A tenant farmer is one of the bravest entrepreneurs in the country. He battles weather, pests, and diseases on someone else’s land to eke out a living. He has nothing to fall back on if the crop fails or price crashes. And to make matters worse, moneylenders mostly fund the operations.
While there is no reliable data on the share of the tenant farmers in agriculture, it is rather safe to assume that they constitute at least a third if not more. Some studies have estimated their share to be around 45 percent nationwide. In order to reduce price risk, most tenant farmers tend to grow crops that are procured by the government at minimum support prices such as maize, paddy, wheat and cotton i.e. more of what is already in the FCI warehouses than what we need. The government believes that to encourage tenant farmers to diversify, some risks need to be taken off their shoulders.
How land leasing works now
There are two general practices of renting agriculture land. Fixed rent for one year (two cropping seasons) is more popular. Depending on the fertility of soil, irrigation facility and the crop, rents can vary from Rs.20,000 to Rs.60,000 per acre. However, when the landowner is in need of a larger amount, a variation of mortgage is entered into. The lessee gives a lump sum of money to the lessor and in lieu of interest, he gets to till the land for a fixed period. At the end of the term, lessor refunds the money and gets back the possession. This type of mortgage is registered with the revenue department but since the amount involved is often large, it is not so common. Where as the short-term contracts are oral due draconian laws against tenancy in many states or to avoid transaction costs in a few states that have liberal laws.
What is NITI Ayog's proposal
A ten-member NITI Ayog committee headed by Tajamul Haque, former chairman of the Commission on Agricultural Costs and Prices, is working on a new model tenancy contract. The basic idea behind the effort is to find a way to formalise these informal contracts so that the lessee can avail benefits and schemes offered by the government while protecting the title of the gentleman farmer.
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Why the propsal may not work
Moreover, the formalisation of tenancy agreement is quite crucial for the revamped crop insurance scheme and the intended direct transfer of benefits to reach the actual cultivator. If a significant portion of the farming community is left out of these schemes, it will be another futile exercise. A formal contract may also give the tenant farmer some access to institutional credit. While this appears to be a win-win for both government and the lessee, it is not clear why landowners will buy into this scheme when their hold on land is already secure. While only 4 percent of land was redistributed to cultivators through tenancy laws, the punitive stories of the past and very low trust on courts to uphold and on the police to enforce contracts will certainly prevent them signing on to anything that even remotely does not threaten their ownership. Even if such agreements are kept outside the purview of the revenue department, as suggested by Arvind Panagaria, Vice-Chairman of NITI Ayog. After all there is a reason behind the common saying that ‘possession is 90 percent of ownership’.
Revenue courts, where such disputes eventually end up, are probably the worst courts of law in the country. Adjudicated by a bureaucrat, it is quite common for cases to go unheard for three to five years and then dragged further in civil courts for at least a decade.
Tenant farmers too would be left with no choice but to continue the current arrangement as there will be someone else ready to pick up the plough. Instead of cajoling the unwilling landowners, a financing scheme should be designed for tenants to buy out the land. Why limit 5/25 generosities to only corporates?
Aruna Urs farms in his village in Mysuru, Karnataka. He was co-founder and CEO of a database management company in Mysuru. Prior to that, he worked as an adviser to the government of Timor-Leste (East Timor).
Aruna blogs about farming, rural & agri economy on his blog, Rural Dispatch, a part of Business Standard's platform, Punditry.
He tweets as @arunaurs