“Farming agreement” means a written agreement entered into between a farmer and a Sponsor, or a farmer, a Sponsor and any third party, prior to the production or rearing of any farming produce of a predetermined quality, in which the Sponsor agrees to purchase such farming produce from the farmer and to provide farm services.
3- Farming agreement and its period.
(1) A farmer may enter into a written farming agreement in respect of any farming produce and such agreement may provide for-
(a) the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters; and
(b) the terms related to supply of farm services:
Provided that the responsibility for compliance of any legal requirement for providing such farm services shall be with the Sponsor or the farm service provider, as the case may be.
(2) No farming agreement shall be entered into by a farmer under this section in derogation of any rights of a share cropper.
Explanation. – For the purposes of this sub-section, the term “share cropper” means a tiller or occupier of a farm land who formally or informally agrees to give fixed share of crop or to pay fixed amount to the land owner for growing or rearing of farming produce.
(3) The minimum period of the farming agreement shall be for one crop season or one production cycle of livestock, as the case may be, and the maximum period shall be five years:
Provided that where the production cycle of any farming produce is longer and may go beyond five years, in such case, the maximum period of farming agreement may be mutually decided by the farmer and the Sponsor and explicitly mentioned in the farming agreement.
(4) For the purposes of facilitating farmers to enter into written farming agreements, the Central Government may issue necessary guidelines along with model farming agreements, in such manner, as it deems fit.
4. Quality, grade and standards of farming produce
(1) The parties entering into a farming agreement may identify and require as a condition for the performance of such agreement compliance with mutually acceptable quality, grade and standards of a farming produce.
(2) For the purposes of sub-section (1), the parties may adopt the quality, grade and standards-
(a) which are compatible with agronomic practices, agro-climate and such other factors; or
(b) formulated by any agency of the Central Government or the State Government, or any agency authorised by such Government for this purpose, and explicitly mention such quality, grade and standards in the farming agreement.
(3) The quality, grade and standards for pesticide residue, food safety standards, good farming practices and labour and social development standards may also be adopted in the farming agreement.
(4) The parties entering into a farming agreement may require as a condition 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 party qualified assayers to ensure impartiality and fairness.
5. Pricing of farming produce
The price to be paid for the purchase of a farming produce may be determined and mentioned in the farming agreement itself, and in case, such price is subject to variation, then, such agreement shall explicitly provide for-
(a) a guaranteed price to be paid for such produce;
(b) a clear price reference for any additional amount over and above the guaranteed price, including bonus or premium, to ensure best value to the farmer and such price reference may be linked to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices:
Provided that the method of determining such price or guaranteed price or additional amount shall be annexed to the farming agreement.
6. Sale or purchase of farming produce
(1) Where, under a farming agreement, the delivery of any farming produce is to be-
(a) taken by the Sponsor at the farm gate, he shall take such delivery within the agreed time;
(b) effected by the farmer, it shall be the responsibility of the Sponsor to ensure that all preparations for the timely acceptance of such delivery have been made.
(2) The Sponsor may, before accepting the delivery of any farming produce, inspect the quality or any other feature of such produce as specified in the farming agreement, otherwise, he shall be deemed to have inspected the produce and shall have no right to retract from acceptance of such produce at the time of its delivery or thereafter.
(3) The Sponsor shall,-
(a) where the farming agreement relates to seed production, make payment of not less than two-third of agreed amount at the time of delivery and the remaining amount after due certification, but not later than thirty days of delivery;
(b) in other cases, make payment of agreed amount at the time of accepting the delivery of farming produce and issue a receipt slip with details of the sale proceeds.
(4) The State Government may prescribe the mode and manner in which payment shall be made to the farmer under sub-section (3).
7. Exemptions with respect to farming produce
(1) Where a farming agreement has been entered into in respect of any farming produce under this Act, such produce shall be exempt from the application of any State Act, by whatever name called, established for the purpose of regulation of sale and purchase of such farming produce.
(2) Notwithstanding anything contained in the Essential Commodities Act, 1955(10 of 1955) or in any control order issued thereunder or in any other law for the time being in force, any obligation related to stock limit shall not be applicable to such quantities of farming produce as are purchased under a farming agreement entered into in accordance with the provisions of this Act.
8. Sponsor prohibited from acquiring ownership rights or making permanent modifications on farmer’s land or premises –
No farming agreement shall be entered into for the purpose of-
(a) any transfer, including sale, lease and mortgage of the land or premises of the farmer; or
(b) raising any permanent structure or making any modification on the land or premises of the farmer, unless the Sponsor agrees to remove such structure or to restore the land to its original condition, at his cost, on the conclusion of the agreement or expiry of the agreement period, as the case may be:
Provided that where such structure is not removed as agreed by the Sponsor, the ownership of such structure shall vest with the farmer after conclusion of the agreement or expiry of the agreement period, as the case may be.
9. Linkage of farming agreement with insurance or credit – A farming agreement may be linked with insurance or credit instrument under any scheme of the Central Government or the State Government or any financial service provider to ensure risk mitigation and flow of credit to farmer or Sponsor or both.
10. Other parties to farming agreement – Save as otherwise provided in this Act, an aggregator or farm service provider may become a party to the farming agreement and in such case, the role and services of such aggregator or farm service provider shall be explicitly mentioned in such farming agreement.
Explanation. – For the purposes of this section,-
(i) “aggregator” means any person, including a Farmer Producer Organisation, who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor;
(ii) “farm service provider” means any person who provides farm services.
11. Alteration or termination of farming agreement – At any time after entering into a farming agreement, the parties to such agreement may, with mutual consent, alter or terminate such agreement for any reasonable cause.
12. Establishment of Registration Authority – (1) A State Government may notify a Registration Authority to provide for electronic registry for that State that provides facilitative framework for registration of farming agreements.
(2) The constitution, composition, powers and functions of the Registration Authority and the procedure for registration shall be such as may be prescribed by the State Government.
Mechanism for dispute resolution under Farmers Agreement on Price Assurance and Farm Services Act 2020