Indian economy's twin-engine heart needs land leasing push

Top Stories

»	India’s export outlook brighter as manufactured goods gain share: RBI
»	Private consumption driving growth in Q3 with rural India taking lead: RBI
»	Indian MSMEs create about 10 crore jobs in 15 months
»	Indian prefer Q-commerce for daily essentials, physical stores for high-value buying
»	Embedded finance to unlock $25 bn revenue opportunity for India’s platforms by 2030

Poornima Advani | 24 Aug, 2020
In the bleak Covid scenario, a rare bright spot has emerged with Indian corporates waking up to the rural sector's potential. However, forging a deeper synergy of the two that can pivot India's economy would require pushing through impending changes in land leasing laws.

For decades, the Indian industry's interest in the farm sector through contract farming has been lukewarm because of the obstacles to the consolidation of fragmented agricultural land which hampers mechanization and harvest collection.

As per the latest Agricultural Census, 48 per cent of agricultural holdings are of half a hectare or lower and over 68 per cent are up to 1 hectare. 86 per cent of holdings are up to 2 hectares, accounting for 46 per cent of the nation's cultivable land.

Given the staggering proportion of marginal landholding, the reason for farmer distress becomes self-evident. What has historically stood in the way have been obsolete laws that made a lease of farmland illegal.

High time to dust out model law

To its credit, the Indian government recognized the problem. It approved the Model (Agricultural) Land Leasing Act of 2016, under which the landlord was allowed to legally lease the agriculture land with mutual consent for agriculture and allied activity.

However, this law that allows consolidation of land by a cultivator has been gathering dust as it is yet to be adopted by any state in India. Effectively, this has stymied the effort because agriculture is a state subject, and the centre's role is more in policymaking.

However, there is much more that can be done than wring hands. The ruling Bharatiya Janata Party has an iron grip over many states including the most populous Uttar Pradesh, where the changes to land leasing can easily be instituted.

In unprecedented moves, the government has taken the initiative to launch a series of agricultural reforms recently including the freedom to allow farmers to sell their produce anywhere in the country. It has simultaneously taken steps to encourage contract farming.

Good beginning- but a long road ahead

All these efforts may yield only marginal results unless the process of farm consolidation is implemented. If a few BJP-ruled states were to take the initiative, the benefits to farm income are likely to be so apparent that other states would follow.

While farmers may hesitate to lease their land to big corporates for fears that they may not be able to get back their property, the Model Act clearlyesays that the land should return to the owner at the end of lease period. There are already many successful examples of similar leasing agreements, such as in the poultry industry.

In any case, the contours for dispute resolution has been set in the Model Land Leasing Act with the first charge on the farm output given to the landowner in case of a default in the lease payment.

However, to build greater confidence, these provisions should be fine-tuned further. A model lease agreement should be inserted as a schedule in the act, which could serve as a reference point to resolve any disputes between the owner and cultivator where their contract is silent.

There is a provision in the Model Act of dispute resolution through conciliation, which is open-ended. There should be a time limit of one month set for conciliation, and failing a resolution should be referred to the Tehsildar or a jurisdictional revenue officer of equivalent rank.

There should be a period of limitation or put simply a time bar, for an appeal to the collector from Tehsildar's order and a similar one for the collector to pass an order to ensure that the whole system does not get drowned out by cases prolonging indefinitely.

The benefits of establishing such a system will be multiple both for the farmer and the state. If the cultivator is a corporate entity, it is highly likely that productivity will increase because of the use of better technology and mechanization.

Land leasing will be a smart way to achieve consolidation of land without disturbing the ownership of land. But as much as states should try to give confidence to farmers, they should also have the wisdom to allay concerns of business houses.

For example, any relief given to farmers during times of natural disaster should not preclude cultivators. Similarly, just because the cultivator might be a big business house, they need not be forced to pay minimum support prices and rather ensure fair market-linked prices.

After all, the state's responsibility towards farmers can't be imposed on business entities and then expect them to come in droves to engage with farmers. Land concessions also need to be provided to ancillary industries like food processing and storage to tackle the nation's tremendous burden of food wastages.

With positive intent, all such niggling issues can be resolved. However, it's important to recognize the unprecedented opportunity created by the pandemic and walk the path.