Land reform is an essential condition for removing the burden of absolute ground rent and set free the forces of production in agriculture in a rural society of a developing economy. Land reforms also expand the greater freedoms and capabilities of the cultivating peasants, especially belonging to the socially marginalized groups by ending the control of the non cultivating landlords over rural labour (Bagchi 2002). Agricultural tenancy reform is an important component of land reform, where the state ensures security of tenure and maintains regulation of rent in particular in order to protect rights to cultivation of tenant farmers.

A recent report of the Government of India, Strategy for Doubling Farmers’ Income by 2022 (GoI 2018), prepared by a committee chaired by Ashok Dalwai, discusses some aspects of agricultural tenancy in India. In its thirteenth chapter, “Structural Reforms and Governance Framework,” the report offers solutions to some unresolved problems of agricultural tenancy. In particular, it raises three major concerns regarding agricultural tenancy. These are

1. How does one remove fear from the minds of the landowners, that they will not lose land rights if they lease out, or if their leased-out lands are registered for licensed cultivation?
2. How does one build confidence and trust between the landowner and his tenant, that land leasing is a win-win solution for both?
3. Will it not make better sense to make necessary amendments in tenancy laws to make land leasing legal and open, and deliver the desired benefits to tenant farmers?

As a solution to these issues, the report suggests adhering to the Model Agricultural Land Leasing Act, 2016, proposed by the Haque Committee (Haque Committee, 2016). In a developing country such as India, tenancy reforms as part of land reforms were meant to abolish informal and exploitative tenancy contracts in order to end the immiserisation of poor tenants by ensuring non-eviction and regulation of rent. The Dalwai report assumes that in a tenancy contract a lessor and a lessee have similar bargaining power. Moreover, this assumption of equal bargaining power with particular reference to tenancy in the report stems from what is known as “market-led agrarian reform”. According to this argument, land reforms need not secure the tenant’s right to cultivation or necessitate a redistribution of land to the cultivating tenants: market forces will determine the form of contract along with the rent to be paid.

In countries such as Phillipines, Egypt, Turkey, and South Africa varying type of market-led reforms have taken place and resulted in deteriorating conditions for poor tenants. A study on market-led land reforms in Egypt (El-Ghonemy 2002) documented a policy shift from state-led land reform to market-led reform during 1992 through the promulgation of a law. The new law of 1992 nullified the previous legislation of 1952, which had secured non-eviction of tenants and regulated rent. As a result of this deregulation, the increase in number of landless agricultural workers with lowered wages and an increase in poverty emerged within a decade of the reform in rural Egypt. Therefore, to assume a so-called “perfect competitive lease market” with equal bargaining power of both lessor and lessee in developing countries is erroneous.

The Model Agricultural Land Leasing Act (Haque Committee, 2016) prescribes legalising land lease contracts. The Act also proposes that the form of the contract and the rent to be paid by the lessee would be realised through mutual negotiations between landowners and tenants. It is well-established that the socio-economic position of the tenant determines his/her bargaining power within a tenancy contract. This combination of legalising and liberalising the tenancy contract will instead legalise instances of rack-renting from small and marginal farmers by powerful landowning classes in the countryside (Singh 2017; Swaminathan 2017). However, legalising land lease contracts may improve the recording of the ‘informal contracts’ in a better way and thus could improve the estimate of agricultural tenancy in India.

In the context of contemporary agricultural tenancy in India, secondary databases on tenancy show that tenancy has increased over the last decade and continues to remain significant. There are, however, three distinct patterns associated with this increase. First, the increase in tenancy is regionally diverse, with states such as Andhra Pradesh, Odisha, Punjab, and Bihar showing an increase in the share of leased-in land to total operational land, but a decline in states such as Haryana and Uttar Pradesh. Secondly, lessee households are distributed across all decile classes of operational land. However, out of all tenant holdings, small and marginal holdings (with less than two hectares of land) constitute more than 52 per cent of total leased-in land. Thus, even though large farmers from upper deciles of operational holding enter the lease market as lessees, small and marginal farmers constitute the majority of lessee households (NSSO 2013). Finally, at the all-India level, fixed money type contracts have emerged as an important form of contract. Here too, there are stark regional differences in terms of the form of tenancy contracts. In Punjab and Haryana, over 70 per cent of tenancy contracts are of the fixed money type, whereas in Uttar Pradesh, Odisha, Assam, and West Bengal there is a preponderance of crop-share contracts (Bansal, Usami, and Rawal 2018).

It is evident that a blanket policy of liberalising the various types of tenancy contracts would adversely affect the conditions of poor tenant farmers specifically under crop-share contracts. As the crop-share amount is generally fixed in a pre-harvest contract, if unregulated, it does not cover crop failure or excess cost borne by tenants. Secondly, even in cases of large farmers leasing in land from marginal farmers (for which there is no direct evidence since the National Sample Survey Organisation does not report the lessor), the lease contract depends on the bargaining power of the marginal landowner as well as that of the lessee large farmer. Therefore this “mutual negotiation” as claimed by Haque Commitee, has to be viewed in context of the bargaining power that a large landowning farmer exercises in a village.

Finally, even for fixed types of contract, secondary databases do not provide information about rent paid. It is thus impossible to form an idea about the bargaining power of the tenant farmer in terms of rent, from existing secondary databases. For example, increase in tenancy over the last decade has been highest in Andhra Pradesh, among all States. The major form of contract in the State is fixed money type contract. However, a study in Ananthavaram village in the south coastal district of Guntur showed that a fixed annual rent for the land on which paddy was cultivated was paid in kind at the end of the kharif season and all costs of cultivation were met by the tenant (Ramachandran, Rawal, and Swaminathan 2010). This was the kind of contract under which landless and small land owning households leased land. The level of extraction through this kind of tenancy contract was high: the rent constituted, on average, about 78.5 percent of the average yield of paddy (5.7 tonnes per hectare), with tenants bearing the entire cost of cultivation. Hence, a shift towards fixed money or fixed produce type of contracts suggests, on the surface, a mere monetisation of rent, and not equal bargaining power between the lessor and the lessee. Neither does monetisation indicate that the lessee household is a rich peasant or a capitalist farmer.

Tenancy contracts in contemporary rural India are an outcome of the complex interaction between the socio-economic status of lessor and lessee households, and relations of productions prevailing in the countryside. Tenancy in the country has historically been associated with the practice of rent extraction by landlords, whose non-economic means of coercion are well-documented. When the distribution of land ownership is skewed because of barriers posed by caste as well as economic status, the market for land leasing is therefore remains as an important means of operation for marginal and small farmers to ensure a basic livelihood. Therefore legalising all type of tenancy contracts or registering tenant farmers without any regulation of rent by the State is a questionable proposition. The recommendations of the Dalwai Committee would eventually push landless, small, and marginal tenant farmers outside agriculture to make way for a “competitive market.” This is exactly the opposite of what was intended in the first three five year plans regarding land reform.

References

Bagchi, Amiya Kumar (2002), “Agrarian Transformation and Human Development: Instrumental and Constitutive Links”, in Ramachandran, V.K and Swaminathan, Madhura (ed.), Agrarian Studies Essays On Agrarian Relations in Less Developed Countries, Tulika Books, New Delhi

Bansal, V., Usami, Y., and Rawal, V. (2018),  Agricultural Tenancy in Contemporary India: An Analytical Report and a Compendium of Statistical Tables Based on NSSO Surveys of Land and Livestock Holding, SSER Monograph, Society for Social and Economic Research, New Delhi.

Dalwai Committee (2018), Report of the Committee on Doubling Farmers’ Income: Structural Reforms and Governance Framework, Volume 13, Ministry of Agriculture and Farmers’ Welfare, Government of India, New Delhi, available at http://agricoop.gov.in/sites/default/files/DFI%20Volume%2013.pdf, viewed on September 6, 2018.

El-Ghonemy, M. Riad.(2002), The Land Market Approach to Rural Development in V.K.Ramachandran and M.Swaminathan(eds), Agrarian Studies: Essays on Agrarian Relations in Less Developed Countries, Tulika Books. New Delhi.

Haque Committee (2016), Report of the Expert Committee on Land Leasing, NITI Aayog, Government of India, New Delhi.

National Sample Survey Organisation (NSSO) (2013), Household Ownership and Operational Holding in India, Report No. 571, Ministry of Statistics and Programme Implementation, Government of India, New Delhi.

Ramachandran, V. K., Rawal, V., and Swaminathan, M. (eds.) (2010), Socioeconomic Surveys of Three Villages in Andhra Pradesh: A Study of Agrarian Relations, Tulika Books, New Delhi.

Singh, Sukhpal (2017), “Tenancy Reforms: A Critique of NITI Aayog’s Model Law,” Economic and Political Weekly, vol. 52, no. 2, January 14, pp. 17-19.

Swaminathan, M. (2017) “Tenancy Deregulation in India,” available at https://fas.org.inde-regulation-of-tenancy-in-rural-india/, viewed on September 6, 2018.