Day 31 – Q 3. Examine the potential of contract farming in improving the condition of farmers. What recent measures have been announced by the Government to reform contract farming? Discuss.

  • IASbaba
  • July 15, 2020
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Agriculture, GS 3, UPSC Articles
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3. Examine the potential of contract farming in improving the condition of farmers. What recent measures have been announced by the Government to reform contract farming? Discuss.

किसानों की स्थिति में सुधार के लिए अनुबंध खेती की क्षमता की जांच करें। हाल ही में सरकार द्वारा अनुबंध खेती में सुधार के लिए किन उपायों की घोषणा की गई है? चर्चा करें।

Demand of the question:

It expects students to write about the potential of contract farming in improving the conditions of farmers. It also expects to discuss the recent measures announced by the government to reform contract farming.


Contract farming can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.


Typically, the farmer agrees to provide agreed quantities of a specific agricultural product. These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser. In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.

Potential of contract farming to improve the condition of farmer:

  • Inputs and production services are often supplied by the sponsor so  reduction of burden to manage input and production services on farmer. Hence, it reduces cost of production for farmer.
  • This is usually done on credit through advances from the sponsor, as credit is easily available, farmer doesn’t need to take credit from the private money lender. Hence, it ensures farmer to focus on improving the quality of production & also addresses Rural indebtedness problem.
  • Contract farming often introduces new technology and also enables farmers to learn new skills, it  cumulatively increases the productions quantity, quality and hence, results in win-win situation for farmer. 
  • Farmers’ price risk is often reduced as many contracts specify prices in advance which gives impetus to farmer to invest the money to improve agricultural production.
  • It also ensures that the surplus money can be used to invest to maintain health family members and continuation of children’s’  education. 
  • Contract farming can open up new markets which would otherwise be unavailable to small farmers. Hence, it carries big potential to increase the income of farmer by expanding farmers choices to sell her/his product.

Considering, this potential of contract farming, Government of India with intention to improve the farmers income recently promulgated, “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020”.

  • It provides a framework for the protection and empowerment of farmers with reference to the sale and purchase of farm products. The provisions of the Ordinance will override all state APMC laws.
  • Farming agreement: The Ordinance provides for a farming agreement prior to the production or rearing of any farm produce, aimed at facilitating farmers in selling farm produces to sponsors.
  • It also specifies the Duration of agreement.
  • Pricing of farming produce: The price to be paid for the purchase of a farming produce will be mentioned in the agreement.
  • Delivery and payment: The Ordinance specifies that the sponsor will be responsible for all preparations for the timely acceptance of deliveries and will take deliveries within the agreed time.
  • Dispute Settlement: The Ordinance requires a farming agreement to provide for a conciliation board as well as a conciliation process for settlement of disputes.

These reforms will increase farmers income and will also expand farmers market choices. It will also ensure income security, insurance for investment. But at the same time there are some concerns raised by some experts:

  • The move seems to promote free trade under the slogan of one nation one market where some small and marginalised farmers need some state backed protection.
  • The peasantry at large will be at the mercy of the Agri Business Corporations since there will not be any arrangements for price support and price stabilisation for crops.


The recent reforms announced by the government with respect to contract farming represent progressive approach and hence, they will sure culminate in improving farmers economic and social life. Hence, these reforms by the government with respect to Contract farming truly has potential to improve farmers conditions & contribute to achieve the ambitious target to double the farmers income by 2022.


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