Land Leasing In India : Challenges & Reforms

Land leasing is a commercial agreement in which the user or lesse acquires the right to use the land in lieu of certain amount of payment. Agriculture land leasing at present in India can be classified into following categories:

• Kerala and J&K have complete ban over leasing.

• In Uttar Pradsh, Himachal Pradesh, Bihar etc. land leasing is allowed in certain cases like where owner is widowed women, children, defence personnel etc.

• Punjab, Haryana, Gujarat, Maharasthra and Assam the tenant gets the right to purchase leased land after a certain period.

• In Tamilnadu, Rajasthan and West Bengal liberlised land lease exist.

As a result of this the land leasing activity is very less in India or if exists it is underground or unregulated. Therefore there is a need for reform in land leasing.

Why there is need for reform in land leasing in India:

India's march on the path of inclusive, sustainable and faster growth needs disentangling from some legacy issues. Land leasing is one such area which needs reforms. There are various factors which favor this and some of them are:

• Fragmented landholdings: The average landholding size in India is 2.8 acres. The miniscule returns farmers get from this small landholding prevents mechanization and investments in agriculture and its profitability.

 Low investment in agriculture: In the fear of losing land and in the absence of long term tenancy laws the agriculture land lease are limited to one year. The tenant is not sure of regaining tenancy next year. Therefore there is no incentive for capital investment in agriculture.

• Changes in the occupational structure in rural areas and increasing cases of fallow land: Occupational structure in India has gone significant changes and there has been migration from rural areas to urban areas. This has resulted into the emergence of informal and underground land lease market. This creates a need for regulation.

• Providing benefits to tenants: The presence of informal tenancy puts tenants at the risk of exploitation because of no legal security and high rents. Along with these risks the tenants didn't get benefits of various government initiatives related to credit, insurance and subsidies like Kisan Credit Card, fertilizer subsidy.

• Problems of land acquisition: With the passage of new land acquisition law in 2013, the process has been more comprehensive and lengthy. The cost of acquisition has also increased. This creates an opportunity and necessity for exploring long term lease as the option for industrialization. This will reduce farmer's unrest and may solve the associated problems of loss of means of livelihood etc.

What will be the benefits?

• Benefits in the form of enhanced investments, economies of scale in use of capital, machines and other inputs.

• Enhanced social mobility as non farmland owning groups or castes can benefit by taking land on lease can generate more income. Those with small landholding can lease out their lands and migrate to other occupations and therefore will reduce the burden on agriculture land.

• Will help corporate farming under which corporates can take large chunks of land on lease and do cultivation. This will completely professionalize the agriculture activity.

• Benefits to industries in the form of reduced costs of land acquisition. They can take land on lease and after certain period of time lease agreement can again be negotiated. This will also reduce farmer's unrest who agitate against loss of land titles.

What are the concerns?

• Future government led redistribution in the favour of tenants as was done after independence. 

• Will prevent redistribution of land through transfer ownership as people living outside the area will prefer leasing instead of selling. Otherwise land distribution through selling was an important means of redistribution and consolidation of land. Land leasing will promote absentee landlords.

• It may led to situation where individuals with big pockets will control agriculture by taking large chunks of land on lease.

What else is needed?

Land leasing alone is not the solution to the problems faced by agriculture. This has to be complemented by a number of other steps which are:

• Modernization and digitization of land records so that each and every owner has proper titles of his land. This will also reduce litigation related to the land leasing.

• Established of independent regulator for the sector to resolve the disputes legalization and operationalisation of land leasing will bring in people who will take lease at large scales. The standardization of lease agreements and dispute resolution mechanisms should be developed. Otherwise litigations will clog the already burdened courts.

• Modernization of the agriculture marketing so that informed decisions regarding leasing can be made so that informed lease agreement are concluded with proper knowledge of future market rates.

• Enhancing credit and insurance facilities for agriculture

• Providing improved technical inputs in the form of soil health card, laboratory facilities etc.

• Transformation of agriculture as a business - cum - livelihood activity so that investments are planned based on long term strategies and hedged from market and environmental risks.

• Proper awareness and education among the rural folk about the benefits that land leasing can bring to their household income and life. They must be taught about the benefits of land leasing.

Overall land leasing will be of great help to Indian agriculture which is reeling under stress because of continuous droughts and neglect by governments.

Recently government has formed the ‘Haque committee’ to frame model land leasing act and many states have requested government for prospective implementation of tenancy laws so that existing tenants are not affected.