The Union Ministry of Agriculture and Famers Welfare has unveiled Model Agriculture Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 to ensure better price to farmers. It is aimed at reducing farmers’ risks by creating assured market for their produce at pre-agreed price, while encouraging investment from agribusiness and food processing industries by enhancing productivity and cost efficiency.
Under contract farming, agricultural production (including livestock and poultry) can be carried out based on pre-harvest agreement (contract) between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations). The producer can sell agricultural produce at specific price in future to buyer as per agreement. Under contract farming, producer can reduce risk of fluctuating market price and demand. The buyer can reduce risk of non-availability of quality produce.
The draft Model Act seeks to create regulatory and policy framework for contract farming and servives. Based on this draft Act, states legislatures can enact law on contract farming as agriculture falls under state list of Constitution. It is promotional and facilitative Act and not regulatory in its structure. It not only covers contract farming in agriculture crops but also in livestock, dairy and poultry products.
The Model Act lays special emphasis on protecting interests of farmers, considering them as weaker of two parties entering into a contract. It also takes into consideration services contracts all along the value chain including pre-production, production and post-production in addition to contract farming.
It has provision for Registering and Agreement Recording Committee (Officer) for purpose at district, block, taluka level for online registration of sponsor and recording of agreement. It makes mandatory for covering contracted produce under crop and livestock insurance in operation.
It keeps contract framing outside ambit of Agricultural Produce Marketing Committee Act. Under it, no permanent structure can be developed on farmers’ land or premises. It does not vest right, title of interest of the land on sponsor.
It provides for promotion of Farmer Producer Organization (FPOs) or Farmer Producer Companies (FPCs) to mobilize small and marginal farmers. Under it, FPO/FPC can be contracting party if so authorized by farmers. No rights, title ownership or possession can be transferred or alienated or vested in contract farming sponsor etc.
It assures market safety to contract farming producer by ensuring buying of entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of as per contract. It establishes Contract Farming Facilitation Group (CFFG) for promoting contract farming and services at village or panchayat at level. It provides accessible and simple dispute settlement mechanism at the lowest level possible for quick disposal of disputes.