NEW DELHI: Seeking to protect farmers from price volatility by ensuring guaranteed price for their produce, the Centre will come out with a draft model law on contract farming this month.
Once it is made public, stakeholders including farmers will be given 30 days to comment and give suggestions. A final 'model' contract farming Act is expected to be released in November after incorporating the suggestions.
"The final model Act will serve as a guide for states to bring required legislation on contract farming. In fact, many states including Uttar Pradesh have shown eagerness in adopting it as early as possible," said a member of the committee, headed by senior IAS officer Ashok Dalwai, which has been working on the draft.
Contract farming is a system in which agro-processing/exporting or trading units enter into a contract with farmers to purchase a specified quantity of any agricultural commodity at a pre-agreed price. Integration of fruits and vegetable growers with agro-processing units will help farmers not only in getting better price for their produce but also in reducing post-harvest losses.
"Idea of the contract farming law is to protect farmers from price volatility, particularly in perishable items. Such a law will protect farmers from market fluctuations as it will ensure assured and better price of agricultural and horticultural produce to them through advance agreements," the official said.
The move to bring a model contract farming Act was announced by finance minister Arun Jaitley in his budget speech.
Once states adopt the model law, farmers can enter into contracts with private entities/buyers who may, in turn, invest in technology and quality inputs and even provide management skills to increase productivity and reduce transaction costs.
At present, farmers can suffer losses when a bumper crop causes a glut in the market or in a situation where their produce is unable to reach the 'mandis' in time for a variety of reasons.
Though varied forms of contract farming exist in pockets in the country, the absence of a proper system of registration of contracts with an authorised state agency for verification of the sponsoring companies makes farmers vulnerable. There are reported cases of farmers becoming victims of fly-by-night operators in the absence of any safeguards.
"The new model Act will take care of such issues. It will provide legal safeguard to small and marginal farmers so that they are not exploited by private companies. It will also have a proper system of dispute resolution. Rights of sponsoring contract farming companies will also be protected," the official said.
Though Punjab had enacted a law on contract farming in 2013, it has so far not implemented it. States like Gujarat, Haryana, Karnataka, Maharashtra and Madhya Pradesh have done this through amendments to their existing laws on agricultural marketing for select crops.