Does commercial farming protect the environment? Evidence from chemical input use in Haryana, India

Verma, Saroj and Paltasingh, Kirtti Ranjan and Mohapatra, Souryabrata (2025): Does commercial farming protect the environment? Evidence from chemical input use in Haryana, India. Published in: Journal of Agribusiness in Developing and Emerging Economies

Abstract

Purpose: This study investigates the impact of contract farming (CF) on chemical input usage (fertilisers, pesticides and herbicides) in wheat farming in Haryana, India, weighing on environmental risks from unsustainable chemical input usage under CF. Design/methodology/approach: The research employs an endogenous switching regression (ESR) model using data from 754 farm households, enabling a comparative analysis between contract and non-contract farmers. Findings: The results show that farmers who adopted CF would have reduced chemical input usage by 26.8% if they did not adopt it. Conversely, non-adopters would have increased chemical input usage by 54% if they adopted CF. While CF enhances farm productivity and income, it also increases chemical input usage, posing risks such as soil fertility loss and water contamination. Originality: This study addresses the overlooked topic of chemical input usage in CF research. Leveraging household data and using an endogenous switching regression model provides unique comparative analysis and counterfactual scenarios. The findings contribute to understanding the environmental implications of CF and propose actionable recommendations for sustainable agricultural practices. Managerial or Policy implications: The study recommends promoting organic farming and minimal chemical usage in CF agreements. Government intervention is needed to reduce the environmental impact of CF. Policies should promote environment-friendly fertilisers and provide guidelines on chemical usage based on crop variety, seed quality and soil fertility. Research limitations/implications: The geographic focus on Haryana may limit generalisability. Reliance on cross-sectional data from a single season might not capture variability across different seasons. Future research could expand to other regions, use longitudinal data and investigate a broader range of crops.

• Item Type: MPRA Paper
• Language: English
• Keywords: Contract farming; Chemical inputs; Endogenous switching regression; Haryana, India
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure ; Land Reform ; Land Use ; Irrigation ; Agriculture and Environment

References

Adabe, K.E., Abbey, A.G., Egyir, I.S., Kuwornu, J.K.M. and Anim-Somuah, H. (2019), “Impact of contract farming on product quality upgrading: the case of rice in Togo”, Journal of Agribusiness in Developing and Emerging Economies, Emerald Publishing Limited, Vol. 9 No. 4, pp. 314–332, doi: 10.1108/JADEE-04-2018-0051.

Akber, N. and Paltasingh, K.R. (2021), “Agricultural Growth and Investments in India: Assessment of Recent Trends, Breaks and Linkages”, Italian Review of Agricultural Economics, Vol. 76 No. 2, pp. 17–30, doi: 10.36253/rea-12057.

Akber, N. and Paltasingh, K.R. (2023), “Are returns from adoption of soil conservation practices heterogeneous? Evidence from Indian agriculture”, Journal of Agribusiness in Developing and Emerging Economies, Emerald Publishing Limited, Vol. ahead-of-print No. ahead-of-print, doi: 10.1108/JADEE-05-2023-0117.

Akpan, S., Okon, U. and Ernest, I. (2019), “Factors influencing the utilization of organic and inorganic fertilizer in small scale waterleaf production in Eket agricultural zone of Akwa Ibom State, Nigeria”, International Journal of Agriculture and Rural Development, Vol. 22 No. 1, pp. 4019–4026.

Amin, F. and Jilani, M.I. (2024), “Environmental, Microbiological and Chemical Implications of Fertilizers use in soils: A review”, International Journal of Chemical and Biochemical Sciences, Vol. 25 No. 18, pp. 56–73.

Argaw, S.G., Beyene, T.M., Woldemariam, H.W., Esho, T.B., Worku, S.A., Gebremeskel, H.M. and Mekonnen, K.N. (2024), “Chemical, structural, and techno-functional characterization of yam (Dioscorea) flour from South West Ethiopia”, Heliyon, Elsevier, Vol. 10 No. 10, doi: 10.1016/j.heliyon.2024.e31148.

Asfaw, S., Shiferaw, B., Simtowe, F. and Lipper, L. (2012), “Impact of modern agricultural technologies on smallholder welfare: Evidence from Tanzania and Ethiopia”, Food Policy, Vol. 37 No. 3, pp. 283–295, doi: 10.1016/j.foodpol.2012.02.013.

Asprooth, L., Norton, M. and Galt, R. (2023), “The adoption of conservation practices in the Corn Belt: the role of one formal farmer network, Practical Farmers of Iowa”, Agriculture and Human Values, Vol. 40 No. 4, pp. 1559–1580, doi: 10.1007/s10460-023-10451-5.

Bairagi, S., Mishra, A.K. and Durand-Morat, A. (2020), “Climate risk management strategies and food security: Evidence from Cambodian rice farmers”, Food Policy, Vol. 95, p. 101935, doi: 10.1016/j.foodpol.2020.101935.

Bhattacharyya, R. and Mandal, A. (2014), “Estimating the Impact of the India–ASEAN Free Trade Agreement on Indian Industries”, South Asia Economic Journal, SAGE Publications India, Vol. 15 No. 1, pp. 93–114, doi: 10.1177/1391561414527050.

Bidzakin, J.K., Fialor, S.C., Awunyo-Vitor, D. and Yahaya, I. (2020), “Contract farming and rice production efficiency in Ghana”, Journal of Agribusiness in Developing and Emerging Economies, Emerald Publishing Limited, Vol. 10 No. 3, pp. 269–284, doi: 10.1108/JADEE-11-2018-0160.

Bijay-Singh and Craswell, E. (2021), “Fertilizers and nitrate pollution of surface and ground water: an increasingly pervasive global problem”, SN Applied Sciences, Vol. 3 No. 4, p. 518, doi: 10.1007/s42452-021-04521-8.

Buragohain, D. and Dubey, J. (2021), “Contract Farming: Status and Effect on Socio-economic, Psychological and Social Characteristics of Farmers in Assam”, Journal of Community Mobilization and Sustainable Development, Vol. 16 No. 1, pp. 105–111.

Cahyadi, E.R. and Waibel, H. (2016), “Contract Farming and Vulnerability to Poverty among Oil Palm Smallholders in Indonesia”, The Journal of Development Studies, Routledge, Vol. 52 No. 5, pp. 681–695, doi: 10.1080/00220388.2015.1098627.

Carter, D.W. and Milon, J.W. (2005), “Price Knowledge in Household Demand for Utility Services”, Land Economics, University of Wisconsin Press, Vol. 81 No. 2, pp. 265–283, doi: 10.3368/le.81.2.265.

Danso-Abbeam, G., Ogundeji, A.A. and Fosu, S. (2024), “Cashew contract farming in Ghana: implications on farm performance and household welfare”, Journal of Agribusiness in Developing and Emerging Economies, Emerald Publishing Limited, Vol. 14 No. 2, pp. 292–309, doi: 10.1108/JADEE-12-2021-0339.

Das, G.G. and Bhattacharya, R. (2024), Contract Farming and Food Security in Developing Economies: A Framework Model for Spillover Impact, Discussion Paper No. 1428, Global Labor Organization, Essen.

Dassa, A., Ifa, A. and Gobena, E. (2022), “Determinants of Inorganic Fertilizer Use Intensity on Cereal Crop among Smallholder Farmers: The Case of Toke Kutaye District, West Shewa Zone, Oromia National Regional State, Ethiopia”, 14 January, doi: 10.21203/rs.3.rs-1256471/v1.

Dhankhar, N. and Kumar, J. (2023), “Impact of increasing pesticides and fertilizers on human health: A review”, Materials Today: Proceedings, doi: 10.1016/j.matpr.2023.03.766.

Dsouza, A., Mishra, A.K. and Webster, S. (2023), “Vertical coordination and post-harvest losses: Implications on food loss”, Applied Economic Perspectives and Policy, Vol. 45 No. 1, pp. 460–486, doi: 10.1002/aepp.13210.

Dube, L. and Mugwagwa, K. (2017), “Technical Efficiency of Smallholder Tobacco Farmers under Contract Farming in Makoni District of Manicaland Province, Zimbabwe: A Stochastic Frontier Analysis”, Scholars Journal of Agriculture and Veterinary Sciences, Vol. 4 No. 2, pp. 68–78, doi: 10.21276/sjavs.2017.4.2.5.

Fuglie, K.O. and Bosch, D.J. (1995), “Economic and Environmental Implications of Soil Nitrogen Testing: A Switching-Regression Analysis”, American Journal of Agricultural Economics, Vol. 77 No. 4, pp. 891–900, doi: 10.2307/1243812.

Ganewo, Z., Balguda, T., Alemu, A., Mulugeta, M., Legesse, T., Kaske, D. and Ashebir, A. (2022), “Are smallholder farmers benefiting from malt barley contract farming engagement in Ethiopia?”, Agriculture & Food Security, Vol. 11 No. 1, p. 58, doi: 10.1186/s40066-022-00396-z.

Geffersa, A.G. (2024), “Does cooperative membership enhance inorganic fertilizer use intensity? Panel data evidence from maize farmers in Ethiopia”, Annals of Public and Cooperative Economics, Vol. 95 No. 2, pp. 327–361, doi: 10.1111/apce.12446.

Gersch, I. (2018), “Producer organizations and contract farming: a comparative study of smallholders’ market strategies in South India”, Zeitschrift Für Wirtschaftsgeographie, De Gruyter, Vol. 62 No. 1, pp. 14–29, doi: 10.1515/zfw-2017-0026.

Ghimire, B.R. and Kotani, K. (2015), A Counterfactual Experiment on the Effectiveness of Plastic Ponds for Smallholder Farmers: A Case of Nepalese Vegetable Farming, SDES No. 2015–18, Kochi University of Technology, Japan.

Gille, V. (2012), “Education spillovers: empirical evidence in rural India”, Indian Growth and Development Review, Emerald Group Publishing Limited, Vol. 5 No. 1, pp. 4–24, doi: 10.1108/17538251211224114.

GOH. (2019a), Economic Survey of Haryana 2018-19, Publication No. 1205, Department of Economic & Statistical Analysis, Government of Haryana, Panchkula.

GOH. (2019b), State Statistical Abstract of Haryana 2018-19, Publication No. 1227, Department of Economic & Statistical Analysis, Government of Haryana, Panchkula.

Heisse, C. and Morimoto, R. (2024), “Climate vulnerability and fertilizer use – panel evidence from Tanzanian maize farmers”, Climate and Development, Taylor & Francis, Vol. 16 No. 3, pp. 242–254, doi: 10.1080/17565529.2023.2206373.

Henningsen, A., Mpeta, D.F., Adem, A.S., Kuzilwa, J.A. and Czekaj, T.G. (2015), The Effects of Contract Farming on Efficiency and Productivity of Small-Scare Sunflower Farmers in Tanzania, IAAE 2015 Conference, Milan, p. 24, doi: 10.22004/ag.econ.212478.

Imai, K.S., Cheng, W. and Gaiha, R. (2015), “Agricultural Growth, Poverty and Inequality in Developing Countries”, Development, Vol. 58 No. 2, pp. 230–236, doi: 10.1057/s41301-016-0009-1.

Islam, Md.S., Bell, R.W., Miah, M.A.M. and Alam, M.J. (2024), “Determinants of farmers’ fertilizer use gaps under rice-based cropping systems: Empirical evidence from Eastern Gangetic Plain”, Journal of Agriculture and Food Research, Vol. 17, p. 101228, doi: 10.1016/j.jafr.2024.101228.

Jagri Binpori, R., Awunyo-Vitor, D. and Wongnaa, C.A. (2021), “Does contract farming improve rice farmers’ food security? Empirical evidence from Ghana”, World Journal of Science, Technology and Sustainable Development, Emerald Publishing Limited, Vol. 18 No. 2, pp. 130–149, doi: 10.1108/WJSTSD-11-2020-0091.

Ji, Y., Liu, H. and Shi, Y. (2020), “Will China’s fertilizer use continue to decline? Evidence from LMDI analysis based on crops, regions and fertilizer types”, PLoS ONE, Vol. 15 No. 8, p. e0237234, doi: 10.1371/journal.pone.0237234.

Kaur, P. and Singla, N. (2018), “Can Contract Farming Double Farmers’ Income?”, Economic & Political Weekly, Vol. 53 No. 51, pp. 68–73.

Kumar, A., Roy, D., Joshi, P., Tripathi, g and Adhikari, R. (2019), “Impact of contract farming of paddy seed on smallholder farm profits: evidence from Nepal”, Agricultural Economics Research Review, Vol. 32 No. 1, pp. 25–39, doi: 10.5958/0974-0279.2019.00003.X.

Lenka, S., S, R., Coumar, V., Dotaniya, M. and Saha, J. (2016), Impact of Fertilizers Use on Environmental Quality, Bidhan Chandra Krishi Viswavidyalaya, Kalyani.

Lin, L. and Chang, H.-H. (2021), “Does agro-processing adoption affect farm income and farm diversification? Empirical evidence from Taiwan”, Journal of Agribusiness in Developing and Emerging Economies, Emerald Publishing Limited, Vol. 11 No. 5, pp. 567–577, doi: 10.1108/JADEE-07-2020-0157.

Lokshin, M. and Sajaia, Z. (2004), “Maximum Likelihood Estimation of Endogenous Switching Regression Models”, The Stata Journal, SAGE Publications, Vol. 4 No. 3, pp. 282–289, doi: 10.1177/1536867X0400400306.

Meti, M., Suresha, S. and Raghuprasad, K. (2016), Contract Farming: An Innovative Approach For Risk Management By Small Farmers, No. 3305851, International Institute of Social and Economic Sciences, Miami.

Mishra, A.K., Kumar, A. and Dsouza, A. (2021), “Contract farming and its impact on fertilizer usage: Evidence from India”, in Mishra, A.K., Kumar, M. and Joshi, P. (Eds.), Transforming Agriculture in South Asia: The Role of Value Chains and Contract Farming, 1st ed., Routledge, Abingdon, Oxford, UK, p. 20.

Mishra, A.K., Kumar, A., Joshi, P.K. and D’Souza, A. (2018), “Production Risks, Risk Preference and Contract Farming: Impact on Food Security in India”, Applied Economic Perspectives and Policy, Vol. 40 No. 3, pp. 353–378, doi: 10.1093/aepp/ppy017.

Moghfeli, Z., Ghorbani, M., Rezvani, M.R., Khorasani, M.A., Azadi, H. and Scheffran, J. (2023), “Social capital and farmers’ leadership in Iranian rural communities: application of social network analysis”, Journal of Environmental Planning and Management, Routledge, Vol. 66 No. 5, pp. 977–1001, doi: 10.1080/09640568.2021.2008329.

Mohapatra, S., Wen, L., Sharp, B. and Sahoo, D. (2024), “Unveiling the spatial dynamics of climate impact on rice yield in India”, Economic Analysis and Policy, Vol. 83, pp. 922–945, doi: 10.1016/j.eap.2024.07.021.

Mpeta, D., Kuzilwa, J. and Sebyiga, B. (2018), “Analysis of contract farming effects on efficiency and productivity of small-scale sunflower farmers in Tanzania–a propensity score method approach”, Acta Scientiarum Polonorum. Oeconomia, Vol. 17 No. 1, pp. 75–84, doi: 10.22630/ASPE.2018.17.1.9.

Nazifi, B., Bello, M., Suleiman, A. and Suleiman, M. (2021), “Impact of contract farming on productivity and food security status of smallholder maize farmer’s households in Kano and Kaduna States, Nigeria | Journal of Agriculture and Environment”, Journal of Agriculture and Environment, Vol. 17 No. 1.

Nguyen, M.T.X., Pham, A.T.M., Le, N.H.M. and Nguyen, K.D. (2024), “Economic and Environmental Performance of Farms in Vietnam: Does Contract Farming Matter?”, Journal of Organizational Behavior Research, Vol. 9 No. 1–2024, pp. 98–112, doi: 10.51847/zZnZml9tth.

Paltasingh, K.R. and Goyari, P. (2018), “Impact of farmer education on farm productivity under varying technologies: case of paddy growers in India”, Agricultural and Food Economics, Vol. 6 No. 1, p. 7, doi: 10.1186/s40100-018-0101-9.

Pham, T.T., Dang, H.L., Pham, N.T.A. and Dang, H.D. (2021), “Adoption of contract farming for managing agricultural risks: a case study in rice production in the Mekong Delta, Vietnam”, Journal of Agribusiness in Developing and Emerging Economies, Vol. ahead-of-print No. ahead-of-print, doi: 10.1108/JADEE-05-2021-0107.

Putri, A.T.R. and Rondhi, M. (2020), “CONTRACT FARMING AND THE EFFECT ON PRICE RISK IN BROILER FARMING”, E3S Web of Conferences, EDP Sciences, Vol. 142, p. 05002, doi: 10.1051/e3sconf/202014205002.

Rahman, K.M.A. and Zhang, D. (2018), “Effects of Fertilizer Broadcasting on the Excessive Use of Inorganic Fertilizers and Environmental Sustainability”, Sustainability, Multidisciplinary Digital Publishing Institute, Vol. 10 No. 3, p. 759, doi: 10.3390/su10030759.

Ray, N., Clarke, G. and Waley, P. (2021), “The impact of contract farming on the welfare and livelihoods of farmers: A village case study from West Bengal”, Journal of Rural Studies, Vol. 86, pp. 127–135, doi: 10.1016/j.jrurstud.2021.06.003.

Ren, Y., Peng, Y., Castro Campos, B. and Li, H. (2021), “The effect of contract farming on the environmentally sustainable production of rice in China”, Sustainable Production and Consumption, Vol. 28, pp. 1381–1395, doi: 10.1016/j.spc.2021.08.011.

Rust, N.A., Jarvis, R.M., Reed, M.S. and Cooper, J. (2021), “Framing of sustainable agricultural practices by the farming press and its effect on adoption”, Agriculture and Human Values, Vol. 38 No. 3, pp. 753–765, doi: 10.1007/s10460-020-10186-7.

Sahana, S., Nanjappa, D. and Vasanthi, C. (2017), “Social Impact of Contract Farming on Farmers Practicing Contract Farming”, International Journal of Agriculture Sciences, Vol. 9 No. 28, pp. 4353–4355.

Saroj and Paltasingh, K.R. (2024), “What promotes production contract in Indian agriculture? Managing market risk versus profit orientation”, Agricultural Economics, Vol. 55 No. 1, pp. 140–153, doi: 10.1111/agec.12791.

Saroj, Paltasingh, K.R. and Jena, P.K. (2023), “Does contract farming enhance farm efficiency? A case of wheat growers of Haryana, India”, Heliyon, Elsevier, Vol. 9 No. 4, doi: 10.1016/j.heliyon.2023.e15222.

Savci, S. (2012), “Investigation of Effect of Chemical Fertilizers on Environment”, APCBEE Procedia, Vol. 1, pp. 287–292, doi: 10.1016/j.apcbee.2012.03.047.

Shakeel, A., Salman, Mohd.S., Shazli, T., Naqvi, H.R. and Siddiqui, M.A. (2023), “Reforming Indian agriculture and the rise of farmer’s protest in India: Tracing the discourse and the way ahead”, Journal of Public Affairs, Vol. 23 No. 1, p. e2847, doi: 10.1002/pa.2847.

Sharma, N. (2016), “Does Contract Farming Improve Farmers’ Income and Efficiency? A Case Study from Punjab”, Economic and Political Weekly, Economic and Political Weekly, Vol. 51 No. 40, pp. 63–69.

Sharma, N. and Singhvi, R. (2017), “Effects of Chemical Fertilizers and Pesticides on Human Health and Environment: A Review”, International Journal of Agriculture, Environment and Biotechnology, Vol. 10 No. 6, pp. 675–680, doi: 10.5958/2230-732X.2017.00083.3.

Tong, Y.D. and Clarke, H. (2020), “Economic analysis of development policies with reference to large-scale water control infrastructures and rural intensification in the Mekong River Delta: a case study from Vietnam”, Journal of the Asia Pacific Economy, Routledge, Vol. 25 No. 1, pp. 124–155, doi: 10.1080/13547860.2019.1636605.

Verma, S. (2024), “Education, Risk-attitude and Agricultural Innovation: Farm Level Investigation in North India”, The Indian Economic Journal, SAGE Publications India, p. 00194662241265493, doi: 10.1177/00194662241265493.

Verma, S. and Jena, P.K. (2024), “Who Rewards Farmers Better for Commercialisation? Public versus Private Contracting Firms in North India”, The Indian Economic Journal, SAGE Publications India, p. 00194662241227597, doi: 10.1177/00194662241227597.

Zhang, Y., Yang, R., Zhao, K. and Kong, X. (2023), “Fertilizer Application in Contract Farming: A Risk Analysis”, Land, Multidisciplinary Digital Publishing Institute, Vol. 12 No. 8, p. 1495, doi: 10.3390/land12081495.

Zhou, W., Xue, P. and Xu, D. (2024), “Exploring disparities in employment location and structure: The influence of off-farm employment on reducing chemical fertilizer usage”, Journal of Cleaner Production, Vol. 440, p. 140720, doi: 10.1016/j.jclepro.2024.140720.