills at the time of dispatch of the produce. However Suguna fixes size of the area for contract, between 0.50 to 2.50 acres per farmer. Similarly, Riddi-Siddi fixes 0.50 to 3.00 acres per farmer. Oral agreement is taking place in maize contract farming. The company staff visited the field once in month. Arun pandit et al. (2009) in their study on contract farming on potato stated that contract agreement was largely verbal. No Government functionary was involved in contract farming programme. In some places the agreement was not very clear to the farmers and hence, disputes arise. Vendor was appointed by the company who manages the total affair for a group of villages. 2.2 Pattern of supply of inputs, credit, technology and mechanization services to the farmers under contract farming system Anonymous (1999) reported a success of contract farming in Nasik district of Maharastra state. The company supplied inputs viz: high yielding variety seeds, fertilizers, Plant protection chemicals etc to the farmers on cash and carry basis along with technical advice and purchased the produce at the prevailing market rate at the farm itself. The Nasik District Central Cooperative Bank, Dena Bank, State Bank of India and Bank of Maharashtra participated in the project. About 2000 acres of maize involving 2036 farmers and 124 acres of soybean involving 150 farmers had been covered under the scheme. The estimated availability of maize and soybean to the company after harvest was 4032 mt and 150 mt respectively. Ponnusamy and Jacy Gupta (2003) studied on contract farming in sugarcane in Thanjavur district of Tamil Nadu. The analysis of the data collected from hundred randomly selected sugarcane contract farmers revealed that the farmers are highly satisfied with assured returns, risk reduction, timely availability of critical inputs including technical guidance, arrangements of credit and transport facilities under various dimensions of contract farming. Asokan and Singh (2003) studied the role and constraints of contract farming in agro processing industry and reported that two types of contracts existed between firms and farmer, viz., marketing and production contracts. Marketing contract is the oral or written agreement between contractor and grower that sets a price for commodity before harvest.the second type of contract is production contract, which specifies the quality and quantity of particular commodity to be procured, and the contracting firm has supplied all the inputs to growers. Nagraj et al. (2008) reported that there are some parallels between the domestic and foreign contract firms. The companies supply the quality inputs such as seeds, fertilizers, plant protection chemicals and the technical know how and procure output, establishing vertical linkage between firms and farmers. Arun pandit et al. (2009) examined that the potato contract of Frito-lays in West Bengal, is an instance of a Production management contract where the company supplies inputs and extension services, advances credit (in kind), provides price insurance and monitor grower effort through frequent inspection.

13 2.3 Resource use efficiency in crop production under the system of contract farming The use of Cobb-Douglas production function in agriculture is well known. This function was used by many authors in several crops and is popular among Agricultural economist. Here, past work on related crops are given which are comparable with the present study. Srikanthamurthy (1986) studied the productivity of resource use in two major food crops (Ragi and Paddy) in Bangalore district. Cobb-Douglas production function was fitted and results indicated that marginal farmers used nutrients in excess. Muralidharan (1987) studied the resource use efficiency in rice production in Kerala, employing the Cobb-Douglas production function. The adjusted R² was 0.84 indicating that 84 per cent of the variation in yield of paddy is explained by the estimated production function. The coefficient of land and human labour were positive and significant at one per cent probability level. Deshmukh et al. (1991) used Cobb-Douglas production function to study resource use efficiency under different farming systems. Production elasticities of gross cropped area and expenditure on manures and fertilizers were relatively higher on irrigated farms as compared to rainfed farms under the Bajra-based farming system. Balappa Shivaraya et al. (1998) fitted a modified cobb-douglas type of production function to determine the resource use efficiency in the production of red gram, in Gulbarga district. The study stated that land and fertilizers were found to influence the production significantly for both type of farmers, effect of plant protection chemicals was negative and statistically significant in non-ipm farmers resulting in negative returns. In IPM farmer s effect of plant protection chemicals was positive and the ratio (1.023) of marginal value product to marginal factor cost was nearer to one clearly indicating its optimal use in red gram production. Naik et al. (1998) analyzed the resource use efficiency and productivity of various factors involved in onion production using Cobb-Douglas production function. They observed that regression coefficient for land and farmyard manure was positive and highly significant. Veerapur (1999) analyzed resource use efficiency of cotton by using Cobb-Douglas production function. The regression coefficient of three factors viz., fertilizer, organic manure and IPM component significantly (at 5 per cent) influenced cotton yield in Raichur district of Karnataka. Dyammannavar (2000) in his study on economics of gherkin production and trade in Haveri district employed Cobb-Douglas production function. The regression co-efficient of bullock labour (0.2338) and FYM (0.4805) were found to be statistically significant indicating their crucial role in gherkin production. The MVP to MFC ratio was more in case of bullock labour, FYM, staking material and seeds. This indicated that there is an opportunity to maximize returns by using more of these resources. Dileep et al. (2002) examined resource use efficiency of contract farms and noncontract farms in tomato of Haryana state, India. Data was collected from total sample size of 100 farmers of different size groups of Ellenabad block of Sira district during They fitted Cobb-Douglas production function model and obtained allocative efficiency based on marginal value productivity. The results showed that there existed a scope to increase the production of tomato by increasing the use of critical inputs particularly fertilizer, irrigation and plant protection chemicals in the case of non-contract farms whereas the contract farmers made excessive use of plant protection chemicals.

14 Sunanda and Narendra (2003) studied the resource productivity of mesta farms in Srikakulam district of Andhra Pradesh, observed that mesta fiber accounts for 70 per cent of raw jute. The cultivation involves intensive human labour in addition to manures and fertilizers, seed and cattle labour. The Cobb-Douglas production function analysis for these variables indicated constant returns to scale on all farm size groups. The marginal value product to opportunity cost ratios for all farm size groups indicated resource use efficiency and revealed the scope of adjustments and reorganization of resources, so as to obtain higher returns in mesta cultivation. Saikumar (2005) studied the resource use efficiency in different farming systems of three districts of north eastern Karnataka employing the Cobb-Douglas production function. The adjusted R 2 was 0.76, 0.58 and 0.54 for Bidar, Bellary and Raichur districts, respectively, indicating that 76, 58 and 54 per cent of variation in yield was explained by the estimated production functions. The coefficient of cost of seeds and feeds plus concentrates in Bidar, fertilizer plus FYM cost in Bellary and fertilizer plus FYM cost and labour cost in Raichur district were positive and significant at 5 per cent probability level. Mohan (2009) examined that the production function estimates of IPM farmers indicated that output elasticities of seed (0.138), human labour (0.148) and IPM component (0.279) had significant influence on the cotton yield in IPM farmers. Whereas in non-ipm farmers chemical fertilizer (0.087) and plant protection chemicals (-0.047) found to have significant influence positively and negatively on cotton production in non-ipm farmers. 2.4 Marketing facilities, the market and the prices for crop produce under the system of contract farming Kiresur et al. (2002) highlighted advantages of contract farming like reduced capital investment, no price fluctuations and guaranteed income. Reduced capital investment, improved efficiency and efficient marketing were the benefits realized by the company through contract farming. Dileep et al. (2002) in a study on contract farming in Sirsa districts of Haryana reported that there were two processing firms viz., the Hindustan lever Ltd.and Niger Agro Foods Ltd. operating in contract farming for tomato. The processing firms fixed the procurement price for tomato as Rs.188 per quintal which was 12 per cent more than the average non-contract price. In a study by Ponnusamy and Jacy Gupta (2003) on contract farming in sugarcane in Thanjavur district of Tamil Nadu the data collected from hundred randomly selected sugarcane contract farmers revealed that assured price, credit, market, inputs, technology and reduced risk were perceived as the major motivating factors to prefer contract farming in sugarcane. Manjunath et al. (2004) studied on contract farming of organically produced Basmati paddy in Haryana.They collected samples from Sonepat and Kaithal district of Haryana. The major agencies like Picric, Sunstar, Agrocell etc. which have contract with farmers and engaged in marketing, processing and exporting of organically produced basmati paddy were selected for the study. Per quintal price paid by the consumer/ processor through contract farming was more in case of organic basmati paddy than the inorganic/ordinary basmati produce. The share of producer in processor price was more in organic basmati as compared to ordinary basmati paddy. The marketing margin was almost same in both the cases. Generally the organically produced basmati was brought to the market by the producers and in the market the contracting firm buys the produce at 10-30% higher than the prevailing market price. Contract farming helps the farmer in reducing marketing risk and increasing income.

15 Arun pandit et al. (2009) reported that the price was fixed well before planting. In the open market price fluctuates vigorously. Thus a farmer received considerable price insurance in contract farming.however, the price fixed was not uniform across the state.depending upon vendor, it was fixed for whole produce. In some places some incentive was provided with the base price. Incentive was given on the basis of pay for performance, i.e. for quality produce and good cultural practices. 2.5 Income and employment generation through contract farming Singh (2000) conducted a study on contract farming of tomato, potato and chilli revealed that contract farming has led to more employment opportunities.the labour intensity was much higher than the traditional crops. It varies from 38 labour days in potato to 67 labour days in other kharif crops. Abhiram singh (2001) examined the supply chain management and role of contract faming.he highlighted that the services of contract farming system were advantageous to both the farmers and company. The impact was clearly brought out by contract farming.tomato yields increased three fold (from 16mt/ha to 52 mt. /ha), chilly yields increased from 6mt./ha to18 mt./ha, farm incomes increased by more than 2.5 times, processing season linked to fruit increased from 28 to more than 55days and there was an improvement in the quality of produce. Tatlidal and Akturk (2004) made a study on comparative analysis of the contract and non-contract farming models of tomato production in Biga district of Canakkale province, Turkey. Data for production period was obtained from a sample of 57 contract farms and 45 non -contract farms. Input use level, gross-margin and net profit in tomato-growing farms were examined. Farms operating by the contract farming model utilize more input per unit area, adopt technological innovations and obtain greater yields of tomato per unit area. The gross margin of contract farms was 13 per cent while net profit was19 per cent higher when compared to non-contract farmers. Vinayaka (2005) reported in maize cultivation about 6.32 man days of human labour used for land preparation, for FYM and compost transportation and application 5.96 man days were employed. About 7.96 man days were employed for sowing. For weeding about 8.92 man days, for harvesting 10.6 man days and for threshing 13.6 man days were used. Total of man days were employed for different activities of maize cultivation by contract farming. In a study by Ramsundharam et al. (2005) on contract farming of cotton in Coimbatore district of Tamil Nadu revealed that the income obtained by contract farming was 75 per cent more than non-contract farming. In a study by Jagadish kumar and Prakash kumar (2008) in Tumkur district revealed that the average gross farm income was higher on contract farms (Rs. 1, 35,898) than noncontract farms (Rs. 69,498) by about 96 per cent. The per- year income from crops was higher on contract(rs 1,24,215) than non-contract (Rs. 56,4180 farms, the farmer contributing 91.4 per cent and the latter 81.2 per cent to the gross farm income. The family human labour employed in crop production and livestock was also more on contract farms than non-contract farms. It was due to higher cropping intensity and more labour- intensive crops. 2.6 Participation of women in crop production under the system of contract farming Birari et al. (1991) in their paper have examined the pattern of employment and participation of women in agriculture activities in Maharashtra.The proportion of family women labour was the highest (14.2 per cent) in western Maharashtra, while the proportion of hired women labour was the maximum of 65 per cent in Vidarbha region. Women accounted for 18 percent of the total labour employment under special activities such as incidental farm work. Nearly 50 per cent of the labour requirement for agricultural activities was contributed by woman in the study area.

16 Pandey et al. (1999) in their study have attempted to examine the extent of temporal changes in the pattern of employment of rural women across crop and animal husbandry activities in Hisar district of Haryana. Cotton, paddy, wheat and Rabi fodder were the major crops while weeding, hoeing, harvesting/picking, threshing and winnowing as well as transportation were the major 0perations which absorbed female labour in Haryana. The findings suggests that concerted efforts are needed to develop better technologies for agricultural operations such as transplanting, weeding, harvesting/picking and cleaning of farm produce to reduce the physical burden drudgery of women operations. Ponghal et al. (1999) in their paper studied the efficiency of men and women labour in performing different crop production operations in major crops of Haryana. The study revealed that women labour participation was quite high in operations like transplanting, weeding and picking.there was no participation of women labour in irrigation and ploughing operations in all zones of Haryana and almost in all the crops. Singh et al. (1999) in their study on the impact of changing cropping pattern and women s participation in crop production in Farrukhabad district of U.P examined the socioeconomic structure of selected farm workers households and the rate of participation of farm women workers in various field operations like sowing, inter-culture, threshing, winnowing and harvesting, the participation of females was more than that of the male workers. The female labour employment in the cultivation of maize, potato, wheat and sunflower varied from per cent as total labour days employed. The study concludes that with the increase in intensity of cropping and introduction of labour intensive crops, the rate of female workers has increased to a considerable extent. Sinha and Singh (2000) in their study on the involvement of farm women in jute production technology, found that farm women s contribution to collecting weeds, weeding by khurpi and uprooting of weeds was 85, 87 and 100 per cent respectively. Also the involvement of farm women was quite high in land preparation (37.5 per cent) than and in inter-culturing (77.33 per cent). Dhillen et al. (2007) conducted a study in 3 agro-climatic zones of Punjab on involvement of farm women in agriculture and allied activities. Multistage stratified random sampling technique was used to select the sample of 120 from women. The results of the study showed age of farm women ranged between years. Majority of the farm women (42.5 per cent) belonged to the families having 6 family members. Majority of the families in zone-iii (62.5 per cent) were holding large farm size of more than 10 acres followed by Zone-I (37.5 per cent) and Zone-II (22.50 per cent).

17 III. METHODOLOGY This chapter outlines briefly the characteristics of the study area, methods adopted in the selection of samples, the nature and source of data. The various statistical tools and techniques employed in the analysis of data and evaluating the results and definitions of terms / concepts used in the study are presented below. The details are presented under following heads: 3.1 Description of the study area 3.2 Sampling procedure 3.3 Nature and source of data 3.4 Analytical tools employed 3.5 Definitions of terms and concepts 3.1 Description of the study area. The background of the study area is given below Location of the study area. The study was undertaken in Gubbi and Turvekere taluks of Tumkur district in Karnataka. Tumkur district falls in the eastern dry zone of Karnataka state. Gubbi is 20 kilometers west of Tumkur on the Bangalore-Shimoga road and 90 kilometers from Bangalore. Turvekere is 72 km from Tumkur and 129 kilometers from Bangalore. The Tumkur district is surrounded by Ananthapur district of A.P and Chitradurga district of Karnataka. The geographical area of Gubbi taluk is 4.38 sq. km. It has an average elevation of 767 meters (2516 feet). As of 2001 India census, Gubbi had a population of 16,802. Males constitute 51 per cent of the population and females 49 per cent. The male to female ratio is 1000:946. The geographical area of Turuvekere taluk is 3.77 sq. km. It has an average elevation of 794 meters (2604 feet). As of 2001 India census, Turuvekere had a population of 13,275. Males constitute 52 per cent of the population and females 48 per cent. The male to female ratio is 1000: Population and Demography The geographical area of Tumkur district is 10, 64,755 hectares consisting of ten taluks, fifty hoblis and 2,537 inhabited villages, as well as 181 uninhabited villages. The total population in the district is around 25,84,711 (as per 2001 census), out of which rural population constitutes lakhs. The schedule caste population constitutes 4.74 lakhs, out of which 4.12 lakhs live in rural areas and remaining 0.62 lakh schedule caste population live in urban areas of the district The schedule tribe population constitutes 1.94 lakhs of which 1.70 lakhs live in rural areas and remaining 0.24 lakhs of schedule tribe people live in urban areas. The sex ratio in the district is 967 females for every 1000 males.

18 FIGURE 1: MAP SHOWING THE STUDY AREA s

19 Climate, Rainfall and Soil Type Tumkur district falls in the eastern dry agro climatic zone. The temperatures start rising from January to peak in May; around 40 degree Celsius is common. Thereafter it declines during the monsoon period. The maximum and minimum temperature of district is 35.2 degree Celsius and 16.3 degree Celsius. The humidity is lowest during the dry season and highest during the monsoon period. The winds are predominantly south westerly during the summer monsoon and northeasterly during the winter monsoon. The annual potential evapo-transpiration is over 1800mm with monthly rates less than 100mm during December and January and over 250 mm during May. The year may broadly be classified into four seasons. The dry season is from January to February. It is followed by hot weather from March to May. Over 18 percent of annual rainfall occurs during the pre monsoon season. The monsoon season is from June to September. This season yields around 52 percent of the annual rainfall. The post monsoon period from October to December contributes around 30 percent of annual rainfall. On an average, annually over 650 mm rainfall occurs in nearly 45 rainy days. There are three distinct agricultural seasons in the district viz. Kharif (June- September) Rabi (October-January) and summer (February-may). The southwest monsoon commences by about the end of May or early June and continues intermittently till the end of September. The average rainfall in the district is 88 mm and actual rainfall in the year 2008 was mm with a major portion of the same being received from south west monsoon only. The average annual rainfall in Gubbi taluk is mm. The average annual rainfall of Turvekere taluk is mm. Major types of soils occurring in the district are Red loamy soil, red sandy soil, mixed red and black soils. The soils in the Gubbi and Turvekere come under red loamy soils, which are swallow in depth and well-drained soils which contain medium nutrients. 3.2 Sampling Procedure and Sources of Data Selection of study area The area under gherkin is highest in Tumkur district in the Karnataka state. Tumkur district is covered under gherkin AEZ. Hence Tumkur district was selected for the study. Out of ten taluks in the district Gubbi and Turvekere taluks were selected because in these two taluks larger area was devoted for production of gherkin compared to other taluks. In Gubbi taluk three villages viz: Bidare, Yekalakatte and Shivapura and in Turvekere taluk three villages viz: Goppenalli, Bedarkodigehalli and Chikkashettikeri were selected for the study as gherkin production is mostly concentrated in these villages Selection of the sample respondents Gherkin cultivation is emerging issue throughout the district. In order to study the terms of contract, pattern of input supply, arrangement of credit, technical guidance, the marketing facilities, the market and the prices, resource use, income and employment and women participation fifteen farmers producing gherkin under contract farming system were selected from each selected village. Thus a total of ninty farmers, fourty five from Gubbi taluk and fourtyfive from Turvekere taluk were selected for the study.

20 Table 3.1: District wise area, production and productivity of gherkin in Karnataka ( ) Sl. No. District Area (acre) Production (tonnes) Productivity (tonnes/acre) 1 Tumkur Hassan Haveri Davangere Kolar Dharwad Bangalore (R) Chitradurga Koppal Bellary Gadag Chickmagalur Mysore Bidar Bagalkot Chamarajanagar Shimoga Bangalore (U) Mandya Uttar Kannada Total Source: Anurag et al., (2009) Southern Economist.

21 3.3 Nature and source of data For evaluating the specific objectives of the study, primary data were collected from the sample farmers by personal interview method with the help of structured pre-tested schedule. The data were collected on certain socio- economic characters of farmers such as land holdings, asset position, family size and composition and education level etc. The details regarding input use and output obtained in gherkin were also collected. Further, the data on the quantity of produce sold, prices of inputs and outputs etc were collected from them. The opinion about gherkin cultivation, marketing facilities available and information of participation of women in gherkin production were recorded separately. The technical guidance in the cultivation of gherkin given by the field officers appointed by the private companies were also sought in contacting the farmers and collecting relevant information. 3.4 Method of Analysis For the purpose of evaluating the objectives of the study, based on the nature and extent of data, the following analytical tools and techniques were adopted Tabular presentation method Production function analysis Allocative efficiency Tabular presentation method The tabular presentation method was followed to study the general characteristics of sample farmers, to understand the system of contract farming arrangements existing between gherkin farmers and exporters, the pattern of supply of inputs and technical guidance to the farmers, to study the marketing facilities, the market and the prices for gherkin under the system of contract farming, to analyze the income and employment generation through contract farming in gherkin and to study the participation of women in production of gherkin.the statistical averages and percentages were computed for comparative analysis Production function Analysis The resource use efficiency was studied by fitting the Cobb-Douglas type production function to the farm level data. This production function helps to find out the contribution of each resource or input used in gherkin production to the output and also to find out whether the resources employed were optimally used or not. Heady and Dillon (1964) indicated that Cobb-Douglas type of production functions have been the most popular of all possible algebraic form in farm firm analysis. Where, The general form of the function is, Y= ax i bi X is the variable resources Y is the output a is constant (efficiency parameter) b is the regression coefficients (output elasticity)

22 The equation is estimated in log liner form by the method of ordinary least squares (OLS). This type of function allows constant, increasing or decreasing marginal productivity. It does not allow on input-output curve embracing all these simultaneously with all other resources/inputs held in fixed magnitudes. The function of the following form was fitted for a gherkin crop. Y=ax 1 b1 ax 2 b2 ax 3 b3 ax 4 b4 ax 5 b5 ax 6 b6 ax 7 b7 e The logarithmic form of the above equations is: Log Y = Log a + b 1 log x 1 + b 2 log x 2 + b 3 log x b 7 log x 7+ u log e Where, Y = Estimated returns from gherkins (Rs/farm) a = Constant / intercept term X 1 = Human labour (Rs/farm) X 2 = Bullock labour and tractor labour (Rs/farm) X3= Seeds (Rs/farm) X 4 = Fertilizers and FYM (Rs/farm) X 5 = Plant protection chemicals (Rs/farm) X 6 = Staking material (Rs/farm) b i s= Regression co-efficients e = Random variable e = Allocative efficiency Given the technology, allocative efficiency exists when resources are allocated within the farm according to market prices and it implies the proper level of input use in production. To decide whether a particular input is rationally or irrationally, its marginal value products will be computed. If the marginal value product of an input just covers its acquisition cost it is said to be used most efficiently. The Marginal Value Products (MVP) was calculated at the geometric mean levels of variables by using the formula. MVP i th resource = b i Y Xi

23 Where, Y = Geometric mean of the output X i = Geometric mean of i th independent variable b i = The regression coefficient of the i th independent variable In order to determine the efficiency of allocation of the resources or price efficiency, the value of the marginal product obtained by multiplying the marginal product by the price of the product was compared with its marginal cost. A ratio of the value of marginal product to the factor price more than unity implied that the resources were advantageously employed. If the ratio was less than one, it suggested that resource was over utilized. 3.5 Terms and concepts used in the study. In order to analyse income generation through contract farming in gherkin production there is a need to compute economics of gherkin production. It is observed at the time of data collection that farmers of this region were more familiar with using acre as the unit of measuring the land area instead of hectare. Hence, in this study also all cultivation details pertaining to the economics of cultivation of gherkin were calculated on acre basis. Note: 2.47 acre = 1 hectare Costs The total cost (TC) was divided into two broad categories of costs i.e. variable costs and fixed costs. A.1 Variable costs (VC): These costs comprised of costs incurred on variable inputs such as seeds, farmyard manure, fertilizers, and electricity charges, plant protection chemicals, staking materials, labour (human and animal) and interest on working capital. The computation of variable cost components is as follows. 1. Seeds: As the seeds were supplied by the companies, the cost of seeds was computed by using the actual price paid by the sample farmers towards seed material. 2. Farmyard manure (FYM): The value of FYM was computed by considering the rates prevailing in the local area at the time of application. 3. Fertilizers: The companies supply fertilizers. The cost of fertilizers was based on the actual price paid by the sample farmers including the cost of transportation and other incidental charges if any.

24 4. Plant protection chemicals (PPC s): Companies supply PPC s, the actual price paid by the farmers towards plant protection chemicals was used to compute the cost of plant protection chemicals. 5. Electricity costs of irrigation: It includes only electricity charges plus maintenance charges paid by the respondents and the same has been apportioned based on the area of crop. 6. Staking materials: It includes the cost of poles, iron wire and thread which was used for staking the plant. The actual price paid by the sample farmers was used to compute the cost of staking materials. 7. Labour: The cost of labour was computed by taking the wage rates paid by the sample farmers for men, women and bullock labour. The same wage rates were used while computing the cost of family labour and own bullock labour. 8. Interest on working capital: This was calculated on the entire working cost of the enterprise at the prevailing rate of interest of 7 per cent per annum on short term loans for the duration of crop from the financial institutes. A.2. Fixed costs: (FC): 1. Depreciation charges: Depreciation on each capital equipment and machinery owned by the farmers and used for cultivation of land was calculated for individual farmer based on the purchase value using the straight line method. Annual depreciation = Purchase value Junk value Economic life of the asset The average life of the asset as indicated by each farmer was used in the computation of the depreciation. The average value of the asset after its useful life as estimated by the respondents was considered for calculation of junk value. The depreciation cost of each equipment was apportioned to the crop based on its percentage use. 2. Interest on fixed capital: Interest on fixed capital was calculated at 11 per cent per annum, which is the prevailing rate of investment credit. The items considered under fixed capital are implements and machinery. Interest was considered on the value of these assets after deducting the depreciation for the year.no interest was charged on the land value since the rental value of owned land was considered. Then the amount so calculated was apportioned to the crop acreage for the duration of crop. 3. Land revenue: Actual land revenue paid by the farmers was considered. 4. Land rent: The farmers owned their land and not purchased recently, only the rental value of the land (opportunity cost of land) was considered and the rental value was imparted on the existing lease market in the study area.

25 Grading mechanism of Gherkins After harvest the gherkin fruits are suitably graded before these are marketed. Three different grades have been specified for the fruits. Grading of the fruits is very much essential as the grades will determine the prices of gherkins.details of the grades are as below. Grade-I: The fruits harvested from 6-7 days after flowering are covered under this grade. Fruits will be of 3.5 to 4.0 cm in length and weighing about 3.33 to 6.25 gm. Around fruits of this grade will form a kg of fruits. Grade-II: The fruits harvested from 7-9 days after flowering are covered under this grade. Fruits will be of 4.0 to 5.0 cm in length and 6.25 to 8.33gm in weight. Around fruits of this grade will form a kg of fruits. Grade-III: The fruits harvested from 9-11 days after flowering are covered under this grade. These fruits weigh about 8.33 to 12.5 gm on an average. The fruit will be of cm in length and about 80 to 120 fruits will form a kg of fruits of this grade. The fruits left unharvested in the field beyond these days will not be accepted by the companies. Therefore, careful management of harvesting is very essential to get quality gherkins in order to get better price.

26 IV. RESULTS The findings of the study are presented in this chapter under the following headings in consonance with the objectives of the study. 4.1 Socio-Economic characteristics of respondents 4.2 Contractual arrangements between farmers and contracting firms 4.3 Pattern of supply of inputs, credit, technical guidance and mechanization services to the farmers under contract farming system 4.4 Resource use efficiency in gherkin production under the system of contract farming 4.5 Marketing facilities, the market and the prices for gherkin produce under the system of contract farming 4.6 Income and employment generation through contract farming 4.7 Participation of women in gherkin production under the system of contract farming 4.1 SOCIO - ECONOMIC CHARACTERISTICS OF RESPONDENTS The results in respect of socio- economic characteristics of the sample farmers are presented as follows: General features of sample respondents General information about gherkin growers which will assist to analyze the results is presented in Table 4.1. The average age of farmers growing gherkin was around years. About 11 per cent of the farmers were illiterate and remaining farmers were found literate. About per cent, per cent, and per cent of the farmers had studied up to primary school, High school and college education respectively. Almost all farmers growing gherkin took up Agriculture as main occupation with no subsidiary occupation. The average size of family was 4.07 members Pattern of land holdings of sample farmers The pattern of land holdings of gherkin growers is given in Table 4.2. The average size of the land holding of the sample growers was 5.72 acres out of which dry land was 3.68 acres (64.30 per cent) and irrigated was 2.0 acres (35.01 per cent). Gherkin crop was cultivated in an average area of 0.56 acres which accounted for 9.7 per cent of total land holding Cropping pattern on sample farms The area under different crops grown on sample farms is presented in Table 4.3.It is evident from the table that in the study area, gherkin crop occupied a major(0.56 acre) proportion of the area among irrigated crops, which worked out to be 9.79 per cent of the gross cropped area. Coconut occupied an area of 0.6 acres accounting for per cent followed by paddy, arecanut and vegetables, which occupied 5.24 per cent, 4.89 per cent and 4.54 per cent of the gross cropped area respectively.

27 Table 4.1: General features of sample respondents Sl. No. Particulars Average (No.) Percentage (%) 1 Age (years) Above Education Level Illiterate Primary(1-7) High school(8-10) College and above(>10) Total Occupation Agriculture as main occupation Agriculture as subsidiary occupation Family size Family members engaged in farming

28 Among dry crops, ragi occupied a major (28.49 per cent) proportion of the gross cropped area. The others crops like pulses, fodder sorghum and fodder maize occupied about per cent, per cent and 7.86 per cent of the gross cropped area respectively. 4.2 CONTRACTUAL ARRANGEMENTS BETWEEN FARMERS AND CONTRACTING FIRMS Terms of contract with Intergarden and Unicorn companies The agreement between the farmers and the company was oral and informal in Intergarden Company whereas, in Unicorn Company the agreement between the farmers and the company was written and formal. The terms and conditions are as follows: 1. The company provides complete information, advice and guidance regarding production of gherkin. Expenses of implements, wages for labourers, manures etc required for gherkin production should be the responsibility of the farmers. In order to get best quality gherkins, farmers have to follow the following instructions: a) Timely application of fertilizers, Plant Protection Chemicals under the guidance of field officers. b) In time guiding with the help of wooden poles and jute threads. c) Continuous irrigation and timely weeding operations should be taken. d) Harvested gherkins should be placed in netted bags. Gherkins which are placed in plastic bags or gunny bags will not be procured. e) Complete produce produced should be given to the company based on prescribed prices by the company. 2. Company will supply seeds at the rate of 35 paisa per seed. 3. Although farmers get complete information and guidance about gherkin cultivation from field officers, farmers should agree to take up this crop with interest in order to achieve higher production. Company will not assure for crop loss and profits. Farmers are held responsible for crop related difficulties. Farmers should agree for field officer decision for dropping of crop based on the severity of diseases and pests. It is necessary to spray recommended pesticides at regular intervals for the control of fruit borer and fruit flies, if farmers do not spray recommended insecticides at correct dosage then company can drop the agreement. Farmers should agree that they will not take seeds from other company, if in case farmers breach this agreement they must agree to pay any penalty decided by the company. 4. Guidelines for gherkin procurement a) Harvested gherkins should be transported to nearby booth centers within 2pm. b) Separate healthy gherkins from broken, rotten, shapeless, mudded and infected with fruit flies and fruit borer. Then with the help of sieves gherkins will be graded and weighed. 5. Payment settlement pattern a) Company would not pay any advance payment. Farmers are responsible for wages of labour, poles and other expenses.

29 Table 4.2: Pattern of average land holdings of sample farmers Sl. No. Particulars Area (acres) Percentage (%) 1 Dry land Irrigated land a Owned b Leased in Total Size of the average landholding Average area under gherkin (Kharif)

30 Table 4.3: Cropping pattern of sample respondents Sl. No. Particulars Area (acres) Percentage (%) I Irrigated crops 1 Gherkin Paddy Vegetables Arecanut Coconut Subtotal (A) II Rainfed crops 6 Ragi Fodder sorghum Fodder Maize Pulses Subtotal (B) III Gross cropped area

31 Pulses, Gherkin, 9.72 Paddy, 5.24 vegetables, 4.5 Fodder maize, 7.86 Arecanut, 4.89 Fodder sorghum, Coconut, Ragi, Figure 2: Cropping pattern on sample respondents (%)

32 Table 4.4: Contractual arrangements prevailing in study area Sl. No. Particulars No. of farmers Percentage (%) 1 Total samples Introduced to the crop by a Fellow farmers b Company personnel Type of agreement a Oral b written Frequency of field visit by company personnel: weekly once Satisfaction with company agreement and field staff a Satisfied b Unsatisfied Successive gherkin crop on a Same piece of land 0 0 b Other areas c Both Expectations of farmers from company a Crop advance b More price for the produce c Regular field visits by field officer Successive gherkin crop with previous contractor or new contractor a Old b New 0 0

33 b) It is company s responsibility to make payment before crop completion. Company will deduct money which they have given to farmers in the form of inputs and give remaining 75% once in 15 days. Remaining amount will be given to the farmers after they return passbook to company. c) If the farmers are not able to return the lent inputs taken from the company in the form of fruits, in that case, farmers should agree to pay that in terms of money. 6. Company provides daily transportation for the fruits harvested for entire gherkin production period. Farmers should agree to take responsibility of transportation during public and private strikes. 7. Farmers should declare that they will not take up any agreement to grow gherkins with other companies during this period of agreement. If any breach of agreement takes place during this period of agreement then company s decision will be the final. 8. The farmers should agree not to employ the child labour during entire gherkin production period. The terms and conditions are same for both the companies; the only difference is farmers agree to the above terms orally in Intergarden company, whereas in Unicorn company farmers agree to the above terms in written format along with the signature from both the farmer and company official. The various contractual arrangements between the company and the farmers were examined. The results on the prevailing arrangements, farmers attitude towards the crop, field staff and company, expectation of the farmers are presented in Table 4.4 It can be observed that in study area, 51.1 per cent of farmers were introduced to the crop by the fellow farmers and 48.8 per cent by company staff. The study shows that the agreement between the farmers and the company was oral and informal for 77.7 per cent of the sample farmers and for the rest 22.2 per cent was written and formal agreement. Gherkins are susceptible to pest and disease attack. Hence, the field staff of the company monitors the situation and provides technical advice.all the farmers fields in the study region were visited weekly by the field officer. All the sample farmers expressed that they were satisfied with the contractor and terms of agreement. All the farmers expressed that they will continue to grow gherkins with the same company. Further, all the farmers indicated that they were willing to grow gherkins once again. It is a common observation that gherkins are heavy feeders and can perform better with crop rotation. So, no farmer was ready to grow gherkin on same piece of land. The respondents were asked to indicate additional facilities expected from the company, 17.7 per cent and 77.7 per cent of the sample farmers expressed the desire to receive advance payments and more price for the produce respectively. Regular visits by the field staff were expected by 66.6 per cent of the farmers. It can be observed that in study area, 51.1 per cent of farmers were introduced to the crop by the fellow farmers and 48.8 per cent by company staff. The study shows that the agreement between the farmers and the company was oral and informal for 77.7 per cent of the sample farmers and for the rest 22.2 per cent was written and formal agreement. Gherkins are susceptible to pest and disease attack. Hence, the field staff of the company monitors the situation and provides technical advice.all the farmers fields in the study region were visited weekly by the field officer.

34 All the sample farmers expressed that they were satisfied with the contractor and terms of agreement. All the farmers expressed that they will continue to grow gherkins with the same company. Further, all the farmers indicated that they were willing to grow gherkins once again. It is a common observation that gherkins are heavy feeders and can perform better with crop rotation. So, no farmer was ready to grow gherkin on same piece of land. The respondents were asked to indicate additional facilities expected from the company, 17.7 per cent and 77.7 per cent farmers expressed the desire to receive advance payments and more prices for the produce respectively. Regular visits by the field staff were expected by 66.6 per cent of the farmers. 4.3 PATTERN OF SUPPLY OF INPUTS, CREDIT, TECHNICAL GUIDANCE AND MECHANIZATION SERVICES TO THE FARMERS UNDER CONTRACT FARMING SYSTEM Company which undertakes contract farming of gherkin supplies all inputs to the farmers needed for gherkin cultivation. Company supplies all inputs to the farmers at their door step. Input supply pattern followed by the company for gherkin cultivation in the study area is presented in Table 4.5. In the first week i.e. at the time of sowing on an average the company supplied 9623 seeds, kg of DAP and 19.04kg of Magnesium sulphate per acre. In the second week after sowing 95.23kg of Imidacloropid and kg of Mancozeb was supplied per acre. In the third week company supplied 1.88kg of Potassium nitrate and 99.04kg of Complex fertilizer (20 all) per acre. In the fourth week gms of Mancozeb, gms of Ridomil, 19.05ml of Daman, 38.09ml of Acrobat and ml of lamdacyhalothrin 5%EC per acre were supplied by the company. They also supplied monofilament wire, plastic tape and jute thread at the rate of mt, 9.52kg and 28.17kg respectively. In the fifth week company supplied gms of kavach, 95.23kg of CAN, 95.23kg MOP and kg of magnesium sulphate per acre. In the sixth week 19.05ml of Daman, 1.88kg of Potassium nitrate and gms of Metomyl 12.5%L per acre were supplied by the company. In the seventh week company supplied ml of lamdacyhalothrin 5%EC, kg of Urea and 95.23kg of MOP per acre. In eighth week gms of kavach and ml of Success per acre were supplied by the company.in the ninth and tenth weeks company supplied 95.23kg Complex fertilizer (20 all) and gms of Methomyl12.5% L per acre respectively. Company provided no credit facilities to the farmers. But as per the policy of AEZs farmers could get credit on priority basis without any hustle. Also company did not provide any mechanization services to the farmers under contract farming system. The company staff at field level visited the farmers fields at regular intervals and provided technical guidance to the farmers in gherkins. 4.4 RESOURCE USE EFFICIENCY IN GHERKIN PRODUCTION UNDER THE SYSTEM OF CONTRACT FARMING. In a production unit, one of the major objectives is to co-ordinate and utilise resources in such a manner that they together yield the highest net returns. In this section an attempt is made to analyse the productivity of resources involved in the production of gherkin. In order to study the resource use efficiency of inputs in gherkin production, a modified Cobb-Douglas type production function was fitted to the data. The efficiency of allocation of resources was studied by comparing the marginal value product with the marginal factor cost of each factors of production included in the analysis.

35 The estimated coefficients of the Cobb-Douglas production function are presented in Table 4.5.The gross returns was taken as a function of seeds, human labour, bullock and tractor labour, FYM and fertilizers, PPC and staking materials. The output elasticities of human labour (0.899) and staking materials (0.101) were significant at one percent. The output elasticities of FYM and fertilizers ( ) and PPC (0.1228) were significant at ten per cent. The output elasticities of bullock and tractor labour (0.0197) and seeds ( ) were found to be non- significant. The table shows that the regression co-efficient of the variables, such as value of human labour, bullock and tractor labour, PPC and staking materials was positive, which indicates that they have a positive impact on gherkin production. That is, one per cent increase in the use of human labour, bullock and tractor labour, PPC and staking materials would increase the returns by 0.899, , and per cent respectively. The variables such as FYM and fertilizers and seeds had negative b i value indicating that these resources when added more would decrease the gross returns. It can be observed from the table that the coefficient of multiple regression (R 2 ) worked out to be 0.93.This implied 93 per cent of variation in the gross returns was mainly due to the variation of all the factors of production considered in the model. The sum of elasticities ( b i ) was showed that production is in the decreasing returns to scale. Thus one per cent increase in all the factors of production simultaneously would increase the returns by 0.98 per cent Allocative efficiency of resources in gherkin production The results in respect of allocative efficiency of important variables included in the analysis of gherkin production by the farmers are presented in Table 4.7.The Marginal Value Product (MVP) to Marginal Factor Cost (MFC) ratio was greater than unity for human labour (1.79), plant protection chemicals (3.18) and staking materials (2.66) indicating the greater scope for using additional units of these resources to increase gross income from gherkin cultivation. The Marginal Value Product (MVP) to Marginal Factor Cost (MFC) ratio was positive but less than unity for bullock and tractor labour indicating excessive use of these inputs. The MVP to MFC ratio for seeds and FYM and fertilizers was negative indicating that every rupee increase on seeds and FYM and fertilizers would reduce the gross returns since they are overused. Thus human labour, plant protection chemicals and staking materials were underutilized while bullock and tractor labour, seeds and FYM and fertilizers were over used in gherkin cultivation. 4.5 MARKETING FACILITIES, THE MARKET AND THE PRICES FOR GHERKIN PRODUCE UNDER THE SYSTEM OF CONTRACT FARMING Details of gherkins grown on sample farms The details of gherkins grown on sample farms are presented in Table 4.8. The average size of land holding of sample farmers was 5.72 acres. Gherkin crop was cultivated on an average area of 0.56 acres which accounts for 9.79 per cent of total landholdings. Out of 90 sample respondents 70 farmers cultivated gherkin under contract with Intergarden company and 30 farmers under contract with Unicorn company. Two varieties namely Ajax and Spartar were grown by sample farmers, 76.6 percent farmers grew Ajax variety and 23.3 per cent farmers grew Spartar variety.

36 Table 4.5: Pattern of supply of inputs Sl.No. Time of supply Particulars (inputs) Unit Quantity (Per 0.56 acre ) Quantity (Per acre ) 1. Seeds No FYM* Tonne st week 3. DAP Kg Magnesium Sulphate Kg nd Imidacloprid ml week Mancozeb Gms Potassium nitrate Kg rd week 8. Complex fertilizer (20 all) Kg Mancozeb Gms Ridomil Gms Lamdacyhalothrin 5% EC ml Monofilament wire Mt th week Plastic tape Kg Jute thread Kg Poles* No Daman ml Acrobat Gms Kavach Gms CAN Kg th week MOP Kg Neemazol ml Magnesium sulphate Kg Daman ml th week Potassium nitrate Kg Metomyl 12.5%L Gms Lamdacyhalothrin 5%EC ml th week Urea Kg MOP Kg Kavach Gms th week 30. Success ml th week Complex fertilizer(20 all) Kg th week Methomyl12.5% L Gms *indicates that these inputs are not supplied by company

37 Table 4.6: Production function estimates Sl. No. Particulars Parameters Co-efficients No of observations N 90 1 Intercept (0.2550) *** 2 Human labour X 1 (0.0534) Bullock and Tractor labour X 2 (0.0473) 4 Seeds X (0.0451) 5 FYM and fertilizers X * (0.0594) 6 PPC X * (0.0673) 7 Staking materials X *** (0.0324) 8 Coefficient of multiple determination R Adjusted R --- R F value F Returns to scale b i Note: Figure in parentheses indicate their respective standard error ***Significant at 1% probability level **Significant at 5% probability level *Significant at 10% probability level

38 Table 4.7: Allocative efficiency of resources in gherkin production Sl. No. Variables Geometric mean Coefficient MVP MFC MVP/MFC 1 Gross returns Human labour Bullock and Tractor labour Seeds FYM and fertilizers PPC Staking materials

39 4.5.2 Transportation arrangements The details of transportation arrangements made by the company are presented in Table 4.9.The company is responsible for transportation of entire gherkin produced by sample farmers. Company use tempo as mode of transport. The average distance from company office to sample field was km. After 35 days of crop growth when harvesting of fruit begins the company provide vehicle facility for transporting harvested gherkins to the company office Procurement of the crop and payment The produce was procured by the company with appropriate prices based on their grades. The prices offered by both the companies are presented in Table The harvested gherkins were graded into three grades as Grade-I (3.5 to 4.0 cm in length and weighing about 3.33 to 6.25 gm.), Grade-II (4.0 to 5.0 cm in length and 6.25 to 8.33gm in weight.) and Grade-III (weigh about 8.33 to 12.5 gm on an average and cm in length). In G-I system company procure produce of all grades from Grade-I.In G-II system company procure gherkins of Grade-II and Grade-III only. In G-I system Grade I produce was procured at a price of Rs.17 /kg followed by Grade II and Grade III produce at the price of Rs.13/kg and Rs.8/kg respectively. In G-II system Grade II produce was procured at a price of Rs.15 /kg and Grade III at the price of Rs.12/kg Payment settlement pattern for sample farmers The payment patterns practiced by the company for sample farmers are presented in Table All the farmers received first payment on 50 days of crop age i.e. after fifteen days of crop harvest. Likewise all payments were made at an interval of fifteen days. The cost of inputs supplied to farmers was adjusted in payments by deducting cost of inputs and paying rest of the amount INCOME AND EMPLOYMENT GENERATION THROUGH CONTRACT FARMING Cost involved in gherkin production Table 4.12 shows the various costs involved in gherkin production per acre. The total cost of cultivation per acre was Rs. 67,755 of this variable cost constituted per cent (Rs 64, per acre) and fixed cost constituted 5.03 per cent (Rs per acre). Among variable costs, cost of human labour was the major cost item which contributed to the tune of per cent (Rs per acre) of the total cost. Other important variable cost items from the point of view of their contribution to total cost were cost on PPC (7.66 per cent), fertilizers (5.89 per cent), seeds (5.38 per cent) and interest on working capital (5.02 per cent) and staking cost (4.69 per cent). Among fixed costs rental value of land was the major chunk of cost (Rs per acre) which constituted around 4.48 per cent of total cost of cultivation. Other fixed cost items were depreciation (0.38 per cent), interest on fixed capital (0.13 per cent) and land revenue (0.03per cent).

40 Table 4.8: Details of gherkins grown on sample farms Sl.No. Particulars Quantity/No. Percentage 1. Average size of land holding 5.72 acres Average area under gherkin (Kharif) 0.56 acres 9.79 Contracting Company 3. 1) Intergarden 70 farmers ) Unicorn 20 farmers 22.2 Varieties grown 4. Ajax 66 farmers 76.6 Spartar 24 farmers 23.3 Table 4.9: Transportation arrangements Sl.No. Particulars 1. Responsibility of transportation of produce Company 2. Mode of transport Tempo(Road ways) 3. Average distance of sample farmers field from company Km 4. Frequency of trip for transportation of produce Daily after 35 days of sowing

41 Table 4.10: Details of the prices offered by the companies (Rs/Kg) Sl. No. Name of the company Grade-1 Grade-2 Grade-3 1. Unicorn Intergarden Table 4.11: Payment settlement pattern for sample farmers Sl. No. Name of the company Payment schedule followed (age of the crop in days) Payment 1 Payment 2 Payment 3 Payment 4 1. Intergarden Unicorn

42 Fig 3: Guiding operation in progress Fig 4: Staked gherkin plants

43 Table 4.12: Cost involved in gherkin cultivation Sl. No. Particulars Per 0.56 acre (Rs.) Per acre (Rs.) Percentage (%) A. Variable cost 1 Seeds FYM Fertilizers Plant protection chemicals Irrigation charges(electricity) Labour a) Men labour (@ Rs.100 per day) b) Women labour (@ Rs.60 per day) c) Bullock Rs. 225 per pair) d) Tractor (@ Rs.420 per hour) Total labour Staking materials a) Wooden poles b) Monofilament wire c) Jute thread d) plastic tape Total staking cost Interest on working capital@7% Total variable cost B. Fixed cost 1 Depreciation Rental value of land Land revenue Interest on fixed capital Total fixed cost Total cost (A+B) 37,

44 Seeds FYM Fertilizers Plant protection chemicals Irrigation charges(electricity) Men labour Rs.100 per day) Women labour Rs.60 per day) Bullock Rs. 225 per pair) Tractor (@ Rs.420 per hour) Wooden poles Monofilament wire Jute thread plastic tape Interest on working capital@7% Depreciation Rental value of land Land revenue Interest on fixed capital 1% 0.38 % 0.13 % 0.03% 3% 3% 0.42 % 1% 2% 4% 5% 4% 5% 6% 7% 1% 27% 29% Figure 5: Cost involved in gherkin production (%)

45 Table 4.13: Income generation through gherkin production Sl. No Particulars Units Quantity per 0.56 acre Unicorn Intergarden Quantity per acre Unicorn Intergarden (G-I) (G-II) (G-I) (G-II) Grade-I Yield Grade-II Kg Grade-III Grade-I Price Grade-II Rs./Kg Grade-III Gross returns Rs Total cost of cultivation Rs Net returns Rs Cost of production per kg Rs Net returns per kg Rs

46 Fig 6: Harvesting of gherkin Fig 7: Harvested gherkin