NITI Aayog finalising model law on contract farming

Published on 23 Feb 2017 by Team

NEW DELHI: In a move intended to protect farmers against price volatility, particularly in perishables like onions, tomatoes and potatoes, the Niti Aayog is drawing up a model law on contract farming for approval by the Cabinet by June. As market fluctuations have made distress sales -- with dramatic photographs of farmers dumping kitchen staples on roads -- a regular feature, the centre's think-tank is considering options that can reduce the risks for farmers by balancing entry of private players with safeguards for agriculturalists. “We have been working on the model law for quite some time. Meetings with states’ representatives were held last year. We will hold further consultations on the final draft after the assembly elections,” said Ramesh Chand, agriculture expert and member of NITI Aayog. He told TOI though the NITI Aayog had already come out with an initial draft in October, further discussions and consultations were required to tighten certain provisions which would arm farmers with legal safeguards. 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. A model Agricultural Produce Market Committee (APMC) Act was first circulated to states during 2003 for contract farming agreement. Though 20 states had amended the legislation, only 12 have so far notified rules for implementation. “The new model act will be an improved version, keeping in mind utmost safeguards to small and marginal farmers as they would also be in a position to enter into an agreement with big private players as a group or cooperative,” Chand said while hinting that the model law may largely be like the Punjab Contract Farming Act. Though Punjab had enacted a separate law on contract farming in 2013, it has so far not implemented it. On the other hand, states like Gujarat, Haryana, Karnataka, Maharashtra and Madhya Pradesh have done this through amendments to the existing law for certain crops. 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. Besides bringing a law on contract farming, the states will also be urged to de-notify perishable items like fruits and vegetables from the APMC Act so that farmers will get an opportunity to sell their produce in open market and get better prices. At present, they have to sell their produce at a designated ‘mandi’ where they have to compromise on the price due to involvement of commission agents. “If implemented properly by the states, both these reform measures will go a long way in doubling the farmers’ income by 2022,” said Chand.

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