Skip to content Skip to footer

Contract Farming Law in India

The Contract Farming Law in India: An Overview

Contract farming, also known as agricultural production contracting, refers to a system of agricultural production in which farmers and agribusiness firms enter into an agreement to produce a crop or grow livestock under specific terms and conditions. This system has become increasingly popular in India, as it provides farmers with access to technology, inputs, and markets while guaranteeing agribusiness firms a consistent supply of quality produce. The Indian government has recognized the potential of contract farming to increase agricultural productivity and improve the livelihoods of farmers, and has recently passed a Contract Farming Law to regulate this practice.

The Contract Farming Law, also known as the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, was passed by the Indian Parliament in September 2020. The law aims to create a legal framework that protects the rights of farmers in contract farming agreements and ensures that they receive a fair price for their produce. It also seeks to promote private investment in agriculture and encourage the development of agribusiness.

Under the Contract Farming Law, farmers and agribusiness firms can enter into an agreement for the production and supply of agricultural produce. The agreement must be in writing, and should specify the terms and conditions of the contract, including the quantity and quality of produce to be supplied, the price to be paid, and the time and manner of payment. The law requires that the price paid to the farmer for the produce should be at least the minimum support price (MSP) set by the government, or the price agreed upon in the contract, whichever is higher.

The law also provides for the creation of Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, which allows farmers to sell their produce outside the traditional mandis or market yards regulated by the Agricultural Produce Marketing Committees (APMCs). This provision enables farmers to sell their produce directly to buyers, including processors, exporters, and retailers, without the need for intermediaries. This can potentially increase the price that farmers receive for their produce and reduce their dependence on middlemen.

The Contract Farming Law includes provisions to protect the rights of farmers in contract farming agreements. The law specifies that the farmer is the owner of the produce until it is delivered to the buyer, and prohibits any deductions or penalties from the price paid to the farmer without his/her written consent. The law also requires that the buyer provide the farmer with a copy of the agreement and a copy of any inspection report or test results related to the produce.

The Contract Farming Law has been met with both praise and criticism. Supporters argue that it will provide farmers with access to better technology, inputs, and markets, and will encourage private investment in agriculture. Critics, however, argue that the law may lead to the corporatization of agriculture and the exploitation of small and marginal farmers by agribusiness firms. They also express concerns about the potential impact of the law on the APMC system, which has been the backbone of agricultural marketing in India for decades.

In conclusion, the Contract Farming Law is an important step towards creating a legal framework that protects the rights of farmers in contract farming agreements. The law has the potential to increase agricultural productivity, improve the livelihoods of farmers, and promote private investment in agriculture. However, its implementation and impact on the agricultural sector will depend on effective regulation, monitoring, and enforcement.