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.
With the spread of COVID-19, along with the central government, the state governments have also announced several policy decisions to contain and prevent the spread of the virus. In this blog post, we summarise some of the key measures taken by the Uttarakhand Government in this regard as of April 16, 2020.
As of April 15, 2020, 2,413 samples have been sent for testing in Uttarakhand. Of these, 37 have been found COVID-19 positive and the results of 354 samples are awaited. Of the 37 confirmed cases, 9 patients have been cured/discharged.[1]
Movement Restrictions
To contain the spread of COVID-19 in the state, the Government of Uttarakhand took the following measures for restricting the movement of people in the state.
On March 20, the Department of Health restricted the entry of all tourists (domestic and foreign) into the state.[2] The Department further issued orders for the closure of all educational institutions, gyms, swimming pools, museums, cultural and social centres, and theatres until March 31.[3]
On March 22, the state announced a complete lockdown till March 31.[4] Restrictions during the lockdown included: (i) prohibiting the gathering of more than five people at any public place, (ii) suspending all public transport including taxis and auto-rickshaws, and (iii) closure of all shops, commercial establishments, offices and factories. Establishments providing essential goods and services were excluded from the lockdown restrictions. These include: police, medical and health, print and electronic media, food, groceries, and their transportation, among others.4
On March 25, the central government announced on a 21-day country-wide lockdown till April 14.[5] On April 14, the lockdown was further extended till May 3, 2020.[6]
On April 15, the Ministry of Home Affairs issued guidelines on the measures to be taken by state governments until May 3.[7] As per these guidelines, select activities will be permitted from April 20 onwards, to mitigate hardship to the public due. These activities include health services, agriculture and related activities, certain financial sector activities, operation of Anganwadis, MNREGA works, and cargo movement, among others. Further, subject to certain conditions, commercial and private establishments, industrial establishments, government offices, and construction activities will also be permitted.7
Health Measures
Uttarakhand Epidemic Disease COVID-19 Regulations 2020
On March 15, 2020, the government notified the Uttarakhand Epidemic Disease COVID-19 Regulations, 2020 for the containment of COVID-19 in the state.[8] Key features of the regulations include the following:
All hospitals (government and private) must have dedicated flu corners for the screening of suspected COVID-19 cases.
The spread of any misinformation must be avoided. No person or organisation can use any print or electronic media for information regarding COVID-19 without prior permission of the state health department.
Guidelines for citizens, healthcare facilities and government departments
The state issued several guidelines and advisories on various subjects related to the containment of the virus.[9] These guidelines have been targeted towards citizens, healthcare facilities, as well as government departments. Some of these guidelines are given below:
For citizens: These include guidelines on the use of masks by the public, guidelines for home quarantine, and advisory to not consume tobacco to prevent the virus.8
For healthcare facilities: Guidelines for health care facilities include: sample collection, packaging and transport guidelines, infection prevention control for suspected cases, clinical management of COVID – 19, and discharge policy for COVID-19 patients, among others.8
For government: Guidelines for government departments include: guidelines for cluster containment, strategy, advisory on the use of hydroxychloroquine for high-risk population, and guidelines for quarantine facilities for COVID-19.8
Administrative Measures
On March 21, the state government cancelled all leaves for employees from the Department of Medical, Health and Family Welfare and ordered all the employees on leave to report back.[10] Further, on March 19, the state government announced that the administrative control of all properties and accommodations under the tourism department and other government enterprises will be given to the respective District Magistrates, temporarily.[11]
Education
On March 21, the state government postponed the correction of all state board examination booklets, which were to be corrected from April 1 to April 15, 2020.[12] The government also postponed exams for the Forest Research Institute, which were supposed to be conducted in March.[13]
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
[1] Dehradun Health Bulletin on Corona Virus Disease (COVID-19), Status as on April 15, 2020 Time: 05:30 PM, Uttarakhand State Control Room COVID -19, Health and Family Welfare, Uttarakhand, http://health.uk.gov.in/files/Corrected-15-04-2020-Health-Bulletin.pdf.
[2] Order No. 48/PS-Secy(H)/2020, Department of Medical, Health and Family Welfare, March 20, 2020, https://prsindia.org/files/covid19/notifications/427.UK_Advisory_for_Tourists_20_Mar.pdf.
[3] Advisory on social distancing measure in view of spread of COVID-19 disease, Government of Uttarakhand, https://prsindia.org/files/covid19/notifications/1835.UK_Social_Distancing_Advisory_Uttarakhand.pdf.
[4] Order No. UKHFWS/PS-MDNHM/2019-20/217, Department of Medical, Health and Family Welfare and Medical Education, March 22, 2020, https://prsindia.org/files/covid19/notifications/432.UK_Order_Lockdown_Mar_22.pdf.
[5] Order No. 1-29/2020-PP, National Disaster Management Authority, March 24, 2020, https://mha.gov.in/sites/default/files/ndma%20order%20copy.pdf.
[6] “PM addresses the nation for 4th time in 4 Weeks in India’s fight against COVID-19” Press Release, Prime Minister’s office, April 14, 2020, https://pib.gov.in/PressReleseDetail.aspx?PRID=1614255.
[7] Order No.40-3/2020-DM-I(A), Ministry of Home Affairs, April 15, 2020, https://www.mha.gov.in/sites/default/files/MHA%20order%20dt%2015.04.2020%2C%20with%20Revised%20Consolidated%20Guidelines_compressed%20%283%29.pdf.
[8] Notification No. 370/XXVIII(1)/2020-01(06)/2020, Department of Medical Health and Medical Education, March 15, 2020, http://health.uk.gov.in/files/The_Uttarakhand__Epidemic__Disease__COVID-19_Regulation_2020.pdf.
[9] Website of Department of Medical, Health and Family Welfare, Corona (COVID19) updates, Government of Uttarakhand, last visited on March 16, http://health.uk.gov.in/pages/display/140-novel-corona-virus-guidelines-and-advisory-.
[10] Order No. 1P/Ra0pu0/miscellaneous/1/2018, Department of Medical, Health and Family Welfare, March 19, 2020, https://prsindia.org/files/covid19/notifications/430.UK_DG-Order-Cancellalation_of_Leave_Health_Workers_21_Mar.pdf.
[11] Order No. 42/Secy Health/2020, Department of Medical, Health and Family Welfare, March 19, 2020, https://prsindia.org/files/covid19/notifications/1826.UK_Advisory_for_KMVN_and_GMVN_Mar19.pdf
[12] Advisory No. 123/XXIV-B-5/2020/03(01)/2020, Secretary Uttarakhand Government, March 21, 2020, https://prsindia.org/files/covid19/notifications/429.UK_Advisory_for_Board_Student_of_Uttarakhand_21_Mar.pdf.
[13] Advisory No. 122/XXIV-B-5/2020/03(01)/2020, Secretary Uttarakhand Government, March 21, 2020, https://prsindia.org/files/covid19/notifications/1828.UK_Advisory_for_Board_Student_of_FRI_Uttarakhand_Mar21.pdf.
