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Posted at: Jun 11, 2018, 12:46 AM; last updated: Jun 11, 2018, 12:57 AM (IST)

Escorting market to the farm

The model contract farming law has the potential to transform India’s agriculture sector as it shields the farmer from fluctuating market price and demand, and also insulates the buyer from the risk of non-availability of quality produce, says Dr KC Ravi

The existing law governing contract farming is like a hat that has lost its shape as everyone has worn it. There is no homogeneity. Every state has its own variation. 

The Model Agriculture Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018, can be a move in the right direction, if implemented properly. 

The model law intends to largely streamline the provisions and bring about the much-needed uniformity. The model Act primarily attempts to create a uniform regulatory and policy framework on which state legislatures can enact a law on contract farming. 

Under contract farming, the buyers like food processing units and exporters can get into an agreement with farmers or farmer organisations for agriculture production, including livestock or poultry, before the harvest at a specified price, thereby eliminating the risk to a large extent.

In essence, the producer is insulated from fluctuating market price and demand, while the buyer can reduce the risk of non-availability of quality produce. The producer is entitled to get support from the buyer for improving production through inputs (such as technology, pre-harvest and post-harvest infrastructure) as per the agreement. 

The perennial bone of contention has been with the role of Agriculture Produce Market Committees (APMC), designated as an authority for registration and dispute settlement, whose functioning itself was a question mark in most states.

In line with the unanimous decision of the Committee of State Ministers on Agricultural Reforms, contract farming is proposed to be outside the ambit of APMCs, implying that buyers need not pay market fee and commission charges to the state committees to undertake contract farming.  Instead, the draft law provides for establishing a state-level Contract Farming (Promotion and Facilitation) Authority to ensure implementation of the model Act. The authority would undertake levying and collecting facilitation fees, disposing of appeals related to disputes under the model Act, and publicity of contract farming. 

Another noteworthy feature of the model Act is that a negotiation or reconciliatory process to arrive at a mutually acceptable solution has been provided to resolve disputes between a producer and a buyer. They can also refer the dispute to a dispute settlement officer designated by the state government or appeal to the authority (to be established in each state) in case they are not satisfied by the decision of the dispute settlement officer.

Until now, stockholding limits were imposed through control orders as per the Essential Commodities Act, 1955.  Such provisions of stockholding limits often were restrictive and discouraged buyers to enter into contracts.  The model Act does not limit stockholding of agricultural produce purchased under contract farming.

However, the implementation in letter and spirit besides cutting red tape are the key if the model law is to succeed. The proposed changes should be implemented in the true nature of cooperative federalism. The most important need is to reduce the thrust deficit between the government and the private sector.

— The writer is Vice-President, Business Sustainability, South Asia, Syngenta


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