The law will provide adequate confidence to farmers and incentives to the sponsors to enter into a contract, says Union Agriculture Minister Radha Mohan Singh
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 farmer(s) to purchase a specified quantity of any agricultural commodity at a pre-agreed price. 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.
In order to protect the interests of producers and sponsors of Contract Farming, the Ministry of Agriculture FW drafted Model APMC Act, 2003, which provided provisions for registration of sponsors, recording of agreement and dispute settlement mechanism.
Due to conflict of interest of contract farming sponsors with the APMCs, which were the designated registering, agreement recording and dispute settlement authority the atmosphere was not facilitative. It did not provide adequate confidence to the farmers and incentive to the sponsors to enter into a contract. Thus, the formal contract of farming could not pick up at the ground level as expected. In some states like Maharashtra, Haryana, Karnataka, Madhya Pradesh, limited formal contract farming has been in practice. This warranted for developmental, holistic and progressive law on contract farming. Further, though there exists Indian Contract Act, 1872, it is felt not very conducive for agriculture. It considers the two parties to the agreement as equals, while farmers are weaker vis-à-vis the sponsor-company.
In the above context and with a view to integrate farmers with bulk purchasers including exporters, agro- industries et al for better price realisation through mitigation of market and price risks to the farmers and ensuring smooth agro raw material supply to the agro industries, Union Finance Minister in the budget for 2017-18 announced to prepare a Model Contract Farming Act and circulate the same to the States for its adoption. In pursuance, the Union Agricultural Minister constituted a Committee under the Chairmanship of Dr Ashok Dalwai, CEO, NRAA in February, 2017 to draft a holistic, facilitative and promotional Model Contract Farming Act. Jt secretary (marketing), advisor, NITI Aayog, and principal secretaries, in-charge of agricultural marketing of Maharashtra, Karnataka, Odisha, Punjab and Madhya Pradesh are amongst the members.
The committee held five meetings; and held wider consultations with experts, academics, professionals, contract farming companies/firms, trade associations and food value chain operators apart from undertaking field visits.
The final Model Act The State/UT Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018 has been approved by the Competent Authority and was released on May 22 at Vigyan Bhawan by Radha Mohan Singh, Union Agriculture Minister.
The details of the act were presented by Dr Ashok Dalwai, CEO, National Rainfed Area Authority. This was followed by open house discussion. There was unanimity among the States to adopt the Model Contract Farming and Services Act so as to ensure assured market at pre-agreed prices.