Government finalises Model Contract Farming Act 2018

The Model Contract Act 2018, unveiled by Union Agriculture Minister Radha Mohan Singh in Delhi brings in all services in the agriculture value chain, including pre-production, production and post-production services, under its ambit along with contract farming activity.

The act lays special emphasis on protecting the interests of the farmers, considering them as weaker of the two parties entering into a contract, the ministry states.

One of the key features of the Model Act, to be adopted and enacted by the states is that it brings contract farming outside the ambit of the APMC Act. It provides for a “Registering and Agreement Recording Committee” or an “Officer” at the district/block/taluka level for online registration of sponsor and recording of an agreement. The contracted produce will also be covered under crop/livestock insurance in operation.

Salient features of the Act:

  1. The act lays special emphasis on protecting the interests of the farmers, considering them as weaker of the two parties entering into a contract. It brings contract farming outside the ambit of the APMC Act.
  2. It provides for a “Registering and Agreement Recording Committee” or an “Officer” at the district/block/taluka level for online registration of sponsor and recording of an agreement. The contracted produce will also be covered under crop/livestock insurance in operation.
  3. In a bid to allay the fears of individual farmers, the act explicitly states that no permanent structure can be developed on farmers’ land/premises under such contracts.
  4. It gives no right, a title of an interest of the land to the sponsor. Similarly, no rights, title ownership or possession to be transferred or alienated or vested in the contract farming sponsor.
  5. The act provides for the promotion of Farmer Producer Organization (FPOs)/Farmer Producer Companies (FPC) to mobilize small and marginal farmers. The FPO/FPC can also be a contracting party if so authorized by the farmers.
  6. As per the law, the contracting party will be obliged to buy the entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of contract farming producer as per contract.
  7. It also envisages the setting up of Contract Farming Facilitation Group (CFFG) for promoting contract farming and services at village/panchayat level.
  8. It also includes an accessible and simple dispute settlement mechanism at the lowest level possible for quick disposal of disputes.

The concept of Contract Farming (CF) refers to a system of farming, in which bulk purchasers including agro-processing/exporting or trading units enter into a contract with the farmer(s), to purchase a specified quantity of any agricultural commodity at a pre-agreed price.

Contract farming in India:

Although varied forms of contract farming existed in pockets in the country, the formal contract farming is not, however, widespread in India. By and large, cultivation of commercial crops like cotton, sugarcane, tobacco, tea, coffee, rubber, and dairy have had some elements of informal contract farming for a long time.

Currently, contract farming requires registration with the Agricultural Produce Marketing Committee (APMC) in few states.  This means that contractual agreements are recorded with the APMCs which can also resolve disputes arising out of these contracts.  Further, market fees and levies are paid to the APMC to undertake contract farming.  The Model APMC Act, 2003 provided for contract farming and was released to the states for them to use this as a reference while enacting their respective laws.  Consequently, 20 states have amended their APMC Acts to provide for contract farming, while Punjab has a separate law on contract farming.  However, only 14 states notified rules related to contract farming, as of October 2016.

Over the years, expert bodies have identified issues related to the implementation of contract farming.  These include (i) role of APMCs which are designated as an authority for registration and dispute settlement in most states, (ii) provisions of stockholding limits on produce under contract farming, and (iii) poor publicity of contract farming among the farmers about its benefits.

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