What is Model Act on Contract Farming? What is APMC? (Download PDF)


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Union Agriculture Ministry released final Model Act titled ‘The …. State/UT Agricultural Produce & Livestock Contract Farming & Services (Promotion & Facilitation) Act, 2018’. Main motive behind drafting Model Contract Farming Act is to integrate farmers w/bulk purchasers for better price realization.

Image of Tri-partite Agreement Model

Image of Tri-partite Agreement Model

Image of Tri-partite Agreement Model

  • Union Finance Minister in his budget speech 2017 - 18 announced preparation of Model Contract Farming Act & circulation of same to States for its adoption.

Concept of Contract Farming

  • Concept of Contract Farming refers to system of farming in which bulk purchasers including agro-processing firms & exporters enter into contract w/farmers to purchase specific quantity of any agricultural commodity at pre-agreed price.

  • It’s 2 way process - farmers grow & supply produce to buyer at predetermined quantity & prices, while, buyers agree to buy produce from farmer at predetermined price.

  • Contract Farming functions as tool to minimise price risk for farmers

  • It aims to reduce post-harvest losses.

  • Farmer’s producer organisations (FPO’s) have major role in promoting Contract Farming & Services Contract.

  • It seeks to increase private sector investment in agriculture.

  • In India, concept of Contract Farming was introduced by Pepsi Co in 1927 for cultivation of vegetables.

Famous Examples of Contract Farming Agreement:

Table contain shows the Famous Examples of Contract Farming Agreement

Table contain shows the Famous Examples of Contract Farming Agreement


Farm Produce

Buyer Company

Punjab & Haryana

Potato & Tomato

Pepsi Co



Himalaya Healthcare

Punjab & Madhya Pradesh



Madhya Pradesh


Hindustan Unilever

Himachal Pradesh


Adani Agri Fresh Limited (AAFL)

Image of Joining Bonus

Image of Joining Bonus

Image of Joining Bonus

Provisions of Model Contract Farming Act, 2018

  • Act lays special emphasis on protecting interests of farmers, considering them as weaker of 2 parties entering into contract.

  • Besides including contract farming, model act incorporates services contracts along value chain including pre-production, production & post-production.

  • ‘Registering & Agreement Recording Committee’ or ‘Officer’ will be available at district or taluka level for online registration of sponsor & recording of agreement.

  • Contracted produce will be covered under crop or livestock insurance in operation.

  • No permanent structure can be developed on farmers’ land or premises.

  • Contract farming sponsor will have no right or title ownership on land.

  • Act provides for promotion of Farmer Producer Organisation (FPOs) / Farmer Producer Companies (FPCs) to mobilise small & marginal farmers.

  • FPO/FPC can be contracting party, if authorised by farmers.

  • Act will ensure that buyers buy entire pre-agreed quantity of one or more of agricultural produce, livestock as per contract.

  • Contract Farming Facilitation Group (CFFG) will be created for promoting contract farming & services at village & panchayat level.

  • For quick disposal of disputes, accessible & simple dispute settlement mechanism at lowest level will be provided

  • It is promotional & facilitative Act & not regulatory in its structure.

Contract Farming is Outside Ambit of APMC Act

  • To protect interests of producers & sponsors of Contract Farming, Union Ministry of Agriculture drafted Model Agricultural Produce Market Committee (APMC) Act, 2003, which provided for registration of sponsors, recording of agreement & dispute settlement mechanism.

  • Due to conflict of interest of contract farming sponsors w/APMCs, atmosphere was not facilitative.

  • NITI Aayog observed that market fees & other levies are paid to APMC for contract framing when no services such as market facilities & infrastructure are rendered by them. In this context, Committee of State Ministers on Agricultural Reforms recommended that contract farming should be out of ambit of APMCs.

Agricultural Produce Market Committee (APMC)

  • APMC is statutory market committee constituted by State Govt. under Agricultural Produce Market Committee Act.

  • APMC makes sure that intermediaries do not compel farmers to sell their produce at farm gate at throwaway prices. It ensures that all food produce should 1st be brought to market yard & then sold thru auction.

  • In year 2015, Union Govt. created National Agriculture Market (NAM), pan-India electronic trading portal, to network existing APMC mandis to create unified national market for agricultural commodities.

Functions of APMC

  • To ensure transparency in pricing system & transactions taking place in market area

  • To provide market-led extension services to farmers

  • To promote agricultural processing activities for value addition in agricultural produce

  • To publicise data on arrivals & rates of agricultural produce brought into market area for sale

  • To setup & promote public private partnership in management of agricultural markets

Model APMC Act, 2003

  • As per act, State is divided into several market areas, each of which is administered by separate APMC which impose its own marketing regulation.

  • Act provides for freedom of farmers to sell their produce.

  • Farmers could sell their produce directly to contract-sponsors or in market set up by private individuals, consumers or producers.

  • Model Act increases competitiveness of market of agricultural produce by allowing common registration of market intermediaries.

  • There is provision for Contract Farming, allowing direct sale of farm produce to contract farming sponsor from farmer’s land.

  • Famous examples of APMC in Delhi is Azadpur Mandi, which was established in 1977. Since its establishment, Azadpur APMC is facilitating marketing of Fruits & Vegetables (F&V), & implementing regulations meant for safeguarding interest of farmers, producers/sellers & consumers.

- Published/Last Modified on: September 30, 2018

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