Contract farming refers to the Formal and informal agreement of buying and selling of farm produce between the farmer and Company (who enters into Contract). It means farmers produce on their land or leased land as per the Company requirements, Remunerated as per Market Rate and also provided by Technical Support, Seeds and other Modern Measures to revamp the Production. Contract farming agreements consists of Agriculture/horticulture produce to be sell as per pre-determined prices by forwarding Contract between the parties. Contract farming proves to provide Technical support to farmers like Machinery, Tools and also provide experts Visits to Farm Lands to check the quality of the Produce. But this instalment of Technical support at small farmlands is Uneconomical. That’s why farmers who are doing Contract farming also take land on lease to increase production. This Contract farming will be going to be beneficial only to large farm holders not to marginalized farm holders. The things like fertilizers and chemical to enhance the production is not sustainable Farming. It’s in greed of increasing production to timely meets the market demand of certain products. Farmers instead of entering into Contract farming sell into the open market as per the market rate of generalized food grains like wheat and rice to private mill owners. This kind of selling of produce by Farmers in the Open market is termed an informal agreement.

Contract farming was introduced first in 2002 in Punjab. The Crux behind the Contract Farming to interrupt free from the Wheat-paddy Cycle. The Project of implementing Contract farming to PUNJAB AGRO FOODGRAINS CORPORATION ( PAFC) Limited, Govt. body founded by the Punjab govt. to secure the crops of the farmers for various businesses across the country. Initially, PAFC started Contract Farming with 22,312 acres (9,033 hectares) of land in 2002. Later, this area under Contract farming increased to 2.50 lakh acres in 2004-05. Around 2011-12, this area got reduced to 11,971 acres (4846 hectares) area.

As per the Contract Farming schemes, The PAFC trained farmers to cultivate quality and marketable produce as per demand and supply theory. Hyola (Hybrid rapeseeds mustards), Sunflower, Durum wheat, Malting barley, Moong, Basmati (Pure hybrid, Evolved etc.), Maize etc.

PAFC spent around Rs.15 Crores in one decade under Contract Farming for mechanization adoption throughout the State[1].


The state govt. was not getting any support from the central Govt. in terms of monetary assistance. Because it’s a state Govt. initiative. PAFC is facing Marketing Problems across the markets of the Country. Lack of interest from the new state govt., Changed in 2007. The constant monetary Assistance, Supply of good quality seeds, Motivation of Farmers and Market support was needed by both the state and the Centre Govt., but it was absent.

Soil Testing surveys were needed because of the usage of excessive use of fertilizers and pesticides, shaken the Macro/ Micro Nutrients of the soil affecting the assembly quality. After getting testing results an action-wise plan for diversification was required, but it could not happen because of which farmers were not getting the specified results.

Recent, PEPSICO Sued Four farmers of Gujarat state of infringement of legal right for sowing potatoes of FC-5 (Special quality with less Moisture Content for manufacturing potato chips). Pepsico is having patent rights with this FC-5. Leads to legal implications because of so much technicalities.


India’s rural economy run on Agriculture and Animal husbandry. Pastoralists don’t have their have own forms for grazing their flocks and frequently take their animals to the grazing land of the village, vacant lands or farms owned by farmers.

Sustainable development not on the corporate agenda like for maintaining the fertility of the land –the practice of cultivating more than one food grain in a Single farm. Varieties of foreign land being grown in India’s fields. For millions, of locally grown varieties of the crop have provided nutrition and sustenance for centuries. If such varieties went the population will suffer from malnutrition.

Labour Problem-Unemployment-

Farms cannot operate without labour. Mechanised farming will receive enhanced importance in Contract farming resulting in a decrease in the no. of a Farm labourers.


Contract Farming is additionally a difficulty raised by farmers within the ongoing farmer’s protest, which is going to be governed by THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT OF PRICE ASSURANCE AND FARM SERVICES ACT, 2020. The Farmers contenting on the Punjab example where govt. works on no profit, not loss formula, could not continue till successfully. Even for a decade.

Then how can farmers go to believe in the private players whose prime motive is only earning profit at the cost of farmers? Private Players will even force farmers to sell their lands in case any losses occur in the Contract Farming. Farmers said Contract farming only going to be fruitful for the short – term not for the long term because after some time the whole market will be governed by private players and initially they remunerate at a handsome price for the production. But eventually leads at the mercy of corporates who will give money as per market demand, not per MSP. Because Central govt. only giving written assurance about the same, not ready to incorporate in the new Legislations, creates obligation only on the part of govt. if incorporated in the concerned legislation provisions.


State Govt. Models can become Successful. Only if the Centre provides financial aid for diversifications along with good seed and Research & Development Support. It should be like Public-Private Participation where the interest of farmers including their lands stays safe.  However, there is a clause in THE FARMER (EMPOWERMENT AND PROTECTION) AGREEMENT OF PRICE ASSURANCE AND FARM SERVICES ACT, 2020. India is a water-stressed country with per-capita water availability of 1,544 Cubic metres in 2011, down from 5,178 cubic metres in 1951. This is expected to go low further to 1,140 cubic metres by 2050. India is the biggest exporter of Rice, is the guzzler of water. Rice, fetch around 3,000 to 5,000 litres of water for irrigating a kg, depending upon topography. Considering a median of about 4,000 litres of water per kg of rice, and suppose that half of this gets recycled back to groundwater, Exporting 17.7 million tonnes of rice means that India has effectively exported 35.4 billion cubic metres of water just through the rice[2]. Also, rice cultivation contributes to more than 18% of the Greenhouse Gases emission generated from agriculture.


Contract Farming in India is in a blurred state. Because previous examples of Contract farming not gone well at large, few expectations are there. The New Legislation is also challenged by Farmers unions and the Supreme Court have to intervene and put a stay on the concerned legislation. If the Govt. wants to change the plight of Farmers must introduce an Agriculture policy that does not put farmers at the mercy of agrifirms or Corporates. If the govt. is emphasized on changing the Very first Profession from where the Tillage becomes, it will take him an in-depth analysis of Agri markets. Contract Farming will be promoted through private sector participation in Agriculture, but the private sector will only shake the model the agriculture from the sanctity of soil to the exploitation of farmers instead of this, Public-private partnership will be fruitful. A national Corporation should be set up by the Central govt. to govern on this matter. The govt. have to Incentivised farmers to frame crops in a water-efficient manner and for Soil testing, Maintaining good quality. Farmer’s protests have strongly questioned the grey areas and absence of flourishingly agriculture policy. There is an Urgent need for revisit the agriculture policy and market centered growth model to ensure food security to the poor and marginalized. India is a developing country and remains same if one of the very first profession is not standing on strong pillars.

Author’s Name: Aashish Rawal (Amity Law School, Gurugram)

Image Reference                                                         


[2] www.DGCIS.COM

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