Contract Farming (CF) : Benefits & Challenges

Why in News ?

The President of India promulgates ordinance with the aim of giving a boost to rural India for farmers engaged in agriculture and allied activities -

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020. (It is a part of AtmaNirbhar Bharat Abhiyaan)

+ It will protects and empowers farmers to engage with Agri-business firms, processors, wholesalers, exporters or large retailers for farm services.

+ Sale of future farming produce at a mutually agreed price.

+ It will be fair and transparent.

Central Government  tested whole ecosystem of agriculture and allied activities during COVID-19 Crisis. To facilitate better intra-state and interstate trade of agriculture produce.

What is Contract Farming ?

• 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.

• It can protecting the interests of farmers and buyers.

• In contract farming all services involve such as pre-production, production and post-production.

• Contract Farming to be outside the ambit of APMC Act.

• Ensuring buying of entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of contract farming producer as per contract.

Benefits of Contract Farming :

* Benefits To the Farmers :

• Farmers have a guaranteed market outlet, it reduce risk of price fluctuations.

• It can improve farmers skill by learn to use  fertilizers, pesticides and new technology.

• Farmers adopting crops diversification systems.

• Contract farming can open up new markets which is available to small & marginal farmers.

• Farmers can also get easy credit from the Bank.

• In case of value addition Agri-product, contract farming ensure regular supply of agricultural produce with quality, at the real time and lesser cost.

• The freedom of the farmer from trade barriers in agriculture produce within India.

* Benefits to the Buyers :

• Buyers benefits from guaranteed supply of raw material of high quality which helps in protection from fluctuation in market pricing.

• Long term planning of business is possible they have a dedicated supplier base of raw materials.

• Buyers is also free from trade barriers in agriculture produce within India.

* Other Benefits :

• Model Contract Farming law.

• Contract Farming (Development and Promotion) Authority - setting up at State level agency.

• Setting up "Registering and Agreement Recording Committee" at district/block/taluka level.

• It is outside the ambit of APMC Act of the States/UTs.

• Promoting Farmer Producer Organisation (FPOs) / Farmers Producer Companies (FPCs) to benefits small and marginal farmers.

• Contract Farming Facilitation Group (CFFG) for promoting contract farming and services at village / panchayat at level provided.

• Accessible and simple dispute settlement mechanism at the lowest level possible provided for quick disposal of disputes.

• Contracted produce is to be covered under crop / livestock insurance in operation.

Challenges of Contract Farming :

• According to some expert analysis, contract farming is criticized for being biased in favour of firms or large farmers  while exploiting the poor bargaining power of small farmers.

• Lack of infrastructure and transportation.

• Growers faced problems like delayed payment, low price and pest attack on the contract crop which raised the cost of production.

• Lack of enforceability of contractual provisions can result in a breach of contract by either party.

• Problems of Monopsony (Single Buyer - Multiple Sellers)

• Gender issues - Women have less access to contract farming than men.

• Less awareness among farmers about contract farming.

• Informal contract farming - do not provide legal protection in India.

There is need for better cooperation and coordination to continue support in development and growth of the agriculture sector in the new reformed environment.

_True & _False

1. Contract Farming is protecting the interest of the farmers, considering them as weaker of the two parties entering into a contract.

_True

2. Contract Farming to be under the ambit of APMC Act.

_False

3. Contract Farming is regulated by MAPLCFS Act, 2018.

_False

4. No permanent structure can be developed on farmers' land/premises.

_True

5. Recently, promulgated ordinance for agricultural sector to increase the income of the farmers as a part of the 'Atmanirbhar Bharat Abhiyaan'.

_True.

References

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