Damages clause to shield contract farmers soon

File photo of a farmer in mustard field
The Centre has come out with a draft law on contract farming that seeks to provide damages to agrarians for violation of contracts by purchasers of any related produce.

The draft aims to ensure damages to the aggrieved party in a breach of contract by either side. It is usually the farmers who are losers in such contracts. 

If enacted, the law would regulate contract farming, regulated by the respective state marketing. The draft seeks to keep contract farming and goods produced through contract farming out of the purview of Agricultural Produce Marketing Committees. This would give the buyer freedom from market fee and commission charges, resulting in a saving of 5-10 per cent on transaction cost. 

Contract farming is agricultural production according to an agreement between buyers and farmers. It also covers marketing of the products. 

The proposed law seeks to provide an assured market to farmers. It ensures buying of the entire pre-agreed quantity of produce, livestock or products mentioned in the contract. The model Act would have provisions to guide the fixing of price and decide the sale-purchase price in case of too much movement of prices, up or down. 

It calls for independent agencies in states to promote contract farming and registering of all agreements between buyer and seller. And, a grievance redressal mechanism in districts. 

The model law, put up for public consultation, follows an announcement by Finance Minister Arun Jaitley in the 2017-18 Budget to this effect. Agriculture being a state subject, it is up to states to follow the model law and make necessary changes in their respective rules. 

The proposed law stops any contract farming sponsor from raising permanent structures on contract farming producers’ land and premises and also does not give any right, title ownership or possession on the land and other assets to the sponsor. It also calls for setting up contract farming facilitation groups at village or panchayat levels, to take quick decisions on production and post-production activities of contracted produce or livestock. 

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