What is Tamil Nadu’s contract farming law?

What does it cover? Why was it enacted and who will benefit from this?

November 03, 2019 12:02 am | Updated 12:08 am IST

The story so far: Tamil Nadu has become the first State to enact a law on contract farming, based on the lines of a model legislation put out by the Ministry of Agriculture & Farmers’ Welfare in May 2018. Called the Tamil Nadu Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act of 2019, the law got the assent of President Ram Nath Kovind last month. The State Assembly adopted the contract farming bill in February.

What does contract farming mean?

The law defines it as a written agreement between a farmer and a buyer for producing an agricultural produce/product or rearing livestock. It covers a whole range of activities in the entire agri-value chain — from pre-production to production to post-production. No genetically modified crops are permitted. Price, quantity and the delivery schedule are fixed during negotiations between the two parties.

The law, which covers over 110 items of agricultural produce, requires every purchaser to register himself or herself with a designated officer. Likewise, every agreement has to be recorded with the officer concerned. There are two types of contracts — one for production support (such as inputs’ supply) and purchase and another, only for buying.

The Act, while permitting farmers to lease out their agricultural land or premises to buyers, however prohibits the latter from “raising any permanent structure or creating any kind of leasehold rights or any kind of charge of whatever nature” on lands of farmers.

A few days ago, Tamil Nadu Chief Minister Edappadi K. Palaniswami made it clear that there would be no compulsion for either of the parties — farmers or purchasers — to sign contracts under the law. It would be “purely voluntary”, he clarified. Rules, being framed, will lend more clarity.

How have laws of the land dealt with the concept?

The Central government, as early as in 2003, formulated a model law on the Agricultural Produce Marketing Committee, which provided for “direct sale of farm produce to contract farming sponsors.” Three years later, the Maharashtra government amended the Agricultural Produce Marketing (Development and Regulation) Act, 1963, to introduce norms on contract farming agreements. In 2013, Punjab enacted a separate law which, apparently due to political reasons, has not yet been put into effect.

Why did Tamil Nadu frame a separate law?

The absence of an exclusive legal framework on agreements for contract farming had been a matter of concern for authorities in the State who were frequently being called upon to intervene and resolve issues between farmers and purchasers/firms including matters relating to delay in payment. Also, there is nothing categorical in the State’s Agricultural Produce Marketing (Regulation) Act, 1987, on the subject.

Besides, the authorities were of the view that under the given legal provisions, they had a very little role to play in sorting out disputes over formal contract farming agreements. Small and marginal farmers may not prefer to go for litigation for reasons of affordability.

Even though the State has seen, over the last 25 years, such pacts being signed between farmers and purchasers or firms including those between cocoa farmers of the Coimbatore district and a confectionery major and tapioca farmers and Sagoserve, it cannot, in the words of former Vice-Chancellor of the Tamil Nadu Agricultural University C. Ramasamy, boast of “very many great success stories”. As transactions between the farming community and private traders or firms have been generally informal, the State government, by enacting the law, is hoping to formalise it.

In March 2018, Tamil Nadu Deputy Chief Minister and Finance Minister, O. Panneerselvam, in his Budget speech, announced that the State government would enact a law on contract farming to “sustain agricultural production and promote agro-processing industries”.

Safeguarding the interests of farmers, especially small and marginal ones, in times of violent price fluctuations, and ensuring better prices for them are among the key reasons behind the law.

How will disputes be addressed?

In case parties to the dispute are not able to thrash out their differences through negotiations or mediation, they can approach a dispute settlement committee, comprising the sub-collector as chairman and three members, one each representing farmers or farmer producer organisations, agro-industry and domain experts.

The committee shall resolve the dispute in 30 days and its decisions carry the force of decrees of a civil court.

Those aggrieved over the panel’s orders can approach the respective district collector, who shall dispose of the appeal in 30 days. The authorities have been empowered to recover a decretal amount as arrears of land revenue. The collector’s orders can be challenged before the State Contract Farming and Services (Promotion and Facilitation) Authority.

Is there any safeguard in the Act for farmers against the possibility of facing legal cases due to alleged violation of intellectual property rights?

Yes. According to Section 22 (2) (1) of the Act, farmers are permitted to sell a portion of agricultural produce to others, after meeting commitments under the contract for production support and purchase. This clause, according to officials of Tamil Nadu government, will help farmers in instances similar to what was experienced by potato farmers of Gujarat early this year when PepsiCo had filed a case (which has been withdrawn).

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