Tamil Nadu became the first state in India to pass a law concerned with contract farming. The Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Bill recently received assent from the President of India and became a law. The Bill was passed by the Tamil Nadu Legislative Assembly in February 2019 and then forwarded to the President of India for his assent.
The government of Tamil Nadu is yet to notify the Act. Gagandeep Singh Bedi, the Agricultural Production Commissioner and Principal Secretary to Government, Tamil Nadu told TNM that the department is working to make the law fully functional from January 1, 2020. “We are in the process of setting up the committees and the Authority as per the Act. The Act has been published in the Gazette, but we are striving to implement it fully in a month,” he said.
What does the Act provide?
The Act provides legal protection to the farmers, producer companies and purchasers of agricultural produce for their business transactions.
Many farmers in Tamil Nadu sell their agricultural produce to companies that make plant-based or crop-based products. These deals generally are pre-determined by a verbal assurance between the producer and the purchaser regarding the quantity that will be sold and the rate per unit (pieces, kilograms or tonnes) that would be paid for the purchase. This is called ‘contract farming’.
However, the most common problem that the farmers face at the time of sale of produce is that the price of the produce falls in the open market resulting in the companies choosing to buy the item from the open market without honouring their promise. This leaves the farmers with massive amounts of unsold inventory and huge losses due to high input costs.
This Act aims to put an end to the last-minute disappointment to the farmers. It also provides for the establishment of Contract Farming and Services (Promotion and Facilitation) Authority, which will be the body overseeing the implementation of the Act. The Authority will have ten members led by a Chairman and includes representatives from the agro-industries and farmers and a domain expert in the field of agricultural economics.
Is the protection only for plant crops?
No. The Act covers output of agriculture, horticulture, apiculture, sericulture, animal husbandry or forest activities. It, however, does not include those products that are illegal in India, banned or prohibited by law.
What does the Act mandate?
As per the provisions in the Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, producers of the crop and purchasers are supposed to enter into an agreement with the terms of the transaction, on a stamp paper of hundred rupees in value and document it with the designated officer at the district level. This document shall be considered as a contract between the two parties and will be enforceable by law.
The agreement shall mention the sale price of the produce and the quantity that will be bought by the purchaser at the end of the crop cycle. In addition to these, the agreement can also specify the specific quality grade of the produce that is involved in the transaction.
What happens when there is a dispute on the agreement?
When there is a dispute on the contract, the parties can opt to settle the matter by mutual negotiation or by asking a third party to mediate between them.
The Act also provides for the setting up of a Dispute Settlement Committee chaired by a Revenue officer of the sub-division of the district and three other members who are representatives of farmers or farmer producer organisations, the agro-industry and a domain expert. When mediation and negotiations fail between the contracting parties, the aggrieved party can take the next step and approach the Dispute Settlement Committee for resolution. The Committee is mandated to resolve the matter within 30 days. In case the parties want to appeal the decision of the Committee, they are also allowed to approach the District Collector.
What about breach of contract or non-compliance?
If the contract is violated by either of the parties, apart from the compensation and damages that will be paid by the one who violates the contract, the two parties shall also be liable to pay a fine to the government. While the fine for purchaser will be upto Rs 15000, the farmer/producer will be liable to pay Rs 1500 as fine for contravention of the agreement.