NITI Aayog Preparing Law on Contract Farming

The move that is supposed to benefit farmers in reducing perishables and overcome price volatility, the Niti Aayog is preparing Model Law on contract farming which is likely to be approved by the Cabinet on June. As fluctuations in rates have made distress sales with dramatic evidence of farmers dumping kitchen staples on the roads i.e.; a regular feature, the think-tank is coming up with measure that could be undertaken to reduce risks for farmers by balancing the entries of private players with safeguards for agriculturists. Mr. Ramesh Chandra, agriculture expert and member of Niti Aayog said that they have been working on the model law for quite some time now and the meeting with state representatives was held last year. They would be holding final consultations on the final draft after the assembly elections. Bringing a model law on contract farming was announced as part of reform measures in the Union Budget. 

A law on contract farming is considered important for entry of private players into the sector as it would induce competition and ensure assured and better price of agriculture and horticulture produce to farmers through advance agreements. Such contracts could offered assured price. Once states come on board and adopt the proposed law, farmers can enter into agreements with private entities\buyers who may, in turn, invest in technology and bring in management skills to increase productivity and reduce transaction costs. 

At present, farmers can suffer losses when a bumper crop causes a glut in the market or in a situation where their produce is unable to reach the ‘mandis’ in time for a variety of reasons. Therefore, the main idea behind contract farming is to integrate farmers to agro-processing units for better price realisation. It will also take care of their post-harvest losses, if any.

Under the Punjab Contract Farming Act, a registered buyer can enter into an advance agreement with farmers for a minimum of one crop season or a maximum of three years. It also provides for recovery of crop losses or damages as per prior agreement. It has a provision where district level authority is responsible for dispute resolution. Many such provisions are expected to be there in the model law on contract farming, covering all crops. 

By BOA Bureau