The Cabinet decision on contract farming will not only spur private investments in agriculture but also free up farmers from the clutches of APMCs and encourage them to produce quality produce, say stakeholders.

At present, even the farmer producer organisations (FPOs) or producer companies (PCs) are required to seek permission from the APMC of their respective jurisdictions before entering into any direct sale agreement under contract farming.

Farmers can now have direct association with the processors or exporters. This is a big boost for the FPOs that can engage in processing and marketing activities, said Kuldeep Solanki, in charge CEO of Ahmedabad-based Gujpro Agri-Business Consortium producer company that has over 30 FPOs associated with it, covering about 45,000 farmers across the State.


The government’s decision to provide a level playing field to farmers by allowing them to engage with processors, aggregators, retailers, and exporters without exploitation is seen as a game changer in farm trade.

“This opens up new avenues for processing and marketing while it also opens a warehousing avenue for farmers. This is a big benefit,” Solanki said. “However, the next step will be to do capacity building of these FPOs by connecting them with appropriate ecosystem. Improve their marketing and processing capabilities. There is a need to provide handholding to compete with the established players,” he added. “It will spur more investments into contract farming,” said Pankaj Khandelwal, CEO of INI Farms, the largest exporter of pomegranates and bananas.

“It will bring in a lot more entities that are serious about contract farming, who want to improve the quality of produce. Also, it will help motivate farmers in producing safe food,” said Khandelwal, whose firm works with over 3,000 farmers.

He added that the commercial and legal framework, mainly the dispute resolution at the local level, is a creative solution.

Karthik Jayaraman, Co-founder, Waycool, said, “We are waiting for details. But directionally, it is a positive step.”

Need for clarity

Kurubur Shantkumar of Raitha Mitra FPO said contract farming with a pre-determined pricing will be a welcome step.

However, there is a need for more clarity on the dispute resolution mechanism and who would compensate for probable loss of crop or quality during the cropping cycle due to erratic climate pattern or pest attacks, he said.