Under contract farming, agricultural production (including livestock and poultry) can be carried out based on a pre-harvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations). The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement.
Introduction
Contract farming is a well-known mechanism to coordinate agricultural production and trade, and its use has increased noticeably in recent years. The growing interest in contract farming is associated with recent transformations in food and agricultural systems which make it increasingly difficult to meet consumer demands under more traditional, open market-based procurement strategies. Contract Farming A Comparative Analysis In The Us Eu And India
Contract farming may take several forms depending on many factors, from the perspective of the global environment and the particular conditions of the transaction involved. There are significant differences between the world’s regions and countries, and their level of economic development, which influences the structure of the agricultural sector and markets.
Contract Farming is intended to provide farmers with the assured sale of their crops and agro-business commercial firms with a steady supply of agricultural output required by the market. In its essence, Contract Farming is a commitment of a landowner or a farmer to provide to a known buyer a specified agricultural commodity, at a specified time, price and quantity. Usually, the buyer (the agro-business firm) will control the production process by adding additional provisions, such as technical support and credit.
Consequently, Contract Farming enables poor farmers to transform from outdated cultivation and management practices to market-oriented commercial production, resulting in generating employment and growing income
Comparative Study of Contract Farming: US EU and India
- Contract Farming in India- Legislative History:
Model APMC Act, 2003
Under the Model APMC Act, 2003 also, contract farming was permitted and the Agricultural Produce Marketing Committees (APMCs) were given the responsibility to record the contracts. They were also mandated to resolve the disputes in such contracts. However, market fees and other levies/charges were payable to APMCs.
The State /UT Agricultural Produce Contract Farming (Promotion and Facilitation) Act, 2018: MODEL ACT:
According to the draft Model Act, the buyer can support the producer by providing inputs (such as technology, preharvest, and postharvest infrastructure). Buyers can’t build permanent structures on producer’s land. A producer’s land cannot be transferred to a buyer.
Over the years, expert bodies have identified issues related to the implementation of contract farming. These include (i) role of APMCs which are designated as an authority for registration and dispute settlement in most states, (ii) provisions of stockholding limits on produce under contract farming, and (iii) poor publicity of contract farming among the farmers about its benefits.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020:
- Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets. Any market fee, cess, or levy outside APMC areas is prohibited.
- Farmers Agreement Ordinance establishes a framework for contract farming by requiring an agreement between a farmer and a buyer before producing or rearing farm products. There are three levels of dispute resolution: conciliation board, sub-divisional magistrate, and appellate authority.
- According to the Essential Commodities (Amendment) Ordinance, 2020, the central government may regulate the supply of certain food items only in extraordinary circumstances (such as war or famine). Stock limits may be imposed on agricultural produce only if there is a steep price rise.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020
Farming agreement
The Ordinance provides for a farming agreement between a farmer and a buyer before the production or rearing of any farm produce. The minimum period of an agreement will be one crop season or one production cycle of livestock. The maximum period is five years unless the production cycle is more than five years.
Pricing of farming produces
The price of farming produce should be mentioned in the agreement. For prices subject to variation, a guaranteed price for the product and a clear reference for any additional amount above the guaranteed price must be specified in the agreement. Further, the process of price determination must be mentioned in the agreement.
Dispute Settlement
A farming agreement must provide for a conciliation board as well as a conciliation process for the settlement of disputes. The Board should have a fair and balanced representation of parties to the agreement. At first, all disputes must be referred to the board for resolution. If the dispute remains unresolved by the Board after thirty days, parties may approach the Sub-divisional Magistrate for resolution.
Parties will have a right to appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the Magistrate. Both the Magistrate and Appellate Authority will be required to dispose of a dispute within thirty days from the receipt of the application. The Magistrate or the Appellate Authority may impose certain penalties on the party contravening the agreement. However, no action can be taken against the agricultural land of farmers for the recovery of any dues.
Conclusion
The key benefit for producers is long-term, stable access to more remote markets. In addition, lucrative markets, transparent pricing, and new technologies. Also, technical assistance, credit facilities, and improved inputs. Producers can obtain these benefits through contract farming.
By agreeing on a price, the buyer controls commercial risks. Controlling production risks by ensuring a stable supply of agricultural produce in the required quantity and quality. The buyer is also motivated by access to land. Through contract farming, the buyer can indirectly access land. Integrated production business models cannot purchase or lease it. For more Queries visit to Vakilsearch experts Team .
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