No upper limit to durations of contract farming, says panel

The government is planning to allow companies time flexibility to pool farmers’ land for the long term in accordance with new contract-farming guidelines, currently being drafted by a committee.

This committee is headed by Ashok Dalwai, chief executive officer, National Rainfed Area Authority (NRAA), Union Ministry of Agriculture.

Introduced first in December last year, the model draft guidelines on contract farming, to be incorporated into the State/Union Territory Agricultural Produce and Livestock Contract Farming (Promotion & Facilitation) Act, 2018, have provisions for companies to pool farmers’ land for at least one season and a maximum of five.

Stakeholders in the farming sector have suggested the maximum time limit be done away with.

“We have received recommendations from various stakeholders to remove this periodic limit. In the revised guidelines, to be introduced in March, there will be no mention of limits. We would like corporates to ensure farmers better realisation of their produce. The new contract farming guidelines would enable corporates to set prices in advance, i.e. forward contract, and take responsibility for quality, handling, transportation, and marketing of farm produce,” said S K Singh, deputy agricultural marketing adviser and member-secretary of the committee.

Plants like pineapple and palm start yielding fruit after three-four years of sapling. With the high gestation period, neither companies nor farmers have evinced an interest in this. That’s why palm plantation never succeeded in India despite incentives announced by the government.

Prices set in forward contracts should not be less than the minimum support prices for a number of farm commodities, the committee has suggested. 

In the process, however, the Centre is planning to pull out “contract farming” from the Agricultural Produce Markets Committee Act to promote processing fresh agriculture produce and exports of value-added products.

“Contract farming enables direct procurement and hence offers farmers a higher price realisation. However, for this to happen, companies and farmers need to abide by contractual obligations. With the model law talking about a mechanism to set prices, guidelines to tackle high volatility, and ensuring compensation in the case of violations of contracts, it brings in credibility to the process,” said Ashok Sharma, managing director and chief executive officer, Mahindra Agri Services Ltd.

Currently, companies pay 2-9 per cent for procuring farm produce through APMC mandis in the form of the mandi tax, labour charges, etc. 

Union Finance Minister Arun Jaitley, while announcing the Union Budget this year, projected India’s agricultural exports at $100 billion, of which only a third has been achieved so far despite a massive surplus of agriculture and horticulture produce.

Rajju Shroff, chairman and managing director, United Phosphorus, said: “There are problems in agricultural production such as crop failure, marketing, and post-harvest losses. All these problems can be solved if contract farming is introduced. With contract farming, most of the problems of quality inputs from seeds, fertilisers, crop protection chemicals etc. will be available to farmers.” 

Meanwhile, more than 86 per cent of about 120 million agricultural households are small (less than 2 hectares of cultivable land) and marginal (less than 1 hectare of cultivable land). According to the Census of 2011, the average size of landholdings in India stood 1.1 hectares.