Contract farming is a contractual agreement between firm and farmers in written/oral form describing specific condition for production, procurement of agriculture commodity such as predetermined quantity, quality, price, transportation, etc. After accepting pre- specified condition farmers enter in to contractual agreement. In the study contracting firm, contract farmer as well as proprietor farmers were studied those were involved directly or indirectly in carrot cultivation. Institutional arrangements of Pagro Frozen Food Ltd. for contract farmers were also studied. Further comparative cost return analysis was performed by collecting primary data with the help of structured questionnaire. The study was concluded while suggesting policy measures to improve contract faming in carrot cultivation that will mutually benefited for both contacting firm as well as for farmers.