About the Act:

The Act aims to create a national framework for contract farming through an agreement between a farmer and a buyer before the production or rearing of any farm produces.

Provisions under the Act:

• Protection of farmers: The Government asserts that the Act helps protect farmers engaging with agribusiness firms, processors, wholesalers, exporters, or large retailers for farm services and sale of future farming produce by a mutually agreed lucrative price framework fairly and transparently through a contract.
• Regulation of sale purchase: State Acts for regulation of sale purchase does not apply to Farm Agreements under this Act. Therefore, the Sponsor is not bound by MSP, and Farmer is not bound by Essential Commodities Act or control orders. Choice with the farmer, whether to sell at MSP or to Sponsor.
• Dispute resolution: The Act provided for a 3-level dispute settlement mechanism by the conciliation board, Sub-Divisional Magistrate, and Appellate Authority. The agreement had to provide for a conciliation board as well as a conciliation process for the settlement of disputes.
• Appeals: Appeals to Collector or Additional Collector nominated by the Collector.
• Penalties: Non-payment of dues by Sponsor – 1.5 times of amount due. For farmers – actual amount due.
• Definition of some important terms: Probably the first time ‘force Majeure has been defined in a statute. Includes terms like ‘bad weather’ craves rethinking. The epidemic has been included.

Contract farming:

• Contract farming is agricultural production undertaken under the terms of an agreement between a purchaser and farmers that specifies the requirements for production and marketing of a farm product or series of farm products.
• The farmer usually offers to supply agreed-upon amounts of a given agricultural commodity.
• These must meet the purchaser’s quality requirements and be shipped on schedule.
• In exchange, the customer agrees to buy the commodity and, in certain situations, to assist with processing by providing agricultural inputs, land planning, and technical guidance, among other things.