Columns: From banning tenancy to reviving it

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Published: January 26, 2016 12:21:57 AM

Existing legislation, meant to protect poor cultivators, has turned against them

During the 2014 Lok Sabha election campaign, then BJP prime ministerial candidate Narendra Modi feted Ismailbhai Rahimbhai Sheru, 63, of Rampura Vadla village of Amirgarh taluka in Banaskantha district, for being a progressive farmer. He had produced potatoes weighing more than 2 kg each under a contract farming arrangement for a Canadian company. (The potatoes were rejected because they were too large for French fries!). Sheru believes agriculture can be profitable if done scientifically. He has initiated Unigro Alliance, a collective of 101 small farmers holding 1-5 acres, and 19 big ones, at Varshila village in Patan district. Joint cultivation of 430 acres pooled in so far enables them to deploy machines, obtain discounts on inputs, spread the cost of agronomic advice and fetch better prices for bulk supply of quality produce.

In June 2011, farmers of two mandals in East Godavari district swore an oath before the revenue officer that they would observe a ‘crop holiday.’ They declared that they would leave their farms uncultivated in the coming season as a protest against the ban on export of rice and its movement by rail to other states, even though more rice had been produced than the government could procure. Prices had fallen below support prices and farmers were suffering losses.

Ravi Chandra, who was the district’s collector at the time, gave another twist to the story. He said that farmers could afford to keep their land uncultivated because they were themselves not cultivating it; they had other sources of income, like aquaculture and poultry. The profitability of rice cultivation was declining, he said. In some areas it was a losing proposition. The farms were being let out; informal tenancies were rampant.

While shooting for a television programme last year, I realised that informal leasing was a widespread practice in Punjab. Jugraj Singh Bansi, 35, a grower of potatoes, rice and maize, in Madar village of Jalandhar had leased about half of the 150 acres he cultivated at R30,000 each. Pawanjot Singh, 51, also a Jalandhar-based potato grower, cultivated 180 acres, much of it on lease from family members and others. Ajit Singh Mann, 54, of Nawan Shahr said he owned 10 acres and leased another 60.

Jaskarn Singh Mahal, dean of the school of agri-engineering at Punjab Agricultural University, Ludhiana, said the rentals did not seem justified by the returns, but leasing helped spread fixed costs and reduce the overall cost of cultivation.

To give legal recognition to an informal practice and take the anxiety (for owners) out of leasing, a NITI Aayog committee is drafting a model farmland leasing law which will allow tenancies without the presumption of ownership rights.

The 10-member committee set up last September under the chairmanship of Tajamul Haque, former chairman of the Commission on Agricultural Costs and Prices, has prepared the draft. The report, he says, will be submitted to the government in about a month.

India’s agriculture has swung right back from banning tenancies in the early years of Independence to reviving them with truncated rights for improved efficiency and productivity. The very first Constitution Amendment, in 1951, sought—among other things—to bar courts from striking down legislation that conferred ownership rights on tenants.

The rationale for the law is obvious. Over the years, partition of property among heirs has resulted in too many plots that are too small to be profitable. More than four out of five plots are of less than 5 acres. They account for 44% of the operated area (includes cultivated land). There is also a trend of men engaging in higher-paying non-farm activities, and women cultivating. About 13% of the plots are cultivated by women and these cover 10% of the area.

Machines can reduce the drudgery of home-makers doubling up as cultivators. Rising labour costs also make machines necessary but farms have to be of a certain minimum size for their deployment.

In the enthusiasm to abolish the feudal zamindari system at Independence, Indian laws swung the other way, prohibiting or severely restricting tenancies. In Kerala and Jammu & Kashmir, tenancies are banned. In West Bengal, they are restricted to share-croppers. In many states only widows, physically or mentally impaired persons, soldiers and minors can lease out land. In some states, owners can resume only half of the leased out land for personal cultivation. In some others, tenants have the right of first refusal if the leased out land is sold. In tribal areas, leasing is not permitted without official permission.

Yet, informal tenancies are rampant. According to the latest national sample survey, Andhra Pradesh has the highest share of leased holdings (34%) followed by Punjab (25%), Bihar (21%), Sikkim (18%), Odisha (17%), Haryana (15%), West Bengal (14%), Tamil Nadu (14%) and Telangana (14%). In the other states, the share is less than the national average of 10%.

Haque says the NSSO’s figures underestimate the real spread of tenancies. His 2004 study in seven panchayats of Kerala’s Kottayam district found that 61% of the operated area was under informal lease, the ban notwithstanding.

Tenancy legislation, meant to protect the poor, has turned against them. Tenant farmers cannot obtain subsidised loans or fertiliser. Owners, in fact, borrow and re-lend at higher rates. Since land belongs to the tiller, tenancies are oral. Cultivators cannot even get relief for calamities caused by aberrant weather. They cannot take insurance cover either, as these are tied to loans, for which title to land is needed.

Some states have tried to soften the rigour of tenancy laws. In 2004, Kerala allowed self-help groups of 4-10 women to lease land up to 12.35 acres under tripartite agreements between themselves, the owners and the local panchayats.

In Andhra Pradesh, the Deccan Development Society, a government promoted non-profit, has been encouraging women’s self-help groups to lease in land. In 2013, about 14,000 women were engaged in cultivating on about 4,000 acres in this manner.

In 2011, the Andhra government enacted the Licensed Cultivators Act, which made informal tenants eligible for loan eligibility cards with which they could get bank loans, input subsidies and crop insurance. The following year, about half a million cards were issued. But a survey conducted for the World Bank by Haque two years later found only 15% of the card-holders had got bank loans.

A flaw, in that scheme, according to Haque, is the short duration of the license. The cards have a validity of only one year. Banks hesitate to lend because they have no recourse if crops fail. If the validity is longer, they can expect repayment in good harvest years. The cards also leave a paper trail. They are entered in the Record of Rights with the revenue department. Owners fear a populist government could use the information at a later date to confiscate their land.

The consolidation of holdings through leasing will improve efficiency and productivity. If the tenures are long, and owners do not have to fear loss of title, tenants will make investments in land. And agriculture is not uniformly unprofitable. High-value protected agriculture can be quite paying. Haque thinks it is the only way to retain educated rural youth in farming.

There is also the trend of ‘reverse tenancy,’ that is, large farmers leasing in land from smaller ones, so they can spread fixed capital costs (on farm equipment) over a larger area.

Haque says economic forces can be suppressed but they cannot be wished away. In stock markets, there is a saying that the trend is your friend. The proposed leasing law recognises the truth of that statement.

The author is editor,

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