Farming Contracts
Indian Contract (Amendment) Bill 2017 was introduced in Rajya Sabha on 4th August 2017. The bill sought to amend Indian Contract Act 1872, by introducing new a chapter, Chapter VIA, that governs provisions relating to contract farming .(Bill No: XXI of 2017. Gazette publication No. 25 dated 10-Aug-2017)
Contract farming: Background
Contract farming model was floated, claiming to be an ideal model that could help resolving the plight of poor farmers and was also successfully applied by large corporations in different parts of the country. But, over years, both the farmers and sponsoring companies have been facing issues negatively impacting the effectiveness of the CF model like
(a) Small sized holdings not suitable for contract farming
(b) Trust deficit between parties to the contract due to farmers or company failing to fulfil their contractual obligations.
(c) Delay in payment settlement by the company. Consequent issues for the farmer with his money lenders.
(d) Lack of Technology at farmer’s end to assess the quality of his produce and consequently having to rely on the company’s assessment which may or may not be in his best interest.
These issues warranted bringing contract farming within legislative framework and protect interest of parties involved.
CHAPTER VIA- Special Provisions Relating To Farming Contracts: provides for the following
(i) Agreement registration: Every contract farming agreement shall be registered in such manner as may be prescribed by the law.
(ii) Contract obligations : The contract farming agreement shall clearly lay down the obligations of the buyer and the farmer so as to avoid any dispute.
(iii) Dispute Resolution Committees: The appropriate Government shall constitute district-level Dispute Resolution Committees, to resolve disputes arising out of contract farming agreements.
(iv) Time frame for resolution: The Committee shall resolve a dispute within two months or such shorter period as may be specified by rules.
(v) Insurance: The buyer shall secure the interests of farmer, by getting the farm produce insured against unforeseen contingencies.
(vi) Assessment of produce: State or central Government, as the case may be, shall establish suitable mechanism that aids qualitative assessment of agricultural produce.
(vii) Cooperatives: The appropriate Government shall bring these small and marginal farmers into the cooperatives structure, so that their interests vis-a-vis large corporations are duly protected.
(viii) Support obligations: The buyer shall be under obligation to support production process through supply of inputs, providing technical assistance etc.