Mumbai: The government is working on a contract farming policy to ensure that land belonging to peasants is not leased out or sold to private sector companies, union agriculture minister Sharad Pawar told a workshop on contract farming.

"The contract farming model which we want to implement in India will ensure that land will be permanently owned and cultivated only by the farmers. We are not encouraging a model of leasing land and allowing private sector to acquire it for cultivation," Pawar told the workshop on ''Contract Farming: Methods and Experiences'' being held as part of the Indo-US Knowledge Initiative on Agriculture.

Pawar said the government has taken a number of steps for creating an enabling environment for investment in agribusiness. Policy and regulatory measures have been taken for strengthening forward and backward linkages and reforms in the marketing sector have been given high priority.

Pointing to the government''s continued support to the agribusiness sector, he said, following the centre''s initiative, a majority of states have already amended their APMC Acts to allow direct transaction between buyers and sellers outside the regulated agricultural markets. Financial institutions have been permitted to fund contract farming schemes. Taxes on processed foods have been reduced. A number of agricultural export promotion zones have been established. FDI is allowed in food processing and single brand retailing, the minister said.

Such platforms would suggest ways of going about the policy and if necessary provide the inputs for any new legislation, Pawar said, adding that some institutional mechanism is needed to protect the interests of both the contracting arties.

Pawar said such workshops will provide an idea on the way one should formulate the policy and then "if required what way we should prepare a new legislation for the purpose. We are in that process".

The Indo-US Knowledge Initiative on Agriculture was announced in July 2005 during the visit of Indian prime minister to the US. The workshop is being held to share experiences of experts and farmers of the two countries in contract farming.

The minister emphasised that demand for high-value and processed food products is rising and will continue to rise because of the booming economy, rising incomes, growing urbanisation and changing consumer preferences. In addition, globalisation offers an opportunity to access the world market. He expressed happiness that realising the enormous untapped opportunities in the Indian agribusiness sector, a number of business houses locally and from abroad have started entering it.

Pawar, however, cautioned against the exclusion of small farmers and the likely adverse impact of contract farming on food security.

The government''s main concern is how benefits of emerging opportunities reach the producers, especially the smallholders, he said. Since the small farmers face problems relating to credit, technology, inputs and market access, Pawar suggested that agribusiness firms should integrate farmers in their supply chains through institutions such as cooperatives, producers'' associations and contract farming.

''"We are encouraging farmers to form grass-root level associations/informal cooperatives owned and managed by farmers themselves and/or producer companies," he said.

Case studies of some successful models indicate that contract farming, if well managed, benefits the farmers in terms of assured market, reduced marketing and transportation costs, access to improved technology and quality inputs, and sharing of production and price risks, Pawar said and asked participants of the workshop to come out with models relevant to Indian conditions.