Contract Farming/Buy-Back Agreement
Contract Farming is a system of organized agriculture wherein the farmers grow selected crops under a buy-back arrangement. An agreement between a buyer and farmer is drafted, mentioning conditions for the production and marketing of a farm product or products. Typically, the farmer agrees to provide agreed-upon quantities of a specific agricultural product, meeting the quality standards of the purchaser, at a predetermined rate. In turn, the buyer commits to purchasing the product and, in some cases, to supporting production through, for example, the supply of farm inputs, land preparation, and the provision of technical advice.
Advantages of Contract Farming (Buy-Back Agreement Service)
Contract farming is looking towards the benefits both for the farm-producers as well as for the agro-processing firms.
- Makes small-scale farming competitive: access to technology, credit, marketing channels, and information
- Assured market for produce at doorsteps, reducing marketing and transaction costs
- Reduces the risk of production, price, and marketing costs.
- Can open new markets that would otherwise be unavailable to small farmers.
- Ensures higher production of better quality, financial support in cash and/or kind, and technical guidance to the farmers.
- In the case of agri-processing, it ensures a consistent supply of agricultural produce with quality, at the right time, and at a lesser cost.
Government Policy
Agricultural marketing is regulated by the States’ Agricultural Produce Marketing Regulation (APMR) Acts. In order to regulate and develop the practice of contract farming, the government has been actively advocating for the States and Union Territories (UTs) to reform their agrimarketing laws to provide a system of registration of contract farming sponsors, recording of their agreements, and a proper dispute settlement mechanism for the orderly promotion of contract farming in the country.
So far, 21 states (Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Madhya Pradesh, Mizoram, Nagaland, Odisha, Punjab (separate Act), Rajasthan, Sikkim, Telangana, Tripura, and Uttarakhand) have amended their Agricultural Produce Marketing Regulation (APMR) Acts to provide for contract farming, and of them, only 13 states (Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Madhya Pradesh, Odisha, Rajasthan, and Telangana) have notified the rules to implement the provision.