Contract farming guidelines: Farmer liability is limited

Farmers entering into contract farming agreement with food processors and other firms will have liability limited to the advance that they receive or cost of farm services provided by the sponsoring firm, according to guidelines on the new contact farming ordinance issued by the Agriculture Ministry.

Also the sponsor under no circumstances can gain ownership rights over the farmers’ land.

The guidelines have clearly spelt out that the sponsor would be responsible for any loss of damage to the farming produce, production site, assets and any legal consequence of inputs supplied to farmers. Farmers, on the other hand, cannot use inputs provided by the sponsor for anything other than growing the produce which has been agreed upon.

These are part of a set of guidelines that the Ministry came out with for providing a legal framework for the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, which the government passed early last month.

It said the farming agreement should be for a minimum period of one cropping season or a maximum of five years. The contract can be beyond five years only if the single production cycle of the crop is more than five years.

The agreement should clearly indicate the nature of the farming, size of land area, survey number of the farmer’s field, business address of sponsor, name of the village and address of the farmer. The farmers entering into the agreement should have clear title of the land. If the agreement is with a farmer producer organisation (FPO), the guidelines insist on ensuring that the responsibility for the performance of the agreement is appropriately assigned amongst the members of the FPO.

Similarly, if a sharecropper is involved in the agreement, he or she may be made responsible for receiving and using inputs from the sponsor. No clause in the agreement can be in derogation of rights of the sharecropper. The obligation to deliver the contracted quantities would rest with the farmer.

If the produce is rejected, the reasons should be informed by the sponsor to the farmer and offer the farmer the chance to inspect the rejected consignment or have it inspected by a third party. Third party may be a certified assayer, Krishi Vigyan Kendra, seed certifying agency, or a qualified agriculture scientist.

As per the guidelines, if the sponsor fails to take delivery of produce within the stipulated days mentioned in the agreement, the farmer may sell the produce to a third party and claim from the sponsor the difference between the price in the agreement and the actual price that he received for the produce. Sub-divisional authority can impose penalty up to 150 per cent of the claim on the sponsor.

The produce must be purchased at the price provided for in the farming agreement. The sponsor will have no right to make permanent change on the farmer’s field. But he can make temporary changes if the farmer agrees and he is obliged to restore the land to its original condition before the expiry of the agreement.

The guidelines also stress that the farmer of FPO should ensure that their ownership of the land is secure and legally valid before entering into an agreement. They should not opt for selling or changing the ownership of the land while in an agreement with the sponsor.

When disputes arise, the aggrieved party can demand formation of conciliation board. If the issue is not settled in 30 days, it can be escalated to the sub-divisional authority and if that too fails an appellate authority, district collector, can hear the matter and the authority’s decision would be final, the guidelines said.