Tamil Nadu has become the first State in the country to enact a law on contract farming with President Ram Nath Kovind giving assent to the Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act.

In March 2018, the Deputy Chief Minister and Finance Minister O Panneerselvam while presenting the State Budget for 2018-19 said that the State would enact a contract farming law to sustain agricultural production and promote agro-processing industries.

The law would safeguard the interests of farmers when there is a bumper crop or during major fluctuation in market prices. In such a scenario, the farmers will be paid a predetermined price arrived at the time of signing agreements with buyers. However, any produce that is banned by the Centre government or the State government or by the Indian Council of Agricultural Research, would not be covered under contract farming, says a State government press release.

What’s contract farming

According to Tamil Nadu Agricultural University, Coimbatore, contract farming refers to varied formal and informal agreements between producers and processors or buyers. It may include loose buying arrangements, simple purchase agreements and supervised production with input provision, with tied loans and risk coverage.

Contract farming usually involves the following basic elements - pre-agreed price, quality, quantity or acreage (minimum/maximum) and time (Manage 2003). Contracts can range from oral deals to formal, registered written contracts, the university said on its Website.

Tamil Nadu Chief Minister Edapaddi K Palaniswami has asked officials to finalise the rules and ensure early implementation of the law, the release said.

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