A New Legal Framework for Contract Farming Has Been Introduced By The Central Government

Published on Jun 07, 2020

A New Legal Framework for Contract Farming Has Been Introduced By The Central Government

Announcing the third tranche of the Modi government's Rs 20 lakh economic stimulus, Finance Minister Nirmala Sitharaman said that the Center plans to come up with a legal framework to facilitate contract farming. The move has been welcomed by all sectors in view of the freedom given by farmers.  The convenient legal framework was created to enable farmers to connect with processors, aggregators, large retailers, and exporters in a fair and transparent manner. Has been done. In contract farming, farmers and buyers sign an agreement prior to agricultural production, which covers the required quantity and rate of harvest. In 2005, three textile mills, led by Super Spinning Mills, with cotton farmers Agreed. According to the contract farmers in Tamil Nadu were to produce 42,500 acres of additional staples, the Tamil Nadu government was the third party in the agreement. The program was promising at first but later turned into huge problems. The buyers did not first specify the cotton variety and later rejected the farmers' yield. Textile mills asked producers to sell produce to sell cotton. Unconfirmed reports pointed out that farmers asked for higher prices as the market rate was higher than what textile mills offered. Currently some companies are helping farmers know how to produce agricultural products based on the industry's requirement. Can. As part of its value chain project for wheat and chillies, Kolkata-based ITC Limited helps farmers to grow chillies, maintain soil and conserve water. They train farmers to develop transplanting in trays, pest management and post-harvest management. Farmers are under no obligation to sell their produce to corporates; they receive a premium at market rates which is a win-win situation.

Tamil Nadu is the first Indian state to pass a law promoting contract tracing called the Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act. This law ensures buyers to get assured supplies at pre-determined prices. This law can be used to study new provisions introduced by the central government. The government should focus on addressing limitations in previous experiments in the new legal framework to provide a successful model for farmers. In its provisions, the government should ensure the safety of growers, requiring buyers and farmers to sign long-term contracts so that productivity and crop quality remain through proper investment. Often the same company ties up with multiple farmers and puts producers at a disadvantage. The contracts need to cover production risks, not to protect the company's interest rates as in earlier contracts. Provisions for registration under authorized agencies are important, so the agency can look at the track records of companies that want to sign agreements with producers.

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