Review of Contract Farming Regulations with special reference to State of Maharashtra and Gujarat

Abstract

There is a consensus among experts and policymakers that contract farming (CF) helps to render small-scale farming competitive with large-scale farming as it enables the farmers to access technology, credit, andmarketingchannels, with low transaction costs. However, studies made in the early 2000s found that in the absence of laws governing in appropriate ways the contracts between firms and farmers, the contracts tended to be very unfair to the farmers. Agricultural marketing is, in India, governed by the various states; so, the Union Ministry of Agriculture in 2003 circulated to the 28 states and 7 unionterritory governments a model “Agricultural Produce Marketing (Development & Regulation) (APMR) Act” and, in 2007, a set of model rules for implementing such an act. This model APMR act and set of rules include provisions for the registration of contract farming sponsors, the recording of CF agreements with some authority prescribed under the act, and a vital dispute-settlement mechanism. The rules are intended to protect the interests of farmers. As of 2015, 21 states have made legal provisions accordingly, but in reality, many of the contracting firms are not registering with the prescribed authorities. The multi-national corporations drawing up the CF contracts in regard to the large-scale production of white onions and chip-grade potatoes in Maharashtra and Gujarat have not registered themselves with the prescribed district authorities in. Survey conducted in 2012–13 in selected districts of Maharashtra found that the farmers, unaware of the existence of dispute-settling authorities, felt helpless whenever a dispute would arise. In this paper, attempt is made to review the CF rules in the national Model APMR Act; and identify, in the light of that review and of discussions with selected contracting firms and Government officials, some suggestions on how to make contract farming rules more participatory and effective have been suggested. We argue that better compliance of the CF rules would reduce the amount of troublesome uncertainties in regard to exploitation by contracting firms, and would thereby strengthen the CF system.