Draft Model Contract Farming Act, 2018

Why in news?

The Ministry of Agriculture recently released a draft Model Contract Farming Act, 2018.

What is contract farming?

Under this, agricultural production (including livestock and poultry) can be carried out based on a pre-harvest agreement.
The contract would be between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations).
Accordingly, the producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement.
It reduces the risks of fluctuating market price and demand for the producer and non-availability of quality produce for the buyer.

How is the existing regulatory structure?

Provisions - Currently, contract farming requires registration with the Agricultural Produce Marketing Committee (APMC) in few states.
Consequently, the APMCs can also resolve disputes arising out of these contracts.
Further, market fees and levies are paid to the APMC to undertake contract farming.
Concerns - The market fees and other levies are paid to the APMC when no services such as market facilities and infrastructure are rendered by them.
There are other concerns relating to stockholding limits and poor publicity of the benefits among the farmers.
Model APMC Act - The Model APMC Act, 2003 provided for contract farming.
This was meant for the states, to use as reference while enacting their respective laws.
20 states have amended their APMC Acts; however, the procedures for registration and recording of agreements vary across states.
Also, only 14 states have actually notified rules related to contract farming, as of October 2016.

What are the key provisions of the present Act?

The draft Model Act seeks to create a regulatory and policy framework exclusively for contract farming.
Based on this, the states can enact their own laws, as contracts fall under the Concurrent List.
Authority - The Act seeks to bring contract farming outside the ambit of the state APMCs.
Accordingly, buyers need not pay market fee and commission charges to APMCs.
It provides for a state-level Contract Farming (Promotion and Facilitation) Authority to ensure implementation.
Functions of the Authority include:

Further, the sale and purchase is out of the ambit of regulation of the respective state/UT Agricultural Marketing Act.
Support - As per the Act, the producer can get support from the buyer for improving production through inputs.
It may include that on technology, pre-harvest and post-harvest infrastructure, etc as per the agreement.
However, the rights or title ownership of the producer’s land cannot be transferred to the buyer.
Also, the buyer cannot raise a permanent structure on the producer’s land.
Registration - Registering and Agreement Recording Committee will be set up at the district, taluka or block levels.
It will consist of officials from departments such as agriculture, animal husbandry, marketing, and rural development.
The Act specifies that every agreement should be registered with this Committee.
Disputes - The draft Model Act offers ways for resolving any dispute arising between a producer and a buyer.
They are:

negotiation or conciliation for a mutually acceptable solution
referring the dispute to a dispute settlement officer designated by the state government
appealing to the Contract Farming (Promotion and Facilitation) Authority if not satisfied by the decision of the dispute settlement officer

Stockholdings limits - The existing provisions of stockholding limits on contracted produce discourage buyers to enter into contracts.
Under the draft Model Act, stockholding limits will not be applicable on produce purchased under contract farming.

What are the concerns?

Given the states' lethargic response for the model APMC Act, the implementation of the model law on contract farming, even if passed by the states, is uncertain.
It allows companies to enforce price cuts or reject the produce on the plea of inferior quality.
But the quality parameters stipulated by the companies are often hard to meet.
The restrictive provisions in the model act thus need a reassessment for balancing the interests of farmers and businesses.

Source: PRS India