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Contract farming

Contract farming is a pre-agreed buyback arrangement between an agricultural producer and a sponsor — typically a processor, exporter or organised aggregator — that specifies the variety, area, quality, delivery schedule and price for a future harvest. The arrangement provides assured offtake to the farmer and predictable supply to the sponsor.

Overview

Under a contract farming agreement the sponsor often supplies seed or planting material, agreed inputs and extension support, while the producer commits sown acreage and adherence to agronomic protocols. The buyback price may be fixed at the time of signing, indexed to market price at harvest, or a hybrid of the two.

Eligibility

Any farmer, group of farmers or registered Farmer Producer Organisation can enter into a contract with a sponsor. The Centre's Model Agricultural Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 recommends recognition of FPOs as preferred contracting counterparties (see Farmer Producer Organisation Fpo).

Benefit and structure

The Model Act issued by the Department of Agriculture, Cooperation & Farmers Welfare in 2018 sets out an institutional framework outside the APMC Act, covering registration of contracts, dispute resolution at sub-divisional level, prohibition of mortgage or alienation of farmer land under the contract, and a special facilitative role for FPOs and aggregators.

Implementation

Because agriculture is on the State List of the Indian Constitution while contracts fall on the Concurrent List, the Model Act has to be adopted or adapted by each state legislature. State-level adoption has been uneven, and contract arrangements continue to operate under general contract law in states that have not enacted dedicated legislation. Sponsors typically combine contract farming with backward-linkage extension and forward-linkage logistics into mandi yards (see Apmc Mandi) or electronic platforms (see Enam Electronic National Agriculture Market).

See also Apmc Mandi, Farmer Producer Organisation Fpo and Enam Electronic National Agriculture Market.

References

  1. Model Contract Farming Act 2018. Department of Agriculture & Farmers Welfare.
  2. Model Contract Farming Act 2018 — explainer. Vikaspedia.