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Recently, the Ministry of Agriculture released a draft Model Contract Farming Act, 2018. The draft Model Act seeks to create a regulatory and policy framework for contract farming. Based on this draft Model Act, legislatures of states can enact a law on contract farming as contracts fall under the Concurrent List of the Constitution. In this context, we discuss contract farming, issues related to it, and progress so far.
What is contract farming?
Under contract farming, agricultural production (including livestock and poultry) can be carried out based on a pre-harvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations). The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement. Under contract farming, the producer can reduce the risk of fluctuating market price and demand. The buyer can reduce the risk of non-availability of quality produce.
Under the draft Model Act, the producer can get support from the buyer for improving production through inputs (such as technology, pre-harvest and post-harvest infrastructure) as per the agreement. However, the buyer cannot raise a permanent structure on the producer’s land. Rights or title ownership of the producer’s land cannot be transferred to the buyer.
What is the existing regulatory structure?
Currently, contract farming requires registration with the Agricultural Produce Marketing Committee (APMC) in few states. This means that contractual agreements are recorded with the APMCs which can also resolve disputes arising out of these contracts. Further, market fees and levies are paid to the APMC to undertake contract farming. The Model APMC Act, 2003 provided for contract farming and was released to the states for them to use this as reference while enacting their respective laws. Consequently, 20 states have amended their APMC Acts to provide for contract farming, while Punjab has a separate law on contract farming. However, only 14 states notified rules related to contract farming, as of October 2016.
What are the issues with the current structure, and how does the draft Model Act seek to address them?
Over the years, expert bodies have identified issues related to the implementation of contract farming. These include: (i) role of APMCs which are designated as an authority for registration and dispute settlement in most states, (ii) provisions of stockholding limits on produce under contract farming, and (iii) poor publicity of contract farming among the farmers about its benefits.
Role of Agricultural Produce Marketing Committees/Marketing Boards
The NITI Aayog observed that market fees and other levies are paid to the APMC for contract framing when no services such as market facilities and infrastructure are rendered by them. In this context, the Committee of State Ministers on Agricultural Reforms recommended that contract farming should be out of the ambit of APMCs. Instead, an independent regulatory authority must be brought in to disengage contract farming stakeholders from the existing APMCs.
In this regard, as per the draft Model Act, contract farming will be outside the ambit of the state APMCs. This implies that buyers need not pay market fee and commission charges to these APMCs to undertake contract farming. Further, the draft Model Act provides for establishing a state-level Contract Farming (Promotion and Facilitation) Authority to ensure implementation of the draft Model Act. Functions of the Authority include (i) levying and collecting facilitation fees, (ii) disposing appeals related to disputes under the draft Model Act, and (iii) publicising contract farming. Further, the sale and purchase of contracted produce is out of the ambit of regulation of the respective state/UT Agricultural Marketing Act.
Registration and agreement recording
The Model APMC Act, 2003 released to the states provides for the registration of contract farming agreements by an APMC. This was done to safeguard the interests of the producer and the buyerthrough legal support, including dispute resolution. The procedures for registration and recording of agreements vary across states. Currently, registration for contract farming has been provided with the APMC in few states, and with a state-level nodal agency in others. Further, market fee on purchases under contract agreements is completely exempted in few states and partially exempted in others. The Committee of State Ministers on Agricultural Reforms recommended that a instead of a APMC, district-level authorities can be set-up for registration of contract farming agreements. Further, any registering authority should verify the details such as the financial status of the buyer.
Under the draft Model Act, every agreement should be registered with a Registering and Agreement Recording Committee, which will be set up consisting of officials from departments such as agriculture, animal husbandry, marketing, and rural development. Such a Committee can be set up at the district, taluka or block levels.
Disputes between the producer and the buyer
The Ministry of Agriculture and Farmers Welfare observed certain risks related to upholding the contract farming agreement. For example, producers may sell their produce to a buyer other than the one with whom they hold a contract. On the other side, a buyer may fail to buy products at the agreed prices or in the agreed quantities, or arbitrarily downgrade produce quality. The Committee of State Ministers on Agricultural Reforms recommended that dispute redressal mechanism should be at block, district or regional-level state authorities and not with an APMC.
Under the draft Model Act, in case of disputes between a producer and a buyer, they can: (i) reach a mutually acceptable solution through negotiation or conciliation, (ii) refer the dispute to a dispute settlement officer designated by the state government, and (iii) appeal to the Contract Farming (Promotion and Facilitation) Authority (to be established in each state) in case they are not satisfied by the decision of the dispute settlement officer.
Stockholdings limits on contracted produce
Stockholding limits are imposed through control orders as per the Essential Commodities Act, 1955. Such provisions of stockholding limits can be restrictive and discourage buyers to enter into contracts. It was recommended that the buyers can be exempted from stock limits up to six months of their requirement in the interest of trade. Under the draft Model Act, limits of stockholding of agricultural produce will not be applicable on produce purchased under contract farming.
Other recommendations
While contract farming seeks to provide alternative marketing channels and better price realisation to farmers, several other marketing reforms have been suggested by experts in this regard. These include: (i) allowing direct sale of produce by farmers, (ii) removing fruits and vegetables out of the ambit of APMCs, and (iii) setting-up of farmer-consumer markets, (iv) electronic trading, and (v) joining electronic National Agricultural Market for the sale of produce.
Source: www.pib.nic.in
Yesterday the Prime Minister reshuffled his Cabinet and inducted four cabinet ministers and four ministers of state. Since the beginning of the UPA II government, there have been three major Cabinet reshuffles and a number of minor readjustments in the portfolios of ministers. Analysing changes in the portfolios of ministers gives an insight into the churn in the political leadership of the different ministries of the government of India. Until recently there was no central online resource where information could be collated about cabinet reshuffles. The information was scattered between the websites of the President, the Prime Minister and the Press Information Bureau. Since 2012, the Cabinet Secretariat has started putting details about changes in the portfolio of the council of ministers in the public domain. However analysing this information becomes difficult as the information is split into different files and details about the Cabinet reshuffle do not go back till 2009. We have tried to collate data about changes in Cabinet portfolios since May 2009, so that it becomes easily accessible and can be analysed by interested individuals. The raw data file can be accessed here. This data could be analysed to see which Ministers have shifted across ministries or the average length of tenure of Ministers in different ministries. If you spot interesting trends in the raw data above, please share them with us on twitter@prslegislative We have done a preliminary analysis of the data to see which ministries have had the most changes in Cabinet Ministers since May 2009: - Railway Ministry portfolio has been held by six different Cabinet Ministers [Mamata Banerjee, Dinesh Trivedi, Mukul Roy, C P Joshi (twice), Pawan Kumar Bansal and now Mallikarjun Kharge] - Ministry of Law and Justice, Corporate Affairs and Science and Technology: Four Cabinet Ministers. - Ministry of Petroleum and Natural Gas, Civil Aviation, Rural Development, Tourism and Youth and Sports: Three Cabinet Ministers. - Ministries like Finance, Home, External Affairs, Communications and Information Technology, Human Resource Development: Two Cabinet Ministers. - Ministries like Agriculture and Non Conventional Energy Sources have the same Ministers from May 2009. This data also helped us put together a brief chronology of Cabinet reshuffles since the beginning of the term of the UPA II government:
23 & 28- May-09 | Cabinet sworn in. |
31-May-09 | Meria Kumar resigns as Minister of Water Resources to become Speaker of Lok Sabha. |
19-Apr-10 | Shashi Tharoor resigns as Minister of State from the Ministry of External Affairs. |
15-Nov-10 | A Raja resigns as Minister of Communications and Information Technology. Kapil Sibal gets additional charge of the ministry. |
19-Jan-11 | First major cabinet reshuffle. Most ministries affected. |
12-Jul-11 | Second major Cabinet reshuffle. Dinesh Trivedi assumes charge of Railway Ministry after Mamata Banerjee, Salman Khursheed becomes Law Minister, Jairam Ramesh moves to Rural Development. New Ministers like Rajeev Shukla (Parliamentary Affairs) and Jayanthi Natarajan (Environment and Forest) get inducted. |
18-Dec-11 | RLD joins UPA. Ajit Singh inducted as Minister of Civil Aviation. |
20-Mar-12 | Dinesh Trivedi resigns and Mukul Roy becomes Railway Minister. |
27-Jun-12 | Pranab Mukherjee resigns as Finance Minister to fight the presidential election. |
31-Jul-12 | P Chidambaram moves from Home to Finance Ministry and Sushil Kumar Shinde moves from Power to Home Ministry. |
22-Sep-12 | Trinamool withdraws support to UPA. All TMC ministers resign. C P Joshi assumes additional charge of Railway Ministry. |
28-Oct-12 | Third major reshuffle. S M Krishna resigns from Ministry of External Affairs and Salman Khursheed takes over. Ashwani Kumar comes in place of Salman Khursheed in Law and Justice. Ambika Soni resigns and Manish Tiwari takes charge of Ministry of Information and Broadcasting. Ajay Maken moves from Ministry of Youth Affairs and Sports to Housing and Urban Poverty Alliviation. |
21-Mar-13 | DMK withdraws support. All DMK Ministers resign. |
11-May-13 | Ashwani Kumar and Pawan Kumar Bansal resign. Kapil Sibal takes charge of Ministry of Law and Justice and C P Joshi takes charge of Railways. |
16-Jun-13 | Ajay Maken and C P Joshi resign. |