Producer Company Registration

Farmers Agreement of Price Assurance Bill, 2020: Explained

Farmers Agreement of Price Assurance Bill, 2020

This Farmers Agreement on Price Assurance and Farm Services Act, 2020 was passed to fulfil the objective to provide a national framework to provide an agreement that empowers and protects the farmers who engage with wholesalers, processors, agri-business firms, exporters or any large retailers. There has to be transparency and sale of agricultural produce at an agreement basis. The agreement should cover all the aspects related to the price, parties, delivery mechanism, product and the dispute resolution process.

Farmers agreement

When a farmer enters into an agreement which may provide the following:

  • All the terms and conditions related to the supply of the produce such as standard price, grade, quality, time of supply and other related matters.
  • Terms and service related to the farm service supply.

Under this agreement, an oral agreement is void. It should be written in the local language and further, the presentation of the terms should be in a modest manner and easily understood to all the parties involved. Until and unless there is a deviation, the farming agreement must fulfil all the basic requirements of the contract law. Hence, for example, the parties of the contract should be competent and must enter freely and fulfils all other essentials of the valid contract. Moreover, the agreement must be signed by all the parties to the parties to the contract.

Duration of Farmers Agreement

The minimum time period of a farming agreement shall be one crop season, or 1 production cycle of the livestock and the maximum period of the agreement will be five years. In the cases where the production cycle is beyond 5 years, the longest period of the farming agreement will be mutually decided by the sponsor and the farmer.

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Inputs by the sponsor in Farmers Agreement

The sponsor must supply the inputs to the farmers and the responsibilities of the sponsor must be clearly mentioned in the agreement. Further, the sponsors must share the required inputs including delivery and also provide farmers with technical advice either free or on cost sharing basis. He should deliver the inputs to the specific place and time as mentioned in the agreement.

Use of Inputs by farmers in Farmers Agreement

The inputs which are supplied by the sponsor must be verified and checked for its quality and quantity by the farmer. If any defect is found by the farmer, they can notify the sponsor in writing. All the inputs should be used in accordance with the instruction mentioned in the farming agreement and it should not divert from the main purpose. Furthermore, if there is any form of loss after delivery, then the sole responsibility will be on the farmers input. The farmer may return any unused inputs at the end of the production cycle or as per the agreement.

Exemption from existing laws in farmers agreement

Under the farming agreement, the farming produce will be exempted from the legislation aimed to control the sale and purchase of farm produce. Further, these agricultural produces or producer company will be exempted from the rules of the Essential Commodities Act, 1955 and will to confine to the stock limit obligation.

Pricing under farmers agreement

The price of the farm produce is to be paid in accordance with the Farming agreement between sponsor and farmer.

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In the cases where the price of the agricultural produce is subject to variation, the agreement shall clearly provide for the following:

  • A definite price to be paid for such produce.
  • Any additional amount over the above the guaranteed price such as premium and bonus to certify the best value to the farmers and such reference of the price may be associated with a prevailing price which is specified in the APMC market or the transaction platform or electronic trading and at last any other appropriate benchmark price.

The method related to determining the stated price shall be mentioned in the agreement.

Dispute settlement in the Farmers Agreement

The agreement related to the farming shall provide for a conciliation board as well as the process of conciliation for the settlement of disputes.  The board will ensure that both the parties to the agreement should have balanced and fair representation. The initial step of any disputes it to refer the matter to the resolution board. If the dispute is unable to be resolved by the conciliation board within 30 days, the either of the party may approach for a resolution to the Sub-Divisional Magistrate.

Further, parties have the right to appeal against the decision of Sub Divisional Magistrate[1]. The Appellate Authority and the magistrate are mandated to dispose of that particular dispute within the time period of 30 days. Moreover, the appellate authority and the magistrate have the authority to impose penalties which they think suitable for the party. However, no act or order can be passed for recovery of dues against the agricultural land of the farmer.

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Benefits of the farmers agreement

This legislation will act as a benefit for the farmers as it will facilitate them to engage with the wholesalers, large retailers, exporters etc without any fear of any exploitation. It will act as an advantage to the farmers by shifting the risk of market unpredictability to the sponsor and further enables the farmer to use better inputs and modern technology. It will help in improving the income of the farmer and reduce the cost of marketing.

Furthermore, the farmers will connect with direct marketing, hence abolishing the intermediaries and resulting in full recognition of price. Farmers have been offered adequate protection with respect to sales, mortgage, and lease of the farmers land is totally prohibited and protected against any recovery.


The government’s motive behind this legislation to provide for a national and uniform framework on the farming agreement that empowers and protects the farmers engage with exporters, wholesalers, processors and Agribusiness firms for sale of future produce or farm service at remunerative pricing. Further, it works as an advantage to the farmers by shifting the risk of market unpredictability to the sponsor and further enables the farmer to use better inputs and modern technology. It will help in improving the income of the farmer and reduce the cost of the marketing. If there are any disputes between the parties, then there is a way to settle disputes under this act.

Read our article:The Farmers Amendment: Bill 2020


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