Centre unveils model contract farming law

To ensure better price to farmers, the Centre today unveiled a model law on contract farming and services not only in agriculture crops but also in livestock, dairy and poultry products.

The draft Agricultural Produce and Livestock Contract Farming and Services (promotion and facilitation) Act 2018 seeks to keep the contract farming/services contracts outside the ambit of respective Agricultural Produce Marketing Committee (APMC) Act of the states, which will help buyers save 5-10 per cent on their transaction cost.

It also provides for setting up of a dispute settlement authority and imposition of penalties for breach of contract.

"Now, the ball is in the court of states, who have to adopt the model law and implement it at the earliest for the benefit of farmers," Agriculture Minister Radha Mohan Singh said after releasing the model law here.

The government's aim is to double farmers income by 2022. The reforms in the marketing and other areas are being taken, keeping this objective in mind, he added.

Over a dozen state agriculture ministers and officials were present at the event. Two Ministers of State for Agricutlure Parshottam Rupala and Gajendra Singh Shekhawat also attended the function.

Contract farming is a pre-production season pact between farmers (either individually or collectively) and sponsors.

"Apart from providing for contract relating to marketing, the Model Act also enables entering into services contracts all along the value chain including pre-production, production and post-production," Chairman of the Committee on Doubling Farmers' Income and CEO of National Rainfed Area Authority (NRAA) Ashok Dalwai said.

The contracted produce is to be covered under the crop / livestock insurance in operation.

Among other key features, the model law provides for setting up of a state-level board and constitution of a committee or officer at district/block/ taluka level for online registration and recording of the contracts to ensure effective implementation.

"No rights, title ownership or possession of the land will be transferred or vested in the contract farming sponsor," according to the draft.

It also has a provision to ensure buying of entire pre-agreed quantity of one or more agri produce, livestock or its product of contract farming producer as per the contract.

Also, it aims to promote Farmer Producer Organisation (FPOs) and Farmer Producer Companies (FPCs) to mobilise small and marginal farmers to benefit from scales of economy in production and post-production activities. FPO and FPCs can be a contracting party if so authorised by farmers.

The draft law also provides for Contract Farming Facilitation Group for promoting contract farming and services at village and panchayat level.

Presently, contract farming is being promoted through the APCM Act 2003. However, it did not pick up at the ground level due to conflict of interest of contract farming sponsors and the APMCs which were the designated registering, agreement recording and dispute settlement authority.

As a result, contract farming has been in practice in small scale in some states like Maharashtra, Haryana, Karnataka and Madhya Pradesh.

Since Indian Contract Act of 1872 treated two parties to the agreement as equals, it was not conducive for agriculture and hence a model law was framed considering farmers as weaker vis-a-vis the sponsor company following the Budget 2017 annoucement.