Lack of law hinders growth of contract farming

Published On: August 8, 2017 03:00 AM NPT By: Republica  | @RepublicaNepal

ILAM, August 7: Though contract farming is beneficial for both farmers and businessmen, experts say it is not flourishing in the lack of rules, regulations and laws.

Speaking at a discussion in Ilam on Monday, stakeholders of agricultural sector said that that though contract farming is already in practice in some places, lack of official recognition has left investors worried. 

Contract farming is a pre-agreement on investment and production reached between producers and buyers. Investors finance the entire farming procedure starting from procurement of seeds to plantation, weeding and harvesting. In turn, farmers have to sell their production to the same investor. 

Diwakar Poudel, an agriculture expert who has worked in the agricultural sector for 33 years, said that contract farming benefits both farmers and investors. “Farmers face less financial risks and have access to new technology. It also guarantees high pay as products find new market,” he said. “It reduces social discrimination, empowers farmers and establishes their identity.”

Poudel further added that contract farming will help investors or buyers in quality control, supply management, marketing, privacy and minimization of risks. “But agreement on issues like investment and price of products needs to be done beforehand,” he added.
He also said it was high time the government studies pros and cons of contract farming and prepared laws, rules and regulations accordingly.” 

According to Poudel, 21 states of India have already prepared necessary laws to facilitate contract farming. 

Of late, investors and farmers have started contract farming in poultry, tea, cardamom, vegetable and fruits farming, among others. Under contract farming, investors generally provide seeds, fertilizers and pesticides, among others, to farmers; and farmers sell products to the same investor.

Participants of the program said that though the term 'contract farming' is not used, similar partnership between farmers and investors is increasing in recent years. They said dadani practice (trade of cash crops with daily consumables between consumers and traders) is already in practice in villages. 

Devendra Regmi, a tea farmer, said that contract farming guarantees investment and maintains quality of products. “This system is already in practice in village areas on the basis of trust and oral agreement. If needful legal instruments could be put in place, it can benefit both the parties,” he added.

The program was organized by World Vision Advocacy Forum. Cardamom and tea entrepreneurs, traders, farmers and government officials, among others participated in the discussion.

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