A. Implementation of Model Act on Agricultural Marketing

          The following steps have been taken to persuade the States to bring changes in the APMC Act on the lines of the Model Act:

i)                   National level meetings were organized with the State Governments at Delhi on 07.01.2004 and at Bangalore on 19.11.2004.

ii)                 Follow up letter from Union Agriculture Minister sent to State Ministers In-charge of Agricultural Marketing for amending the APMC Act on 16^th July, 2004 and again on February, 2005 and to the Chief Ministers on 25-5-05.

iii)               A new Central Sector Scheme to provide investment subsidy on market infrastructure development projects implemented in November, 2004.  Central assistance under the scheme is to be provided in those States that amend the APMC Act on the lines of the Model Act.  An amount of Rs.25 crore was also released to NABARD/ NCDC to provide investment subsidy to eligible projects through banks in March, 2005. 

iv)              Several States have initiated steps for amending the APMC Act.  A statement indicating the latest progress state-wise is at Annexure IV.  It is expected that with the initiatives already undertaken and the subsequent follow up  done by the Department, most of the States may amend the APMC Act by March, 2006.   

B          Contract  Farming

          Contract farming has been prevalent in various parts of the country for commercial crops like sugarcane, cotton, tea, coffee, etc.  The concept has, however, gained importance in recent times in the wake of economic liberalization. The main feature of contract farming is that farmers grow selected crops under a buy back agreement with an agency engaged in trading or processing.

          There are many success stories on contract farming such as potato, tomato, groundnut and chilli in Punjab, Safflower in Madhya Pradesh, oil palm in Andhra Pradesh, seed production contracts for hybrids seed companies in Karnataka, cotton in Tamil Nadu and Maharashtra etc. which helped the growers in realization of better returns for their produce.   

          In our country contract farming has considerable potential where small and marginal farmers can no longer be competitive without access to modern technologies and support. The contractual agreement with the farmer provides access to production services and credit as well as knowledge of new technology.  Pricing arrangements can significantly reduce the risk and uncertainty of market place.  

          Small-scale farmers are frequently reluctant to adopt new technologies because of the possible risks and costs involved. In contract farming, private agribusiness will usually offer improved methods and technologies because it has a direct economic interest in improving farmers' production to meet its needs. In many instances, the larger companies provide their own extension support to contracting farmers to ensure that production is according to the specification. Skills the farmer learns through contract farming may include record keeping, improved methods of applying chemicals and fertilizers and knowledge of the importance of quality and of the demands of export markets. 

          In view of above, contract-farming arrangements need to be encouraged widely. While doing so, Government needs to protect the interest of both the farmers as well as the industry equitably. This would require arrangement for registration of sponsoring companies and recording of contract farming agreements, in order to check unreliable and spurious companies. A dispute resolution mechanism need to be set up near to farmers which can quickly settle issues, if any, arising between the farmers and the company under a quasi-judicial manner. The farmers while raising the contracted crops, run the risk of incurring debt and consequent displacement from land in the event of crop failure. Farmers need to be indemnified from such displacement by law. 

Model law on marketing has been formulated keeping these requirements in view. This law inter-alia provides for an institutional arrangement for registration of sponsoring companies, recording of Contract Farming Agreement, indemnity to farmers’ land and lays down a time bound dispute resolution mechanism.           The Model law has been discussed with the State Governments and the representatives of Trade and Industries at the National Conference of State Agriculture Ministers on 7^th January, 2004 and again on 19^th November, 2004 and a consensus has been arrived at to give a major thrust to this programme.  Several State Governments have already initiated legal amendments to APMC Act. Haryana and Gujarat are among the first States to take steps in establishing an institutional set up for supporting contract farming in these States.  A statement indicating the status of contract farming as reported by DMI is at Annexure V.