|Demand of the question |
Introduction. Contextual introduction.
Body. Contract farming benefits. Salient features of Model Contract farming act, 2018.
Conclusion. Way forward.
Contract farming can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products. Typically, the farmer agrees to provide agreed quantities of a specific agricultural product.
How Contract farming can resolve agricultural issues and food security issues?
- Consistent Supply: In case of agri-processing level, it ensures consistent supply of agricultural produce with quality, at right time and lesser costresulting in a better control over the factors of production.
- Better supply chain management: Assured supply aids Food processing industries in better supply chain management. It reduce demand supply gap plugging supply side constraints. Contract farming also enable the food processing industries to invest in the warehouses, cold storages and design the logistics in long term.
- Beneficial to farmers: It makes small scale farming competitive. Small farmers can access technology, credit, marketing channels and information while lowering transaction costs.Assured market for their produce at their doorsteps, reducing marketing and transaction costs.
- Reduce risks: It reduces the risk of production, price and marketing costs. Contract farming can open up new markets which would otherwise be unavailable to small farmers, thereby reducing intermediaries thus providing more options to farmers.
- Better quality production: Contract farming also ensures higher production of better quality, financial support in cash and /or kind and technical guidance. It enable optimalutilisation of installed capacity, infrastructure and manpower, and respond to food safety and quality concerns of the consumers.
- Increase investment: It lead to direct private investment in agricultural activities as they find it profitable. The farmers enter into contract production with an assured price under term and conditions.
With a view to integrate farmers with bulk purchasers including exporters, agro- industries etc. budget for 2017-18 announced a “Model Contract Farming Act”. Salient features of Model Contract Farming Act, 2018 are:
- The Act lays special emphasis on protecting the interests of the farmers, considering them as weaker of the two parties entering into a contract.
- In addition to contract farming, services contracts all along the value chain including pre-production, production and post-production have been included.
- “Registering and Agreement Recording Committee” or an “Officer” for the purpose at district/block/ taluka level for online registration of sponsor and recording of agreement is provided.
- Contracted produce is to be covered under crop / livestock insurance.
- Contract framing is to be outside the ambit of APMC Act.
- No permanent structure can be developed on farmers’ land/premises.
- Promotion of Farmer Producer Organization (FPOs)/Farmer Producer Companies (FPCs) to mobilise small and marginal farmers has been provided.
- It ensure buying of entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of contract farming producer as per contract.
- Contract Farming Facilitation Group (CFFG) being created for promoting contract farming and services at village/panchayat at level provided.
- Accessible and simple dispute settlement mechanism at the lowest level possible is provided for quick disposal of disputes.
India with its diverse agro climatic zones, can be a competitive producer of a large number of crops.Contract farming offers one possible solution.