Page 45 - BANKING FINANCE OCTOBER 2021

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aggregators (one who acts as an intermediary between amount over and above the guaranteed price, including
farmer(s) and sponsor to provide aggregation related bonus or premium. The price references may be linked to
services), involved will have to be explicitly mentioned in the the prevailing prices or any other suitable benchmark prices.
agreement. State governments may establish a registration The method of determining any prices including guaranteed
authority to provide for the electronic registry of farming prices and additional amount will be provided in the farming
agreements. agreement.

The farming agreement may stipulate the timely supply of Delivery and payment: The Ordinance provides that the
inputs by the sponsor to the farmer before the start of sponsor will be responsible for all preparations for the timely
cropping season to carry out farming operations, the farmer acceptance of deliveries and will take deliveries within the
will supply the products at the farm gate or mutually agreed agreed time. In case of seed production, the sponsor will
other place at agreed price. pay at least two-third of the agreed amount at the time of
delivery. The remaining amount can be paid after due
Farming agreements can be agreements for purchase of certification within 30 days from the date of delivery. For
future farming produce with risk of production remaining all other cases, the entire agreed amount must be paid at
with the farmer or for payment of service charges to farmers the time of delivery and a receipt slip must be issued with
where risk of production is borne by the sponsor/buyer. the details of sales proceeds. The state government will
There can be a combination also. The sponsor may also prescribe the payment modes.
agree to supply inputs or technology during the process of
production. Dispute Settlement: The Ordinance requires a farming
agreement to provide for a conciliation board as well as a
Farming agreement usually specifies the price to be paid to conciliation process for settlement of disputes. The Board
the farmer, the quantity and quality of the product should have a fair and balanced representation of parties
demanded by the Sponsor, and the date for delivery to to the agreement. At first, all disputes must be referred to
buyers. The agreement may also include more detailed the board for resolution. If the dispute remains unresolved
information on how the production will be carried out or if by the Board after thirty days, parties may approach the
any inputs such as seeds, fertilizers and technical advice will Sub-divisional Magistrate for resolution. Parties will have a
be provided by the Sponsor to the farmer. right to appeal to an Appellate Authority (presided by
collector or additional collector) against decisions of the
Duration of agreement: The minimum period of an Magistrate. Both Magistrate and Appellate Authority will
agreement will be one crop season, or one production cycle be required to dispose a dispute within thirty days from the
of livestock. The maximum period will be five years. For receipt of application. The Magistrate or the Appellate
production cycle beyond five years, the maximum period for Authority may impose certain penalties on the party
the agreement will be mutually decided by the farmer and contravening the agreement. However, no action can be
the sponsor. taken against the agricultural land of farmer for recovery
of any dues.
Exemptions from existing laws: Farming produce under a
farming agreement will be exempted from all state Acts How it is different from existing contract
aimed at regulating sale and purchase of farming produce.
These produce will be exempted from provisions of the Farming Law 2018?
Essential Commodities Act, 1955 and will not have any stock The agriculture ministry had released a model law to govern
limit obligations. contract farming in 2018, but it was a little too prescriptive.
It allowed contract farming, but only in notified
Pricing of farming produce: The price to be paid for the commodities; the price was determined by government
purchase of a farming produce will be mentioned in the rules; and each contract had to be registered with a district
agreement. In case of prices subjected to variations, the authority. In contrast, the ordinance allows contract farming
agreement must include: (i) a guaranteed price to be paid in any agricultural product, leaves pricing to the parties, and
for such produce, and (ii) a clear reference for any additional allows for a central e-registration of contracts.

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