New Guidelines on Contract Farming

According to guidelines on the new contact farming ordinance issued by the Agriculture Ministry, farmers entering into contract farming agreement with food processors and other firms will have liability limited to the advance that they receive or cost of farm services provided by the sponsoring firm. These guidelines have been issued under the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020
What is farming agreement? A farming agreement under the Ordinance is a written agreement between the farmer (producer) and the sponsor (purchaser) in respect of any farming produce. Under the ordinance, verbal agreements wouldn’t be recognised. The agreement should be in written in the local language. 
(Source: hindubusinessline.com) 
It must outline the following:
·Period of agreement – should be clearly mentioned; and atleast for a minimum period of 1 crop cycle. It may be made for a maximum of 5 years and in certain cases, may run longer than 5 years. 
·Pricing – produce must be purchased at a price given in the agreement. A minimum guarantee price must be specified. Method of payment should also be mentioned. The agreement should contain complex formulas or measurements to arrive at the prices. 
·Payment of sales proceeds – the purchaser should pay the farmer on the day of delivery. They should issue a receipt specifying date, time, quantity and unit price, etc. Payment can be made through bank transfer to the farmer’s account or in cash, as prescribed in the agreement. 
·Ownership rights – the purchaser is not permitted to use the agreement to enjoy ownership rights on farmer’s land. 
The agreement should clearly indicate the nature of the farming, size of land area, survey number of the farmer’s field, business address of purchaser, name of the village and address of the farmer. The farmers entering into the agreement should have clear title of the land. If the agreement is with a farmer producer organisation (FPO), the guidelines insist on ensuring that the responsibility for the performance of the agreement is appropriately assigned amongst the members of the FPO. Similarly, if a sharecropper is involved in the agreement, they may be made responsible for receiving and using inputs from the purchaser. No clause in the agreement can be in derogation of rights of the sharecropper. 
As per the guidelines, if the purchaser fails to take delivery of produce within the stipulated days mentioned in the agreement, the farmer may sell the produce to a third party and claim from the sponsor the difference between the price in the agreement and the actual price that he received for the produce.
When disputes arise – 
·The aggrieved party can demand formation of conciliation board. 
·If the issue is not settled in 30 days, it can be escalated to the sub-divisional authority and if that too fails an appellate authority, district collector, can hear the matter. 
·The authority’s decision would be final.

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