Indian Model Contract Farming Act 2018

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Recently, the Ministry of Agriculture and farmer‟s welfare released a draft Model Contract Farming Act, 2018. It seeks to create a regulatory and policy framework for contract farming. It will help farmers integrate with food processing units for better price realisation and reducing post-harvest losses. The model act provides a framework for determining the pre agreed quantity, quality and price of farm produce between farmers and sponsoring companies and seeks to „transfer the risk of post harvest market unpredictability from the former to the latter.

Currently, contract farming requires to be registered with the Agricultural Produce Marketing Committee (APMC) in some states, which means that these agreements are recorded with the APMCs which is also a committee to resolve disputes arising out of these contracts. For registering, market fees and levies are paid to the APMC to undertake contract farming. Over the years, some issues have been identified in relation to the implementation of contract farming. These include: (i) At present, there is no uniform law in India for contract farming. As Agriculture is a state subject, each state has its own rules and regulations regarding agricultural produce and conditions with respect to contract farming. (ii) provisions of stockholding limits on produce under contract farming, and (iii) poor publicity (lack of full awareness) of contract farming among the farmers about its benefits, (iv) Sometimes, farmers are forced to produce a single type of crop year after year which leads to monoculture and hence depletion of the land and (v) most of the times, farmer or company go back on the contract due to changes in the prices. Generally, it is the farmer who suffers.

The NITI Aayog of India has observed that market fees and other levies that are being paid to the APMC for contract framing are of no use as they were not providing any significant level of services. In this context, the Committee of State Ministers on Agricultural and farmers welfare Reforms recommended that contract farming should not be in the ambit of APMCs. Instead, an independent regulatory authority that must be brought in as to disengage contract farming stakeholders from the existing APMCs. Further, Act provides for establishing a state level Contract Farming (Promotion and Facilitation) Authority to ensure implementation of the draft Model Act.

As per the Act,

1) The producer can get support from the buyer for improving production through inputs, which include technology, pre-harvest (such as seeds, fertilizer etc.) and post-harvest (thresher, combine harvester etc.) infrastructure,etc as per the agreement.

2) It ensures buying of entire pre-agreed quantity of produce as per the contract

3) Registering and Agreement Recording Committee will be set up at the district, taluka or block levels. It will consist of officials from departments such as agriculture, animal husbandry, marketing, and rural development. The Act specifies that every agreement should be registered with this Committee.

4) The Act offers ways for resolving any dispute arising between a producer and a buyer. They are:

i. Negotiation or conciliation for a mutually acceptable solution

ii. It creates a dispute settlement mechanism at the lowest possible level for quick disposal of disputes.

iii. Appealing to the Contract Farming (Promotion and Facilitation) Authority if not satisfied by the decision of the dispute settlement officer

5) The existing provisions of stockholding limits on contracted produce discourage buyers to enter into contracts. Under the draft Model Act, stockholding limits will not be applicable on produce purchased under contract farming.

6) The produce will be insured under the existing agriculture insurance schemes.

7) It makes provisions to decide sale-purchase price in case of fluctuations (upswing / downswing) of market price vis-à-vis pre-agreed price as a win-win situation for both buyer and seller.

The main concern in this model contract farming act is that it allows companies to cut down the prices or reject the produce on the plea of inferior quality but the quality parameters stipulated by the companies are often very hard to meet so the restrictive provisions in the model act thus need a reassessment for balancing the interests of farmers and businesses.

Agricultural Industry experts have welcomed the model act that seeks to ensure that farmers and buyers abide by pre-agreed price, quality and quantity to protect farmers from post-harvest market unpredictability and it also bars the transfer of ownership of farmers. It will make farming a more organized activity and help improve quality and quantity of production.

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