THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES BILL, 2020

THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES BILL, 2020 

CONTEXT: 

• It replaces the Ordinance promulgated in June 2020. The Bill provides a framework for farmers to engage in contract farming, i.e. farming as per an agreement with the buyer before sowing, under which farmer sells produce to the buyer at a pre-determined price. 

KEY FEATURES OF THE BILL: 

• Farming agreement: The Bill provides for a farming agreement prior to the production or rearing of any farm produce, aimed at facilitating farmers in selling farm produce to sponsors. Such agreement may be between: (i) a farmer and a sponsor, or (ii) a farmer, a sponsor, and a third party. 
• State governments may establish a registration authority to provide for the electronic registry of farming agreements. 
• The agreement may provide for mutually agreed terms and conditions for supply, quality, standards, price of farming produce and farm services 
• Duration of agreement: The minimum period of an agreement will be one crop season, or one production cycle of livestock. The maximum period will be five years 
• Pricing of farming produce: The price to be paid for purchase of farming produce by the sponsor (including methods of determining any price) may be mentioned in the agreement. In case the price is subject to variation, the agreement must include: (i) a guaranteed price to be paid for such produce, and (ii) a clear price reference for any additional amount over and above the guaranteed price, including bonus or premium. 
• Payment: In case of seed production, the Bill requires the sponsor to pay at least two-third of the agreed amount at the time of delivery. The remaining amount can be paid after due certification within 30 days from the date of delivery. For all other cases, the entire agreed amount must be paid at the time of delivery and a receipt slip must be issued with the details of sales proceeds. 
• Dispute Settlement: The Bill requires a farming agreement to provide for a conciliation board (comprising of representatives of parties to the agreement) and a conciliation process for settlement of disputes. 
  • At first, all disputes must be refered to the board for resolution. If the dispute remains unresolved by the Board after thirty days, the Sub-Divisional Magistrate (SDM) may be approached for resolution. 
  • Parties can appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the SDM. Both SDM and Appellate Authority will be required to dispose a dispute within 30 days from the receipt of application. 

MERITS OF THE BILL 

• Investments in agriculture – investments in machinery, irrigation facilities, seeds etc. by contracting buyer. 
• Better technology – farmers may get access to new technologies like genetic technology, improved sowing and harvesting methods etc. 
• Assured income – farmers will get pre-determined (in contract) prices in cases of slump in prices of food and additional prices in times of market price rise. 
• Improved productivity – productivity of food crops, especially high valued crops may increase due to better inputs and investments 
• Small and marginal farmers – may benefit due to contracts. Earlier they were unable to market their product due to low quality and productivity. 
• Doubling farmer’s income- It may help in achieving the aim of doubling farmer’s income by 2022-23. 
• Horticulture sector – horticulture products like fruits may get boost as it requires high initial investment and infrastructure like cold processing. 
• Food processing sector – development of food processing industries as farm produce may match industry requirement due to contracts. 
• Development of forward and backward linkages – due to development of infrastructure and 
• Boost to rural economy- rural economy is intricately linked to farmer’s income which will increase due to contracts. 
• Easy access to loans- farmers may get easy access to institutionalized loans on the basis of contracts. 

CONCERNS RAISED OVER THE IMPACT OF BILL 

• Corporatisation of agriculture – choice of food crops and quality will be dictated by corporates and industry choices rather than traditional eating habits, farmer’s choice. 
• Farmers in weaker position – Farmers will be in weaker position while negotiating with big companies and industries. 
• Dispute mechanism- courts are not involved. Farmers especially small and marginal may not get proper representation before administration which act as dispute settlement platform. 
• Lack of bargaining power- with big corporate especially small and marginal farmers. Farmers may also face issues in implementation and in cases of exploitation. 
• Pricing issues – No mechanism for fixing price. There is apprehension that there may be exploitation of farmers at the hands of corporates. 
• Ecological concerns – Contracts may force farmers in increasing productivity using excessive uses of fertilizer and genetic modified crops which may be harmful for soil qualities, biodiversity in long run. 
• Constitutional issues – agriculture comes under state list. Parliament passing bill on state issue can be challenged in courts and is against spirit of federalism 

WAY FORWARD 

• While contract farming is good step in improving agriculture, government should ensure that farmers participate in contract as equal partners and some safeguards mechanism should be included so that farmers are not expolited.