The Strong Case for Le­gal­is­ing Ten­ancy

Needed for con­sol­i­da­tion and sub­sidy re­form

The Economic Times - - Breaking Ideas -

If the govern­ment is se­ri­ous about trans­form­ing agri­cul­ture, it must le­galise land leas­ing. Land­hold­ers must be able to lease out land with­out the fear of los­ing own­er­ship. This is pos­si­ble by en­act­ing a leg­is­la­tion that will set out the broad frame­work for states to make land leas­ing and ten­ancy le­gal. The shadow of za­min­dari no longer looms over ru­ral In­dia. The farmer now needs land con­sol­i­da­tion for economies of scale.

Ten­ancy was abol­ished post-In­de­pen­dence with the aim of cre­at­ing an eq­ui­table and ef­fi­cient agrar­ian econ­omy. The re­stric­tive laws of the 1960s and 1970s made ten­ancy in­for­mal, in­se­cure and in­ef­fi­cient. Though agri­cul­ture ac­counts for 14% of the GDP, it em­ploys 49% of the to­tal work­force, and 64% of the ru­ral work­force. The overde­pen­dence has re­sulted in high level of frag­men­ta­tion of land­hold­ing, cou­pled with the limited trans­fer of work­force to non-agri­cul­ture sec­tors, lead­ing to low per­capita ru­ral in­comes, in­ef­fi­cien­cies and per­sis­tent poverty. Le­gal land leas­ing will en­cour­age big landown­ers as well as own­ers of tiny plots too small to be vi­able on their own to lease out land with­out the fear of los­ing own­er­ship. Those thus freed up from cul­ti­va­tion can move into new oc­cu­pa­tions. Leased in con­tigu­ous, tiny plots will per­mit ef­fi­cien­cies that would im­prove pro­duc­tiv­ity. Le­gal­is­ing land leas­ing will pave the way for ef­fi­cient and tar­geted sub­sidy dis­bur­sal to the ac­tual farmer rather than to the land­holder. Be­sides re­duc­ing leak­ages, in­ef­fi­cient use of in­puts like fer­tilis­ers or restrict­ing crop op­tion, the in­come sup­port op­tion is also WTO-com­pli­ant. Le­gal sanc­tity will en­able tenant cul­ti­va­tors to ac­cess in­sti­tu­tional credit, in­surance and a host of sup­port ser­vices. It will al­low for farm­ers to form com­pa­nies that will im­prove their ac­cess to mar­kets and higher in­comes.

Ten­ancy is alive in ru­ral In­dia — 10% of the 140 mil­lion farms are cul­ti­vated by tenant farm­ers — the lack of a le­gal frame­work has meant in­se­cu­rity, low in­comes and life­long poverty for them. Le­gal­is­ing land leas­ing will change this, al­low­ing for a true ru­ral trans­for­ma­tion.

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