Question: What Is Contract Farming In India?


What is meant by contract farming?

Contract farming can be defined as an agreement between farmers and processing and/or marketing firms for the production and supply of agricultural products under forward agreements, frequently at predetermined prices.

Is contract farming profitable in India?

The contract farming is more beneficial for large farmers in terms of production so the small earn less profit in comparison to large farmers. Basically In India there are no strict rules and regulations regarding the fulfillment of the contract, which results in the failure of the contract.

What is contract farming and how does it work?

Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.

Where is contract farming in India?

For example, contract farming in wheat is being practised in Madhya Pradesh by Hindustan Lever Ltd (HLL), Rallis and ICICI. Under the system, Rallis supplies agri-inputs and know-how, and ICICI finances ( farm credit) the farmers.

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Is contract farming good or bad?

Well managed contract farming is an effective way to develop agriculture and help the farmers. Though it is an agreement between unequal parties, by suitable intervention by the government many drawbacks and concerns can be removed. It is beneficial to both farmers and the companies.

Is contract farming good?

Well -managed contract farming is an effective way to coordinate and promote production and marketing in agriculture. Nevertheless, it is essentially an agreement between unequal parties: companies, government bodies or individual entrepreneurs on the one hand and economically weaker farmers on the other.

Why contract farming is bad?

Contract farming could entail foreign varieties being grown in India’s fields. For millions, locally grown varieties of crops have provided nutrition and sustenance for centuries. If such varieties are gone, the population will suffer from malnutrition, as is the case in many places today.

Is contract farming legal in India?

Between the Punjab Contract Farming Act 2013 and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020, another law on contract farming — the State/UT Agricultural Produce & Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 — also known as Model Act

What are the types of contract farming?

Broadly speaking, contract farming arrangements fall into one of five models:

  • The centralized model.
  • The nucleus estate model.
  • The multipartite model.
  • The informal model.
  • The intermediary model.

How can I do contract farming?

Make direct private investment in agricultural activities. The price fixation is done by the negotiation between the producers and firms. The farmers enter into contract production with an assured price under term and conditions.

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Is contract farming mandatory?

Currently, contract farming requires registration with the APMC in a few states. Despite this, it hasn’t taken off properly and only 15 companies have entered into contract farming for crops in Punjab, Haryana, MP, Gujarat, Maharashtra, Karnataka and Chhattisgarh. Most of these contracts are for cotton and barley.

Is contract farming profitable?

The survey results show that the average revenue of a contract farm is about 11 percent higher than an average non- contract farm. The per hectare cost of production in a contract farm is about 13 percent lower and as a result the average profit margin under contract is more than 50 percent above those without contract.

Which companies are doing contract farming in India?

Private Consortium – Farmer model Hindustan Lever Ltd (HLL), Rallis and ICICI jointly promote contract farming in wheat in Madhya Pradesh. Under the system, Rallis supplies agri-inputs and know-how, ICICI provide farm credit to the farmers and HLL buysback the farm output.

What is new farmer act in India?

The FPTC Act, enacted by the Central government, gives the freedom to sell and buy farm produce at any place in the country––within APMC mandis or outside them. To promote e-commerce in agriculture, the new law also allows the setting up of an electronic platform for the sale and/or purchase of farm produce.

What new farmers rule?

After signing the contract, farmer will not have to seek out traders as the purchasing consumer will need to take the produce directly from the farm. The Essential Commodities (Amendment) Act 2020 removes commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.

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