5.2. Contract Farming

♤ Under Contract Farming, agricultural production (including livestock and poultry) can be carried out based on a preharvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations).

♤ Benefit: The producer can reduce the risk of fluctuating market price and demand while buyer can reduce the risk of non-availability of quality produce.

♤ It comes under Concurrent List of the Seventh Schedule of constitution; however Agriculture is under State list.

♤ Present laws on contract farming only include one or two farm commodities and are limited to marketing only.

The Government has brought Model Contract Farming Act in 2017. Key features of the Act is shown in figure below.