What Is Contract Farming Law in India

It is also difficult to ensure that big business does not enslave already marginalized farmers. By allowing oral and written contracts, the Centre exposes farmers to the risk of the agreement ending without redress. The regulation stipulates that a registration authority will be set up in each state to register contracts electronically. States will do well to communicate the rules for the registration of treaties expeditiously. Although India has had relatively successful models, contract farming has not taken off significantly. The three bills jointly focus on transactions in commercial areas, contract farming and storage in a way that makes them uncontrollable. Between the Punjab Contract Farming Act 2013 and the Farmers` Price Insurance and Agricultural Services (Empowerment and Protection) Act 2020, another Contract Farming Act – the State/UT Agriculture and Contractual Services (Promotion and Facilitation) Act 2018 – also known as the 2018 Model Law – was enacted by the Union Government. One bill eases restrictions on the purchase and sale of agricultural products, the second relaxes storage restrictions under the Essential Products Act (ECA) of 1955, and the third introduces special legislation to allow contract farming on the basis of written agreements. The professor, who has more than three decades of experience in the field of “contract farming,” added that there is a term in the center`s 2020 law called “agricultural agreement” that is used and confused with other agreements such as partial lease or rental contracts. “The confusion has led to the Rajasthan amendment bill 2020, which assumes sponsors can lease farmland,” he said. In fact, it was Captain Amarinder Singh, during his first term as Prime Minister of Punjab in 2002, who introduced contract farming to wean farmers off the wheat-rice cycle.

Currently, contract farming in some states requires registration with the APMC. This means that contractual agreements are entered into with the APMCs, which can also settle disputes arising from these contracts. In addition, market fees and royalties are paid to the APMC to carry out contract farming. At present, informal contracts between industry and farmers are also widespread. In West Bengal, many small and marginal farmers grow potato chips under contractual agreements, usually without a written contract. Under this system, the company regularly inspects the establishments and provides advisory services. In general, companies, both modern processors and retailers, are reluctant to enter into formal contracts with hundreds of farmers, and they use an intermediary, the so-called organizer. They fear that the political system will not support them in the event of a farmer`s default, regardless of the substance of the case. First, we look at the incremental contribution of these invoices. Many comments falsely suggest that farmers had no choice but to sell their products to greedy middlemen operating in the Mandis.

This is far from the truth (Figure 1). Nationally representative data of farm households suggests that only 25% of all transactions in India in 2012-13 were made via these mandis, while 55.9% were sold to private traders. Even before these regulations were adopted, a number of states had already reformed their APMC laws, which allowed private actors to create markets, engage in contract farming, buy products directly from farmers, etc. (Purohit, 2016). A series of measures covering the years 2012-2015 designated several horticultural products and exempted them from the requirement that the first sale had to take place at the APMC shipyard. Cotton grains and spinners, solvent extractors, sugar, oil and dal mills historically come directly from farmers in several states. Karnataka, for example, pioneered deep market reforms earlier this decade that unified markets through an electronic trading platform and simplified licensing procedures across the state. If, on the other hand, CMDAs lose importance and influence and cease to offer a benchmark price, what replaces the CMPA as a source of price signals? In the absence of a dense market with many players and high transaction volumes, transactions in the new trading areas could fragment on the negotiating islands, leaving prices to the relative bargaining power of the farmer vis-à-vis the buyer. The result of such a system is disturbingly similar to that of the structure it is attempting to replace.

A great advantage of contract farming is that investments in the farm come from the agricultural industry. The third regulation, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, is more easily referred to as the “Contract Farming Bill” and aims to create a framework for written agreements between farmers and developers without obliging them to do so. It allows “sponsors” to contact farmers through written contracts if they decide to use such contracts. Unlike the CMPA Circumvention Act, contract farming legislation has a long history of intensive consultations with stakeholders. Confusingly, however, the 2020 bill appears to have broken with the past by abandoning the model law on contract farming proposed in 2018 in favor of national legislation. | READ Punjab`s FAILED ATTEMPT to contract culture Reason for reluctance to accept agricultural laws? “The 2018 law contains provisions for the producer who leases farmland to the developer – tenant – which is no longer legally inconsistent. But how can a committee dealing with contract farming legislation enter into the realm of land lease issues when, in addition to state-level laws, there is a separate model law for land leasing by NITI Aayog? This would clearly allow developers unrestricted access to arable land, not only through contract farming, but also to promote corporate farming disguised as contract farming. .