Odisha Promotes Contract Farming – Economics – Free PDF Download

Published On June 4th, 2020 Leave a comment

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Recently, the Odisha government has promulgated an ordinance allowing investors and farmers to enter into an agreement for contract farming.
The contract farming has been allowed in view of the continuing uncertainties due to the Covid-19 pandemic.

Contract Farming

An agricultural production (including livestock and poultry) based on a pre-harvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations).
The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement.
Under contract farming, the producer can reduce the risk of fluctuating market price and demand.
The buyer can reduce the risk of non-availability of quality produce.
Contract farming addresses the problem of low investment in agriculture and ensures a supply of quality inputs, technical guidance and management support for farmers.
It provides an assured market and a pre-agreed sale price for produce, makes it easier for farmers to access cheaper institutional credit.

To facilitate both farmers and sponsors to develop mutually beneficial and efficient contract farming systems.
To improve the production and marketing of agricultural produce and livestock.
Promoting farmers’ interest.

The agreement will be entered into between the contract farming sponsor or entire value chain including pre production, and the contract farming producer.
Sponsor- the one who offers to participate in any component.
Producer – farmers who agree to produce the crop or rear the livestock.

The loans and advances given by the sponsor to the producer can be recovered from the sale proceeds of the produce.
It cannot be realised by way of sale or mortgage or lease of the land in respect of which the agreement has been entered into.

Notwithstanding anything contained in the agreement, no title, rights, ownership or possession of land or premises or other such property will be transferred or alienated or vest in the sponsor or its successor or its agent.

To review the performance of the contract farming
To make suggestions to the government for its promotion and efficient performance.

In India, contract farming is regulated under the Indian Contract Act, 1872.
In addition, the Model APMC (Agricultural Produce Market Committee) Act, 2003 provides specific provisions for contract farming, like compulsory registration of contract farming sponsors and dispute settlement.
Since agriculture is a state list subject, therefore contract farming is not uniform.
The NITI Aayog observed that market fees and other levies are paid to the APMC for contract framing when no services such as market facilities and infrastructure are rendered by them.
Thus, it has been recommended that contract farming should be out of the ambit of APMCs. Instead, an independent regulatory authority must be brought in to disengage contract farming stakeholders from the existing APMCs.
Therefore, the Ministry of Agriculture came out with a draft Model Contract Farming Act, 2018.
The draft Model Act seeks to create a regulatory and policy framework for contract farming. Based on this draft Model Act, legislatures of states can enact a law on contract farming.