![](/images/main_logo.png)
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.
Recently, the Standing Committee on Health and Family Welfare submitted its report to the Parliament on the National Commission for Human Resource for Health Bill, 2011. The objective of the Bill is to “ensure adequate availability of human resources in the health sector in all states”. It seeks to set up the National Commission for Human Resources for Health (NCHRH), National Board for Health Education (NBHE), and the National Evaluation and Assessment Council (NEAC) in order to determine and regulate standards of health education in the country. It separates regulation of the education sector from that of professions such as law, medicine and nursing, and establishes professional councils at the national and state levels to regulate the professions. See here for PRS Bill Summary. The Standing Committee recommended that this Bill be withdrawn and a revised Bill be introduced in Parliament after consulting stakeholders. It felt that concerns of the professional councils such as the Medical Council of India and the Dental Council of India were not adequately addressed. Also, it noted that the powers and functions of the NCHRH and the National Commission on Higher Education and Research (to be established under the Higher Education and Research Bill, 2011 to regulate the higher education sector in the country) were overlapping in many areas. Finally, it also expressed concern over the acute shortage of qualified health workers in the country as well as variations among states and rural and urban areas. As per the 2001 Census, the estimated density of all health workers (qualified and unqualified) is about 20% less than the World Health Organisation’s norm of 2.5 health workers per 1000 population. See here for PRS Standing Committee Summary. Shortfall of health workers in rural areas Public health care in rural areas is provided through a multi-tier network. At the lowest level, there are sub health-centres for every population of 5,000 in the plains and 3,000 in hilly areas. The next level consists of Primary Health Centres (PHCs) for every population of 30,000 in the plains and 20,000 in the hills. Generally, each PHC caters to a cluster of Gram Panchayats. PHCs are required to have one medical officer and 14 other staff, including one Auxiliary Nurse Midwife (ANM). There are Community Health Centres (CHCs) for every population of 1,20,000 in the plains and 80,000 in hilly areas. These sub health centres, PHCs and CHCs are linked to district hospitals. As on March 2011, there are 14,8124 sub health centres, 23,887 PHCs and 4809 CHCs in the country.[i] Sub-Health Centres and Primary Health Centres
Table 1: State-wise comparison of vacancy in PHCs
Doctors at PHCs |
ANM at PHCs and Sub-Centres |
|||||
State | Sanctioned post | Vacancy | % of vacancy | Sanctioned post | Vacancy | % of vacancy |
Chhattisgarh | 1482 | 1058 | 71 | 6394 | 964 | 15 |
West Bengal | 1807 | 801 | 44 | 10,356 | NA | 0 |
Maharashtra | 3618 | 1326 | 37 | 21,122 | 0 | 0 |
Uttar Pradesh | 4509 | 1648 | 36 | 25,190 | 2726 | 11 |
Mizoram | 57 | 20 | 35 | 388 | 0 | 0 |
Madhya Pradesh | 1238 | 424 | 34 | 11,904 | 0 | 0 |
Gujarat | 1123 | 345 | 31 | 7248 | 817 | 11 |
Andaman & Nicobar Isld | 40 | 12 | 30 | 214 | 0 | 0 |
Odisha | 725 | 200 | 28 | 7442 | 0 | 0 |
Tamil Nadu | 2326 | 622 | 27 | 9910 | 136 | 1 |
Himachal Pradesh | 582 | 131 | 22 | 2213 | 528 | 24 |
Uttarakhand | 299 | 65 | 22 | 2077 | 0 | 0 |
Manipur | 240 | 48 | 20 | 984 | 323 | 33 |
Haryana | 651 | 121 | 19 | 5420 | 386 | 7 |
Sikkim | 48 | 9 | 19 | 219 | 0 | 0 |
Meghalaya | 127 | 23 | 18 | 667 | 0 | 0 |
Delhi | 22 | 3 | 14 | 43 | 0 | 0 |
Goa | 46 | 5 | 11 | 260 | 20 | 8 |
Karnataka | 2310 | 221 | 10 | 11,180 | 0 | 0 |
Kerala | 1204 | 82 | 7 | 4232 | 59 | 1 |
Andhra Pradesh | 2424 | 76 | 3 | 24,523 | 2876 | 12 |
Rajasthan | 1478 | 6 | 0.4 | 14,348 | 0 | 0 |
Arunachal Pradesh | NA | NA | NA | NA | NA | 0 |
Assam | NA | NA | NA | NA | NA | 0 |
Bihar | 2078 | 0 | NA | NA | NA | 0 |
Chandigarh | 0 | 0 | NA | 17 | 0 | 0 |
Dadra & Nagar Haveli | 6 | 0 | NA | 40 | 0 | 0 |
Daman & Diu | 3 | 0 | NA | 26 | 0 | 0 |
Jammu & Kashmir | 750 | 0 | NA | 2282 | 0 | 0 |
Jharkhand | 330 | 0 | NA | 4288 | 0 | 0 |
Lakshadweep | 4 | 0 | NA | NA | NA | 0 |
Nagaland | NA | NA | NA | NA | NA | 0 |
Puducherry | 37 | 0 | NA | 72 | 0 | 0 |
Punjab | 487 | 0 | NA | 4044 | 0 | 0 |
Tripura | NA | NA | NA | NA | NA | 0 |
India | 30,051 | 7,246 | 24 | 1,77,103 | 8,835 | 5 |
Sources: National Rural Health Mission (available here), PRS.Note: The data for all states is as of March 2011 except for some states where data is as of 2010. For doctors, these states are Bihar, UP, Mizoram and Delhi. For ANMs, these states are Odisha and Uttar Pradesh. |
Community Health Centres
Table 2: Vacancies in CHCs of medical specialists
Surgeons | Gynaecologists | Physicians | Paediatricians | |
State |
% of vacancy |
|||
Andaman & NicobarIsland | 100 | 100 | 100 | 100 |
Andhra Pradesh | 74 | 0 | 45 | 3 |
Arunachal Pradesh | NA | NA | NA | NA |
Assam | NA | NA | NA | NA |
Bihar | 41 | 44 | 60 | 38 |
Chandigarh | 50 | 40 | 50 | 100 |
Chhattisgarh | 85 | 85 | 90 | 84 |
Dadra & Nagar Haveli | 0 | 0 | 0 | 0 |
Daman & Diu | 0 | 100 | 0 | 100 |
Delhi | 0 | 0 | 0 | 0 |
Goa | 20 | 20 | 67 | 66 |
Gujarat | 77 | 73 | 0 | 91 |
Haryana | 71 | 80 | 94 | 85 |
Himachal Pradesh | NA | NA | NA | NA |
Jammu & Kashmir | 34 | 34 | 53 | 63 |
Jharkhand | 45 | 0 | 81 | 61 |
Karnataka | 33 | NA | NA | NA |
Kerala | NA | NA | NA | NA |
Lakshadweep | 0 | 0 | 100 | 0 |
Madhya Pradesh | 78 | 69 | 76 | 58 |
Maharashtra | 21 | 0 | 34 | 0 |
Manipur | 100 | 94 | 94 | 87 |
Meghalaya | 50 | NA | 100 | 50 |
Mizoram | NA | NA | NA | NA |
Nagaland | NA | NA | NA | NA |
Odisha | 44 | 45 | 62 | 41 |
Puducherry | 0 | 0 | 100 | NA |
Punjab | 16 | 36 | 40 | 48 |
Rajasthan | 57% | 46 | 49 | 24 |
Sikkim | NA | NA | NA | NA |
Tamil Nadu | 0 | 0 | 0 | 0 |
Tripura | NA | NA | NA | NA |
Uttar Pradesh | NA | NA | NA | NA |
Uttarakhand | 69 | 63 | 74 | 40 |
West Bengal | 0 | 57 | 0 | 78 |
India | 56 | 47 | 59 | 49 |
Sources: National Rural Health Mission (available here), PRS. |
[i]. “Rural Healthcare System in India”, National Rural Health Mission (available here).