The legal framework for contract farming under the State Agricultural Produce Marketing Acts will be quite helpful to the small farmers in securing better remuneration for their produce, particularly in backward areas/ districts, as such arrangements would cover the price risk and also the production risk to a great extent.
Contract Farming has the potential of combining small farmers’ efficiency with economy of scale, utilizing corporate management skills, providing assured markets and reducing transaction costs in the value chain by ensuring vertical integration. Several national and multinational processors or fast food chains are increasingly entering into contract with the farmers to encourage them to cultivate farm products (fruit, vegetables, etc.) of the desired quality by providing them not only seeds and other inputs but also assured procurement of the produce at pre-decided prices. Such tie-ups have special significance for small and marginal farmers, who have small marketed surplus and do not have staying power. They may not individually be capable of investing in technology, but through self help groups or cooperatives, there could emerge a desirable institutional framework, through which farmers can suitably reap the benefits of contract farming arrangements. Contract farming is particularly useful for high value crops because it enables the corporates to associate with the farmers and helps in imparting the latest technological know how to them.
The Model Agricultural Produce Marketing (Regulation) Act circulated by the Central Government to the States in 2003 for implementing marketing reforms has provisions for the registration of contract farming sponsors and recording of contract farming agreements with the Agricultural Produce Marketing Committee (APMC) or a prescribed authority under the Act, protection of title or rights of the farmers over the land under such contracts, dispute settlement mechanism and a model draft agreement suggesting various terms and conditions. To help States in the formulation of Rules in this regard, the Ministry of Agriculture has also circulated a set of Model APMC Rules to them for adoption.
By now, relevant provisions have been made by several State Governments/ UTs in their respective APMC Acts for providing a legal framework to contract farming. In seven States/ Union Territories there are no APMC Acts, therefore, there is no regulation of contract farming in such States / UTs. The Model Act circulated by the Ministry is suggestive in nature, and, since Agriculture is a State subject, it is for the State Governments to decide on the implementation, intermediation and monitoring of the contract farming arrangements in their State.
This information was given by Shri Kanti Lal Bhuria, Minister of State for Agriculture in written reply to a question in the Rajya Sabha today.
