Contract Farming and Medicinal Plants: Scope in India

Contract farming is an arrangement where the production and supply of agriculture products are done under a contract between farmers, suppliers and producers. This arrangement can act as a catalyst for modernizing agricultural practices in India because the industries dependant on agriculture products requires adequate and timely inputs for optimum agricultural produce. In addition, the National Agricultural Policy of the Indian Government is also promoting private participation to meet the increasing need.

Advantages of Contract Farming

The present aspects of Indian agriculture have several areas where contract farming can be beneficial, especially in medical plant farming. Therefore, both farmers and agriculture-based firms can get numerous benefits by implementing contract farming. Some of these benefits are discussed below:


  • Reduced marketing and transaction costs and assured market for their produce. In addition, the risk of production and pricing also reduces.
  • Opening up of new markets which were inaccessible to small farmers. Also, farmers get financial support and technical guidance for better quality production.
  • Ensures consistent adequate supply of quality agricultural produce at the right time and at a lesser cost.


  • Utilization of their installed capacity infrastructure and compliance to consumer’s food safety concerns.
  • Direct private investments can be made in the agricultural system. Negotiation based price fixation between the producers and the firms.
  • Both the parties make a contract for production under pre-specified terms and conditions.

Some Indian companies that are engaged in contract farming are mentioned below:

List of Contract Farming Companies in India

  • Dabur contract farming
  • Patanjali Contract farming
  • Pacific Herbs Agro Farms Pvt Ltd.
  • PepsiCo
  • Agronic Herbal Pvt. Ltd.

Medicinal Crops and Contract Farming

Indian farmers are encountering challenges due to the rising cultivation cost and uncertainty in the productions of traditional crops. Therefore, they are shifting towards other crops that can provide more returns. In addition, these crops can be grown in marginal and degraded soils as well with less difficulty. Furthermore, the trade demand for these medicinal crops is rising due to an increased interest of western consumers in eastern medicines.

Potential of Medicinal Crops

Medicinal plants contain bio-molecules with therapeutic potential and are used for developing numerous medical drugs. In addition, medicines of herbal origin are considered more safe, more physiologically compatible and cost-effective. With the passage of time, demand for medicinal plants is significantly increasing to fulfil human needs and trade purposes. India has a massive reserve of medicinal plants and a deep medicinal knowledge.

Also, aromatic plants and herbs, out of which herbal medicines and body care products are made, are a vital contributor to the farm’s high earning. Herbs like Shankhapushpi, Ateesh, Kuth, Karanja, Kutki may not mean so much to an urban consumer. However, they are a vast source of income for farmers who produce such plants.

Policy Initiatives By NABARD

To increase the production of medicinal and other commercial crops to create marketing avenues for farmers, the National Bank for Agriculture & Rural Development(NABARD) provides special refinance packages to contract farming arrangements.

The various actions undertaken by NABARD in this direction are:

  • Financial Interventions
  • Special Refinance package for funding farmers for contract farming in AEZs (agricultural export zones)
  • 100% refinance to payments made by CBs, SCBs, RRBs and select SCARDBs (State Cooperative Agriculture and Rural Development Banks)
  • Term facility for payments (3 years)
  • Fixation of a more massive scale of finance for medicinal plants under contract farming
  • Extension of refinances plan for financing producers for contract farming in AEZs to outside AEZs besides coverage of medicinal plants.
  • An expansion of Refinance scheme for contract farming under the Automatic Refinance Facility

Future Scope

The medicinal crop sector has immense potential. The proper commercializing system can be beneficial for industry and farmers by opening up domestic and global markets and providing higher prices. In addition, there are around 162 species that come under medicinal crops. Therefore, medicinal plant cultivation can be highly remunerative financially and economically, especially for small-scale farmers.

Along with plants, the demand for its collection, processing, and transportation is also increasing. This, in turn, is creating new employment opportunities.

India possesses a rich diversity of medicinal crops for developing a ‘herbal industry.’ Such a high diversity can be helpful in further scientific research for deducing their medical efficacy and implementation for curing various diseases. Furthermore, India is already known globally as a low-cost manufacturer of superior quality generic drugs. Therefore, this factor can be leveraged as a tool for marketing Indian herbal products.

The Bottom Line

The current global interest in plant-based medicines of Indian origin must be harnessed by developing a clear policy through the promotion of contract farming, research and development, and increased exports. For upscaling the medicinal crop sector, coordinated efforts are required at each of the given stages (e.g., research, production, collection, storage, processing, and marketing).

Considering the facts, you want to opt for contract farming or grow medicinal plants as a farmer. Yes, you are making the right decision. To learn more about medicinal crops and contract farming, talk to one of our experts or visit Also, download the Apni Kheti app on your smartphone for easy and quick access to all the information related to farming and farmers.

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