Despite having three units of contract farming legal guidelines being enacted prior to now lower than twenty years, together with the 2020 Act, the fundamental fear among the many farmers is that their land can be snatched by firms with whom they enter into contract. Government, nonetheless, claims that farmers’ land is protected beneath provisions of the brand new Act.
An knowledgeable on contract farming, Dr Sukhpal Singh, Professor, Centre for Management in Agriculture (CMA), Indian Institute of Management (IIM), Ahmedabad, having an expertise round 3-decade on CF, shares his views on the farmers’ fear, why contract farming is required however not a profitable operation and the way a small farmer can use it to reinforce his revenue. Excerpts from his interview with The Indian Express.
Why is contract farming wanted?
For contracting businesses, contract farming (CF) is the one different to purchasing from APMC mandi or personal wholesale market, or shopping for instantly from farmers with out contract, as company farming (whereby company businesses undertake farming operations on owned or leased land for his or her consumptive use or for business objective) possibility isn’t out there in India. This is so as a result of beneath the Ceiling on Land Holdings Act, non-agriculturists can’t personal agricultural land, and beneath the Land Leasing Act, can’t even lease in agricultural land, each Acts being on the state degree.
So, if an organization needs to acquire desired high quality uncooked materials or farm produce in enough amount at affordable value which is probably not out there within the open market or generally not even grown by farmers e.g. processing selection (chips grade) potatoes in India earlier than the Pepsi got here in, then CF was the one possibility in India which Pepsi used.
But, many occasions, company farming even when allowed, isn’t a viable possibility provided that we’re within the age of vertical coordination (shopping for from others) fairly than vertical integration (making in-house). For farmers, CF can deliver advantages of not solely assured market and value but in addition new know-how, seeds, extension, diversification and such different non-price advantages.
When was contract farming began in India, Punjab?
Contract Farming has been in follow in India because the 1960s within the seed sector whereby each private and non-private entities have been utilizing this mechanism to get licensed seed produced, and in different farm produce in lots of states like Punjab and Haryana because the 1990s with the PepsiCo endeavor tomato, chilly and potato contract farming. Pepsi was introduced in for trying crop diversification when contract farming was not even authorized in India.
When have been the primary rules governing CF framed?
CF has been permitted in most states as per the mannequin APMC Act 2003 of the Ministry of Agriculture and Farmer Welfare (MoAFW) whereby three new channels of farm produce shopping for and promoting i.e. direct buy, contract farming and personal wholesale market have been made authorized, which most states adopted in a couple of years, aside from one or two states, and later, beneath the separate mannequin Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation, APLCF&S (P&F)) Act, 2018. Punjab was the one state which, in 2013, framed a separate Act on contract farming as a substitute of offering for it beneath the APMC Act which it had not amended adequately till 2017. However, a separate Contract Farming Act was by no means operationalised, and it was additionally not wanted as all different states had supplied for CF beneath the APMC Act itself.
How has been the expertise of CF thus far?
There is a widespread follow of contract farming throughout crops, states and businesses (public, personal and multinational) in India masking dozens of crops and livestock merchandise with a whole lot of contract farming tasks or schemes, for home processing or for export, and there have been dozens of research during the last 20 years on its efficiency and expertise.
Default by either side (firms and farmers) has been a problem and contract farmers in varied elements of India have confronted many issues like undue high quality minimize on produce or no procurement of produce, delayed deliveries on the manufacturing unit, delayed funds, low value, poor high quality inputs, no compensation for crop failure and even stagnation of contract costs over time, apart from contract agreements being in favour of the contracting businesses. Also, the exclusion of small holders stays a key problem as contracting businesses favor bigger farmers to scale back their transaction prices. Further, contract manufacturing of the identical crop is mostly increased value than open market manufacturing as sure really useful practices must be adopted so far as enter use and crop administration is anxious which additionally results in useful resource constrained small producers being excluded. The firms additionally put minimal land and different sources as the standards for farmers being eligible to supply beneath contract.
If contract farming has not been profitable in areas, what have been the explanations?
Poor regulation and lack of an enabling coverage are the key causes. There is not any coverage to assist smallholder inclusion e.g. decrease value credit score or encouragement to group contracts. Thailand had used CF as a mechanism to achieve agricultural growth by together with it of their 5-year plans after which bringing state assist like extension and credit score for making it unfold throughout crops and farmers apart from selling group, not particular person, contracts.
Now that there have been three units of Acts together with two unbiased Acts on it (the central Act 2020, Model CF Act 2018 and APMC Act 2003), why are farmers nonetheless frightened about their land being snatched by the sponsors. Is their fear real?
It is land leasing beneath CF legal guidelines which worries farmers essentially the most. The mannequin APMC Act 2003 had protected farmer land clearly. Even if famer dedicated default, the contracting company couldn’t lay claims to farmer land or different belongings. But, because the mannequin ALPCF&S (P&F) Act, 2018, the land leasing has been made a part of the contract farming definition which isn’t appropriate as contract farming can by no means embrace land leasing. This is likely one of the causes for fear amongst farmers.
The 2020 Act protects farmer’s land when it states in Section 14: “No farming agreement shall be entered into for the purpose of (a) any transfer, including sale, lease or mortgage of the land or premises of the farmer”. But, another provisions are at a departure from this provision. For instance, the dispute decision part clause 14(7) states: “The amount payable under any order passed by the Sub-Divisional Authority or the Appellant Authority, as the case may be, may be recovered as arrears of land revenue”. However, then once more, it states within the subsequent clause (15), “Notwithstanding anything contained in Section 14, no action for recovery of any amount in pursuance of an order passed under this section, shall be initiated against the agricultural land of the farmer”.
But, nonetheless it means it may be recovered from different belongings and properties of the farmer.
The greatest downside is that within the 2020 CF Act, contract farming has been blended up with company farming. Land Leasing Acts on the state degree are nonetheless intact although could not stay for lengthy going by what Karnataka, Rajasthan and Punjab are planning when it comes to opening up land lease markets. The approach manufacturing settlement is outlined additionally raises doubts whether or not land leasing can also be part of contract farming. The combine up between contract and company farming within the Act is so vital that the Rajasthan Amendment Bill, 2020 assumes that leasing is part of contract farming.
How can farmers’ land stay protected beneath CF?
For security of farmer land possession beneath CF, you will need to exclude land leasing from the definition of contract and it needs to be written clearly within the Act that no recoveries apart from from farm produce might be created from famers even when they default.
How can a farm pleasant CF mannequin be achieved which may also help small farmers in an efficient method to reinforce their revenue?
Better and simpler regulation is step one to guard famer curiosity and to make sure that they profit from contract farming engagement. Further, since Indian farmers are largely marginal or small, they’ll’t take care of massive consumers on their very own even when they’re introduced beneath contract farming by some firms. Therefore, group contracts needs to be inspired by coverage incentives to make the mechanism inclusive and efficient for farmers. The authorities can facilitate such contracts by way of credit score and extension assist to such small farmer teams like in Thailand. Also, we now have 1000’s of Farmer Producer Companies (FPCs) now that are very business-like entities of farmers they usually can play a task in making contract farming ship the targets of farmer revenue enhancement by facilitating contract farming with smallholders, and likewise endeavor contract farming on their very own. But, these entities have been handled as farmers within the Act even if no FPC undertakes manufacturing. They ought to have been outlined as sponsors within the settlement as they do purchase from their members and non-members and likewise undertake or facilitate contract farming. They ought to have been given higher therapy within the new Acts.
Finally, the 2020 CF Act has left the very fundamental features of CF like acreage, amount and high quality, timing and place of supply apart from value for the contracting events to resolve for inclusion into the CF settlement. But, these ought to have been necessary features of the contract settlement like within the mannequin CF beneath the mannequin APMC Act of 2003.