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  1. Contract farming: States allowed to decide prices

Contract farming: States allowed to decide prices

The Centre has released a model Agricultural Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act and appealed to states to enact such a law.

By: | New Delhi | Published: May 23, 2018 4:09 AM
agriculture, agriculture sector, farming The draft law has provided for registration of sponsors, recording of agreement and dispute settlement mechanism.

The Centre has released a model Agricultural Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act and appealed to states to enact such a law. The model law talks about ensuring buying of entire pre-agreed quantity of the agricultural produce.

Amid the rising demand of the farmers and the Centre’s decision to ensure that they get at least the MSP for their crop, the contract farming model law has left it to states to decide the prices under the “rules” to be notified under the Act.

“To provide reasonable protection to the weaker party to the agreement, i.e., the producer, the pre-agreed price, categorywise as under Section 18(2), may be determined in accordance with the guiding criteria as provided in the rules, and mentioned in the agreement,” the draft law said.

“Notwithstanding anything contained in this Act or any other law for the time being in force, the sale prices, explicitly mentioned in the contract, may be determined in accordance with the guiding criteria as provided in the rules,” it said.

The concept of contract farming refers to a system of farming in which bulk purchasers including agro-processing/exporting or trading units enter into a contract with one or more farmers to purchase a specified quantity of crop at a pre-agreed price, an agriculture ministry official said. Although different forms of contract farming existed in the country, the formal contract farming is not wide spread in India. Commercial crops like cotton, sugarcane, tobacco, tea, coffee, rubber and dairy have some elements of informal contract farming for a long time.

The draft law has provided for registration of sponsors, recording of agreement and dispute settlement mechanism. Then finance minister Arun Jaitley in 2017-18 Budget had announced to release a ‘Model Contract Farming Act’. Subsequently, a committee under the chairmanship of Rainfed Area Authority CEO Ashok Dalwai was constituted in February 2017 to draft the model law in consultation with states and experts.

“There was unanimity among the States to adopt the model contract farming and services Act in its true spirit so as to ensure assured market at pre-agreed prices,” an official statement said.

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