Model Tenancy Law Is as Progressive as the Zamindari Abolition Act

Model tenancy law is as progressive a step as the abolition of zamindari, writes Vivian Fernandes.

A NITI Aayog committee is drafting a model farmland leasing law which will allow tenancies without ownership rights. (Photo: The Quint)

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 of 1951 sought, among other things, to bar courts from striking down legislation that conferred ownership rights on tenants. Now, a NITI Aayog committee is drafting a model farmland leasing law which will allow tenancies without ownership rights.

The ten-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.

Since land belongs to the tiller, tenancies are oral. Cultivators cannot even get relief for calamities caused by aberrant weather. (Photo: iStockphoto)

Fallout of Restricting Tenancy

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

About 13 percent of the plots are cultivated by women and these cover ten percent 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, Indian laws swung the other way, prohibiting or severely restricting tenancies even though the powerful landowning class successfully thwarted the redistribution of land. According to a book by PS Appu, even as late as 1992, only four percent of the operated area had been transferred to tenants and 97 percent of the transfers had happened in just seven states.

(Infographic: Rahul Gupta/ The Quint)

But Haque says the NSSO’s figures are an underestimation. His own 2004 study in seven panchayats of Kerala’s Kottayam district found that 61 percent of the operated area was tenanted, ban notwithstanding.

New Tenancy Law

• Tenancy legislation doesn’t favour farmers to whom land has been leased as it becomes difficult to obtain subsidised loan and fertiliser
  
• NSSO figures on land tenancy across states are underestimated as studies reveal 61 percent of operated area in Kerala’s Kottayam district was tenanted
  
• Repeated efforts of states to shield tenants have failed as shown by the Licensed Cultivators Act enforced in Andhra Pradesh in 2011
  
• Despite loan eligibility cards being issued by the Andhra government, process of bank loans to farmers could not be streamlined
  
• Model tenancy law will ensure high efficiency and productivity and also encourage tenants to invest in land
  

Tenancy Laws

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 four to ten women to lease land up to 12.35 acres under tripartite agreements between themselves, the owners and the local panchayats.

In 2004, Kerala allowed self-help groups of four to ten women to lease land up to 12.35 acres under tripartite agreements between themselves, the owners and the local panchayats. (Photo: iStockphoto)

On-the-Ground Efforts

In Andhra Pradesh, the Deccan Development Society, a government promoted non-profit organisation, has been encouraging women’s self-help groups in agricultural activity on leased 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 that only 15 percent of the card holders had got bank loans.

About sixty percent of tenants had not applied for the loan cards because they were not aware. Those who had cards did not get bank loans because the owner had already taken a loan on the plot, or banks were doubtful about the credit-worthiness of the tenants, or the owners had objections. Ninety-six percent of the card holders did not receive input subsidies as owners had already claimed them.

The consolidation of holdings through leasing will improve efficiency and productivity. If the tenures are long and owners don’t have to fear the loss of their titles, tenants will make investments in land. (Photo: iStockphoto)

Economic Forces At Play

A flaw in that scheme according to Haque was the short duration of the licence. The cards had a validity of only one year. Banks hesitated to lend because they had no recourse if crops failed. If the validity was longer, they could hope for repayment in good harvest years. The cards also left a paper trail. They were entered in the Record of Rights with the revenue department. Owners feared that 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 don’t have to fear the loss of their titles, 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. He cites Andhra farmers doing profitable agriculture in Karnataka’s Bijapur and Kolar districts on leased land. This correspondent has met farmers in Punjab, Gujarat and Maharashtra who have leased land for wheat, potatoes and bananas. The annual rent varies between Rs 25,000 to Rs 45,000 an acre.

There is also the trend of ‘reverse tenancy,’ that is, large farmers leasing 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.

(Vivian Fernandes is editor of www.smartindianagriculture.in)

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