MINISTER OF STATE IN THE MINISTRY OF AGRICULTURE (SHRI KANTI LAL BHURIA)
(a): Contract farming has been prevalent in various parts of the country for commercial crops
like sugarcane, cotton, tea, coffee, etc. The concept has, however, gained importance in recent
times in the wake of economic liberalization. The main feature of contract farming is that
farmers grow selected crops under a buy back agreement with an agency engaged in trading or
processing.
(b) The State Governments of Madhya Pradesh, Himachal Pradesh, Punjab, Sikkim, Andhra
Pradesh, Gujarat, Tamil Nadu and Nagaland have provided legal support to contract farming by
making provision for it under the State Agricultural Produce Marketing Regulation Act (APMC
Act). Nature of contract farming depends on the crops the objectives and resources of the buying
company and the experience of the farmers. These agreements can be in the nature of pre-
harvest agreement that bind the firm and the grower for the sale of the crop on specified price.
The agreement may also require the buyers to supply crop inputs, extension or credit in exchange
for the marketing agreement.
(c)to(e): Small farmers in India are generally capital starved and cannot make major investment
in land improvement and modern inputs. Contract farming can fill up this gap by providing the
farmers with quality inputs, technical guidance and management skills and most importantly link
them to assured and profitable markets. In view of above, contract-farming arrangements are
supported by the Government as a measure of reform in agricultural marketing sector. While
doing so, Government has sought to protect the interest of both the farmers as well as the
industry equitably, by suggesting arrangement for registration of sponsoring companies and
recording of contract farming agreements, in order to check unreliable and spurious companies.
A dispute resolution mechanism is also suggested to be set up near to farmers which can quickly
settle issues, if any, arising between the farmers and the company under a quasi-judicial manner.
The farmers while raising the contracted crops, run the risk of incurring debt and consequent
displacement from land in the event of crop failure. Farmers have to be indemnified from such
displacement by law. A model APMC Act inter-alia containing provisions to the said effect has
been circulated to State Government/Union Territories for adopting as the subject matter falls
within their jurisdiction.
