To protect farmers from price risks, price volatility and distress sales and to ensure remunerative price of farm produce to farmers, the Ministry of Agriculture has adopted the Model "State/UT Agricultural Produce and livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018" on Tuesday. The Ministry has urged the States to enact their respective legislations, taking the Model Act as their guide. The Model Act also curtails the role of States.
As per the Model Act, the State's role will be limited to protecting the interests of farmers and others who enter into contract with sponsors. Contracted produce is to be covered under crop/livestock insurance in operation and the contract farming is to remain outside the ambit of respective Agricultural Produce Marketing Act (APMC) of the states.
Union Agriculture Minister Radha Mohan Singh on Tuesday adopted the model act on contract farming - an improved version of its earlier draft - which provides for sponsors to get into a contract with an individual or group of farmers not just for production but also for marketing of produce and farm services. "This will also help farmers to increase their income," he said.
According to officials, the contract farming is a pre-production season agreement between farmers (either individually or collectively) and sponsors. It transfers risk of post-harvest market unpredictability to sponsors (individual or company) who have to pay agreed prices to farmers under an advance agreement.
According to the agriculture ministry, more than 86 percent of close to 120 million agricultural households in the country are small (less than or equal to 2 hectare of cultivable land) and marginal (less than or equal to 1 hectare of cultivable land). As per census 2011, the average size of landholdings in India was 1.1hectare. The model contract farming Act proposes a state-level agency, the Contract Farming (Development and Facilitation) Authority, which would put contract farming outside the ambit of the APMC. The model Act requires the sponsor and the farmers to register the contracts with a registering and agreement recording committee. Registration imposes additional procedures and costs on the parties, and small and medium farmers cannot easily afford these costs.
The Act says no permanent structure will be allowed to be developed on farmers land /premises and no right, title of the interest of the land shall vest to the sponsor. The model Act also does not call for notification of commodities. Parties can choose the commodity as per their interests, provided the contracted produce comes under insurance cover. The proposed legislation, however, gives power to States to de-notify any particular commodity in case of an emergency.