In response to ongoing uncertainties caused by the COVID-19 pandemic, the Odisha government has introduced an ordinance permitting contract farming. This move aims to present a mutually beneficial agreement between investors and farmers.
Objectives of the New Ordinance
The primary goal of the ordinance is to promote efficient contract farming systems that benefit both farmers and sponsors. It hopes to enhance the production and marketing of agricultural produce and livestock while safeguarding farmers’ interests.
Details of the Contract Farming Agreement
The new agreement involves a contract farming sponsor—who offers participation in any or all components of the value chain including pre-production—and a contract farming producer, essentially the farmer who agrees to produce the crop or rear livestock.
Loan Recovery and Land Rights Protection
In this arrangement, loans provided by the sponsor to the producer can be recovered from the sale proceeds of the produce. Importantly, this amount cannot be realised from the sale, mortgage, or lease of the land concerning which the agreement has been made. The ordinance also protects farmers by stating that no title, rights, ownership, or possession of land or premises will be transferred, alienated, or vested in the sponsor or its representative.
The Role of the Contract Farming and Services Committee
The ordinance proposes the establishment of a “Contract Farming and Services (Promotion and Facilitation) Committee.” This committee’s task would be to review the performance of contract farming and make recommendations for its efficient execution and promotion.
Understanding Contract Farming
Contract farming is a system where agricultural production, including livestock and poultry, is based on a pre-harvest agreement between buyers and producers. This type of farming allows risk mitigation—for both buyers against unavailability of quality produce and producers against fluctuating market prices.
Regulating Contract Farming in India
India regulates contract farming under the Indian Contract Act, 1872, and the Model APMC (Agricultural Produce Market Committee) Act, 2003. NITI Aayog has recommended that contract farming should be exempt from APMCs and instead be regulated independently to disengage stakeholders from existing APMCs. Based on these recommendations, the Ministry of Agriculture put forth a draft Model Contract Farming Act, 2018 aiming to create a regulatory and policy framework for contract farming.
Bettering Farmer-Corporate Relations through Contract Farming
Contract farming aspires to offer alternative marketing channels and better price realization to farmers while addressing low investment issues prevalent in agriculture. Though challenges persist, including potential dishonouring of contracted prices, the government hopes to play a facilitation role to ensure fairness and mutual benefit in farmer-corporate relations for the overall development of the agriculture sector.
