The new farm laws allow farmers to terminate and alter a farming contract with buyers only with mutual consent and not unilaterally.
In September 2020, the Indian Parliament passed three new farm bills. One of the bills, titled "The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020", is commonly referred to as the 'Contract Farming Bill.' The bill states that a farmer can enter into a written farming agreement with buyers regarding any farming produce.
A farming agreement is a written contract between "a farmer and a sponsor" or "a farmer, a sponsor, and any third party" made before producing or rearing farming produce with a predetermined quality." The buyer agrees to purchase such farming produce from the farmer and provide farming services in the agreement.
According to the Agricultural Produce Marketing rules 2007, farmers can enter into various types of contracts with the farming sponsors. If a dispute arises between the two parties, it would be referred to a dispute settlement authority for resolution.
As reported by the Frontline, the government advertisements of the new farm laws indicated that farmers could withdraw from their contract at any stage without penalty. However, there are certain exceptions. According to the bill, the minimum agreement period is for one crop season or one production cycle of livestock, as the case may be, and the maximum period shall be five years. Subsequently, suppose the production cycle of the farming produce exceeds five years, in that case, the maximum period of the farming agreement can be mutually decided by the farmer and the buyer. It should be explicitly mentioned in the contract.
The bill further states the clauses for alternating and terminating the agreement: "At any time after entering into a farming agreement, the parties to such agreement may, with mutual consent, alter or terminate such agreement for any reasonable cause".
Hence, this section indicates that farmers cannot unilaterally decide to exit from a contract.