Legalise land leasing

By dilly-dallying on the enactment of laws in tune with the NITI Aayog's model bill, state governments are doing a disservice to the farm community

Legalisation of land leasing is no longer a potentially gainful agrarian reform but has become an economic necessity. Unlike the post-independence land reforms, which were required to dismantle the feudal land ownership regime and reduce the disparity between haves and have-nots, the need now is to facilitate expansion of farm holdings to make them economically viable. It is needed also to put the idle land belonging to absentee landowners to productive use.

Continual division of land owing to inheritance laws has rendered most farm holdings too small to support average farm households. The last agricultural census (2010-11) showed that nearly 85 per cent of the operational land holdings are less than 2 hectares in size, the average being just 1.15 hectares. Worse still, the count of such small and marginal holdings is swelling annually by 1.5 to 2.0 millions. Disquietingly, even these holdings, in most cases, are not in single pieces but are fragmented into tinier parcels of land located wide apart. As a result, a sizable chunk of them has become economically, as also operationally, unviable. This is one of the reasons for the erosion of profitability of farming and consequential widespread economic distress in the farm sector.

Since the process of land fragmentation is set to persist unless the inheritance laws are amended to check division of property among heirs — which is unlikely — the development of a transparent and legally valid land lease market seems the most practical way to mitigate its ill-effects. Legalised leasing would allow exchange of land among farmers for agricultural use without affecting its ownership. While the holders of small and uncultivated pieces of land would be incentivised to lease them out to their neighbours or others, the small and tiny farmers, in turn, would be able to lease-in additional land to boost their earnings.

In the absence of legal sanctity, most absentee land owners are wary of letting out their land for fear of losing its control. This is the fallout of the old tenancy laws in some states which grant certain enduring rights over land to tenants. Around 25 million hectares of arable land is estimated to remain fallow (untilled) for this reason. Besides, it results in oral or concealed tenancy deals where neither party enjoys any security.

This apart, informal leaseholders, including sharecroppers, suffer from several other disadvantages as well. The most significant among these is the denial of access to cheaper institutional credit, crop insurance, disaster relief and other benefits and subsidies offered by the government to land-owning farmers. They are left out even from the moves like loan waivers and income support. Besides, they do not have any incentive to invest in measures to boost productivity of land and efficiency of farming.

Most of these handicaps can be addressed by making land leases legally valid. The National Institution for Transforming India Aayog (NITI Aayog) has already drafted a Model Land Lease Act to serve as a guide for the states to enact their own land leasing laws. Though this draft was circulated to the states in 2016, only a few of them have shown any interest in amending their land-related statutes on these lines. The mooted legislation seeks to safeguard the legitimate interests of both land owners and tenants. While allowing the lease deals to be finalised through mutual consent, it provides for restoration of land to the owners after the termination of the lease. Besides, it specifically gives leaseholders a status equal to that of land-owning farmers to enable them to get all the benefits available to other cultivators. Another notable feature is that it entitles tenants, who invest in land improvement, to get back the unused value of their investment at the expiry of the tenancy. This would spur investment in measures like land levelling, upgradation of soil health and provision of irrigation on the leased lands. Thus, by dilly-dallying on the enactment of laws in tune with the NITI Aayog’s model bill, the state governments are doing a disservice to the farm community.

surinder.sud@gmail.com