Glossary
Contract farming, term by term.
Plain-language definitions of the words you’ll meet in contract farming in India — defined honestly, with no marketing spin.
- Contract farming
- A pre-season agreement between a buyer and a farmer/FPO covering production and supply of a crop — typically quantity, quality, pricing and delivery.
- FPO (Farmer Producer Organisation)
- A legal entity through which farmers organise to aggregate produce and negotiate collectively, giving smallholders more bargaining power.
- Model Contract Farming Act, 2018
- A central model law that states can adopt or adapt, promoting contract farming outside APMC control with registration, farmer protections and a dispute-resolution mechanism.
- APMC
- Agricultural Produce Market Committee — the regulated mandi system. Contract farming is generally facilitated outside APMC mandi regulation under state frameworks.
- MRV
- Measurement, Reporting & Verification — the records and checks that evidence practices, volumes, quality and sustainability claims.
- MRL
- Maximum Residue Limit — the legal ceiling for pesticide residues in produce, critical for export crops like basmati rice and spices.
- Sponsor / Buyer
- The company that contracts with farmers to buy their produce — for example a food processor, exporter, retailer or agribusiness. In Model-Act terminology the buyer is often called the "sponsor". The buyer, not Contract Farming India, is the party to the contract.
- Aggregator
- An intermediary — often an FPO — that consolidates produce from many smallholders so a buyer can deal with one organised counterparty instead of thousands of individual farmers.
- Buyback (buy-back arrangement)
- A contract-farming model where the sponsor supplies inputs and/or technical guidance and commits to buy back the resulting produce at agreed terms. Common in seed, processing-vegetable and poultry programmes.
- Fixed price
- A pricing model where a single price is agreed for the season up front. It protects farmers if markets fall but can feel restrictive if markets rise sharply.
- Formula (market-linked) price
- A pricing model where the price tracks an agreed, independent reference (such as a mandi rate or index), often with a quality premium — sharing market movements between both sides.
- Floor price
- A guaranteed minimum price, with the farmer typically receiving the higher of the floor or the prevailing market price at delivery. Often the most balanced pricing model.
- Nucleus-estate model
- A model where the sponsor runs a central ("nucleus") estate or processing hub and contracts surrounding ("outgrower") farmers to supply additional produce — combining own production with contracted supply.
- Side-selling / leakage
- When a contracted farmer sells produce to someone other than the contracting buyer (side-selling), causing the programme to lose expected volume (leakage). Usually a sign of a price or trust gap; reduced — never eliminated — by fair terms and timely payment.
- Outgrower
- A farmer who grows under contract for a sponsor/buyer, supplying produce to an agreed specification — the farmer side of a contract-farming arrangement.
Let’s explore whether contract farming fits — honestly.
Tell us your crop, region and goal. We’ll tell you what’s realistic, what it takes, and how we can help — whether you’re a buyer or a farmer/FPO.
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