Not long ago, when the American multinational company PepsiCo had filed a case against some potato farmers for violating patent law in the Sabarkantha district of Gujarat. The company had accused farmers of cultivating the FC5 variety of potato, whose patent is near PepsiCo. PepsiCo had said that only he has the right to supply this variety of seeds of potato and these seeds can be used only by farmers associated with the company. No other person can use these seeds for potato cultivation. The company filed a suit against 9 farmers and demanded a compensation of Rs 4.2 crore. After this, the public criticism of PepsiCo was followed, after which the company withdrew the laws after fixing certain conditions. But this whole episode has put many question marks on Seed Sovereignty and Contract Farming.

This controversy raised many questions

  • PepsiCo had said that the farmer would withdraw the lawsuit if his patent stopped growing the potato.
  • PepsiCo has given a patent for potato variety named FC5.
  • PepsiCo had asked these farmers to destroy the existing stock.
  • PepsiCo said that the farmers can take a contract with him and get the crop back to him.
  • PepsiCo has registered the variety of potato named FC5 under the Plant Variety Protection Rights Rule.
  • This registration is valid till 2031 and farmers can not take this potato crop without any contracts till then.
  • Implication implications
  • This latest controversy by PepsiCo vs. farmers has revealed some fundamental facts, which are mandatory to consider:

Sensitiveness of Indian farmers towards large multinational companies

Farmers in India often get entangled in such controversy with large multinational companies, because:

  • Most Indian farmers are less educated and belonging to lower income groups, due to which they are unable to understand all the complex laws like patents.
  • Indian farmers keep some part of the crop in the form of seeds for future use. In addition, seeds are swapped and seeds are also purchased from the market.
  • Apart from this, due to the lack of basic infrastructure in India, farming and farming has not been very beneficial and in spite of this, big companies harass farmers.
  • Contract Low Level Implementation of Agricultural Rules
PepsiCo patent potato dispute and seed sovereignty and contract farming
PepsiCo patent potato dispute and seed sovereignty and contract farming

It is often seen that the rules prescribed in the agricultural contract are not followed. The main reasons behind this are:

  • No suitable institutional mechanism for resolving disputes arising due to contract and contractual terms.
  • Uneducated of the farmers
  • Lack of similar policy for contracted agriculture.
  • What is contract agriculture?
  • Contract is an agreement between the buyer and the farmers, in which the major conditions of agricultural production are defined.
  • In this, some standards are set up for the production and marketing of agricultural products.
  • Under this, farmers agree to give the appropriate quantity of any particular agricultural product to the buyer and the buyer gives his approval to buy that product.
  • Agricultural production (including livestock and poultry) is done on the basis of the pre-crop agreement between buyer (such as food processing units and exporter) and producer (farmer or farmer organization) under contract farming.
  • Benefits of contract farming
  • It is often observed that farmers are not able to get fair price for their crop if they do not get enough buyers. The lack of coordination between the farmer and the market is its biggest achievement.
  • The need for contract farming was felt so that farmers could get better value for their product.
  • Preparing a Negotiated Market for Crop Products The contract is the main purpose of agriculture. It also aims at promoting capital investment in the field of agriculture. This facilitates the ease of facilitating the farming system to many corporate companies engaged in the agricultural product business and they get the raw material of their choice at fixed time and lower prices.
  • Under contract farming, seeds, loans, fertilizers, machinery and technical advice can be made available to farmers so that their yields are in line with the requirements of the companies.
  • There is no middleman involved and farmers get pre-determined prices on behalf of the companies.
  • Such a contract reduces the risk of fluctuation in the demand for its produce and its value in the market for farmers and likewise reduces the risk of unavailability of raw materials for companies.

Intellectual Property Rights in India

  • According to the Seeds Act, 1968, the seeds do not come under the intellectual property rights system and the farmers have complete authority over it.
  • Section 39 of the Protection of Plant Varieties and Farmers’ Rights Act-PPVFR Act, 2001 of the varieties of plants and the protection of seeds, including the preserved seeds, preserving, using, sowing, exchange, sharing Allows even to do and even sell them.
  • If certain varieties of plants are found to be distinctive, similar and permanent, then this act also permits their protection for a few years.
  • Apart from this, this Act protects the rights of farmers and communities who use varieties of plants and preserve them for years.
  • India is the only country where farmers have been granted permission to use seeds of any preserved variety, increase their number and informally share or sell them (unless they do not brand it).
  • But our biggest problem here is that farmers do not have any information about the IPR (Intellectual Property Rights).
  • What to do if things are better?
  • Research is the key to progress only. Factors such as climate change, new pests and diseases, increase in inorganic pressure and increase in income give rise to the need for new varieties, because older varieties do not meet new demands.
  • Educate farmers through different schemes like Kisan Call Centers, Kisan Vigyan Kendra etc.
  • Promote farmers’ organizations.
  • The suit should be deemed to be the last resort for settlement of the dispute.
  • Nobody, including farmers, should not have the right to violate the terms of the contract.
  • Price increases in agricultural products can be increased further by contracted agriculture, which gives consumers better quality goods and farmers get a fixed income.
  • It is necessary to make crop insurance compulsory in the contracted agriculture for the protection of farmers.
  • The case of PepsiCo and the farmers is a good opportunity for the Indian judicial system to explain the PPV & FR and the Contract Act in detail and improve the contracted agriculture and provide a new direction.
  • Encouraging states to adopt Model Contract Farming Act, 2018.
  • Although the Government of India is implementing strict intellectual property rights rules due to global business arrangements, but it is not good for an agricultural country like India, because such harsh measures will establish a monopoly of few selected companies in India, which Is not in the interest.

Proposed contract farming act

In order to increase the income of the farmers and get better value for the produce, the Central Government has approved the Model Contract Farming Act, 2018 on contract farming or contract farming and has issued a draft.

Key features

  • Not only farming but also dairy, poultry and animal husbandry have been included.
  • Under this, the farmers will be able to contract with private companies to sell their crops.
  • A grievance redress mechanism will be created for dispute settlement and farming will also be done.
  • System of grievance redressal mechanism

The present contract exists with different types of problems with the structure of agriculture, especially those which require special attention. In this proposed Act, comprehensive provisions for resolving these problems have been made. In order to face such a situation, the dispute resolution mechanism can be established at block, district or regional level. The dispute settlement officer specified by the state government can settle disputes. If the dispute is not satisfied with the decision of the disposal officer, the established contracts in each state can appeal to the Agriculture (Enhancement and Convenience) Authority- Contract Farming (Promotion and Facilitation Authority).

  • With the protection of the interests of farmers, companies have also been emphasized to make the rules liberal.
  • States have been allowed to amend the provisions at their convenience, but no agreement can be reached with the interests of the farmers in the law.
  • Its main purpose is to make farmers producing fruits and vegetables directly (without intermediaries) from agricultural processing units.
  • This will allow them to get better yield and also reduce the loss due to crop harvesting.
  • Contract will be included in the contract for pre-existing, current and future yield in the pricing of agricultural products.
  • The administration will be the third party in the contract between the farmer and the related company.
  • In contract farming it will not be possible to make any permanent construction on the land.
  • Farmers producing organizations, companies will be encouraged to unite small and marginal farmers.
  • An easy and common dispute settlement mechanism will be constituted for quick disposal of disputes related to contract agriculture.
  • Contract agricultural products will be implemented on crop insurance.
  • To help efficient marketing infrastructure for farmers and increase marketing efficiency, and reduce the risks associated with diversification in production.
  • It will also help in creating Value Chain for all items.
  • All agricultural commodities will be included in this proposed law prepared by the Policy Commission.
  • Practice questions:


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