Start leasing land

Tenancy regulations are outdated and counter-productive

It has been reported that the National Institution for Transforming India, or NITI, Aayog, is to draft a model land-leasing law that will serve as guide for those states that wish to amend their existing legislation. This is a well-advised measure, and could catalyse a much sought-after reform in the land sector. Several states altered land leasing regulations under the land and tenancy reforms carried out soon after Independence. But, however progressive these may have been at the time, many of these laws are now sadly out of date. More than half a century on, they are irrelevant at best and massively counter-productive at worst. They tend to discourage the leasing and sub-leasing of land; but this process has become essential, since it would lead to uncultivated land owned by absentee landowners becoming productive, and also allow small and marginal farmers to expand their holdings to a viable size by leasing in additional land. The difference between now and the post-Independence period is that the average size of landholdings has steadily been shrinking, thanks to the fragmentation of land under inheritance laws. It has contracted from 2.28 hectares in 1970-71 to just 1.15 hectares in 2010-11, according to the agricultural census. For small and marginal farmers, over 85 per cent of the total, their holdings are generally too small to generate enough returns to live on.

Such tiny holdings, many of which could soon be fragmented into even smaller pieces, must be either leased out to other farmers, or expanded by leasing in adjoining lands in order to become economically viable. But the legal framework does not allow this. Creating a legal framework for land leasing would dispel landowners' fear of losing ownership rights once they let land out to tenants. Consequently, large chunks of land that belong to the non-farming households, most of whom have migrated to urban areas, will suddenly become available for productive use. Importantly, the current practice of leasing out land through oral, non-binding, agreements will also give way to legally enforceable lease contracts.

The present uncertainty among tenants over the security of their land tenure has several adverse consequences for agriculture. It dissuades tenant farmers and sharecroppers from investing in long-term land improvement measures like levelling fields, digging wells, constructing embankments and correcting nutrient imbalances. Besides, it also deters them from going in for yield-enhancing cash inputs like hybrid seeds, fertilisers and plant protection chemicals. Worse, tenants are often deprived of access to institutional credit, crop insurance, compensation for crop damage and, most importantly, direct transfer of government subsidies. NITI's emphasis on updating and digitisation of land records also makes sense. Land ownership is by and large "presumptive" in nature and subject to legal challenge. Well-documented land titles are essential to end myriad disputes over land, spur farmers' interest in boosting soil productivity and smooth functioning of the government's welfare schemes. There is, thus, an incontrovertible case for legalising land leasing and improving land records. This move can and should be supplemented with additional steps to persuade the states to undertake land consolidation.