The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

Who is a ‘farmer’ under this Act? What is a ‘farming agreement’?

A farmer is defined as an individual engaged in producing farming produce by themselves or with the help of hired labourers. It includes farmer producer organisations, which are associations or group of farmers registered or promoted under central or state government laws or schemes.

A farming agreement is a written agreement entered into between a farmer and a ‘sponsor’, another farmer, or any third party, prior to the production or rearing of any farm produce of a predetermined quality, in which the sponsor agrees to purchase such fproduce from the farmer and provide farm services. A sponsor refers to the person who has entered into an agreement with the farmer to purchase farming produce.

Farming agreements may include ‘trade and commerce’ or ‘production’ agreements, or a combination of the two. In a trade and commerce agreement the ownership of the commodity remains with the farmer during production, and they get the price of the produce on its delivery as per terms agreed with the sponsor. In production agreements, the sponsor agrees to provide farm services either fully or partially, and to bear the risk of output, and also agrees to make payments to the farmer for services rendered by the farmer. Farm services include supplying seed, feed, fodder, chemicals, machinery and technology, advice, non-chemical and other farm inputs.

No farmer shall enter into a farming agreement “in derogation of any rights of a share cropper.” Parties to a farming agreement may – with mutual consent – alter or terminate the agreement for any ‘reasonable’ cause.

What do farming agreements include?

Farming agreements may contain the terms and conditions for the supply of farm produce – including the time of supply, quality, grade, standards and price of the produce – and farm services.

The minimum period of these agreements shall be one crop season or production cycle of livestock, and the maximum period shall be five years. If the production cycle of any farming produce may go beyond five years, the maximum period may be mutually decided by the farmer and the sponsor, and explicitly mentioned in the agreement. The central government may issue guidelines along with model farming agreements, as it deems fit.

The parties entering into a farming agreement may require “…the performance of such agreement [to be in] compliance with mutually acceptable quality, grade and standards of a farming produce.” Such standards shall be compatible with ‘agronomic practices’, climate and other factors; they may be formulated by the state or central government, or any agency authorised by the government.

The quality, grade and standards for pesticide residue, food safety, ‘good farming practices’ and ‘labour and social development’ may also be adopted in the  agreement. The parties to the agreement may require that such mutually acceptable quality, grade and standards shall be monitored and certified during the process of cultivation or rearing, or at the time of delivery, by third parties.

Unless otherwise mentioned in this Act, a farm service provider may become a party to the farming agreement. In such case, the role and services of the provider shall be explicitly mentioned in the agreement.

What are the Act’s provisions on payments to farmers?

The price of farmers’ produce may be mentioned in the farming agreement. In the event that such price is subject to variation, the agreement should expressly state a guaranteed price to be paid to the farmer for their produce, and a clear price reference for any additional amount to be paid – including a bonus or premium  “…to ensure best value to the farmer.” This price may be linked to prevailing prices in specified Agricultural Price Market Committee yards (which are established for regulating markets and trade in farm produce under various state government laws), or electronic trading and transaction platforms (set up to facilitate the trade and commerce of farming produce through a network of electronic devices and internet applications).

Where farming agreements relate to seed production, the sponsor shall pay the farmer not less than two-thirds of the agreed amount at the time of delivery, and the remaining amount ‘after due certification’, but not later than 30 days after delivery. In other cases, sponsors may pay the agreed amount at the time of accepting the delivery of farm produce and issue a receipt slip with details of the sale. The state government may prescribe the manner in which payments shall be made to farmers.

If, the delivery of any farming produce is to be taken by the sponsor under the farming agreement, they shall take such delivery within the agreed time. Before accepting the delivery, the sponsor may inspect the quality or any other feature of such produce as specified in the agreement.

A farming agreement may be linked with insurance or credit instruments under any scheme of the central or state government, or through any financial service provider, to ensure ‘risk mitigation’ and flow of credit to the farmer, sponsor or both.

What does the Act say about the sponsor acquiring ownership rights to, or modifying, farmers’ land or premises?

No farming agreement shall be entered into for the transfer – including sale, lease and mortgage – of the farmer’s land or premises, or for raising any permanent structure or modifying the land or premises. These provisions apply unless the sponsor – at their own cost – agrees to remove such structures or restore the land to its original condition once the agreement ends. If such a structure is not removed by the sponsor, its ownership shall lie with the farmer after the conclusion of the agreement or the expiry of the agreement period.

What does the Act say about other state government laws on agricultural trade?

The farm produce mentioned in agreements under this Act shall be exempt from the application of any state law that aims to regulate the sale or purchase of agricultural produce. Notwithstanding the provisions of the Essential Commodities Act, 1955, or any orders in force at the time, such produce shall be exempt from ‘any obligation related to stock limit’.

The provisions of this Act shall apply despite any inconsistent provisions in any state government law or instrument in force. If a farming agreement or contract has been entered into under any state government law before this Act came into force, the agreement shall continue to be valid for the period mentioned in the agreement or contract.

Focus and Factoids by Lakshmi Pradeep.