Model Land Leasing Law of NITI Aayog

On April 13, 2016, NITI Aayog has come up with a Model Land Leasing Law aimed at increasing farm productivity by reviving the lease farming in the country by protecting the rights of the agricultural land owners; and at the same time helping them to lease their land to tenant farmers, who in turn can access institutional credit. This bill was drafted by Dr. T. Haque Committee of the NITI Aayog.

Important Facts

  • Land is a state subject in seventh schedule of Constitution. So centre can create / suggest a model act but its enactment has to be done by states themselves.
  • In many states, land leasing is either banned or has too many restrictions. At present, Kerala, Jammu and Kashmir and Manipur do not allow leasing of farmland. In Punjab, Gujarat and Maharashtra, the tenant has the right to buy the leased land from the owner after tilling it for a certain period of time.
  • Tenants belonging to SC/ST categories in Gujarat and Maharashtra cannot be evicted once land is given to them on lease.
  • West Bengal allows only sharecropping, while Andhra Pradesh has fixed the lease tenure to a minimum of six years.
  • Several other states like Bihar, Odisha and Madhya Pradesh have banned leasing of farmland, with exceptions for widows and handicapped landowners.

Background to the Issue

At the time of independence, India had inherited a feudal agrarian set up made of mainly three different kinds of systems viz. Zamindari, Mahalwari and Ryotwari. The land rights were concentrated in hands of few land lords and actual cultivators were tenants with no right or security of tenure. Rack renting was common and exploitation of cultivators was vogue in an unequal and unjust structure.

The Constitution of India put “land” in “state list” of seventh schedule. Towards land reforms, almost all state governments passed various laws with objectives to abolish the intermediaries; abolish or regulate the tenancy; imposition of ceilings on land holdings; redistribution of ceiling surplus land etc.  The overall objective was to create a just and equitable system with high level of farm efficiency. However, the results were only partially received. Moreover, some states passed the restrictive tenancy laws which furthered the problem.

Current Status of Land Leasing and a case for legalization

Currently, most state governments have either put a ban on agricultural land leasing or imposed restrictions on land leasing. This has led to several problems. The T Haque committee has studied the problems and made a strong case for legalizing the land leasing and its liberalization in India. The key arguments are as follows:

  • Legal ban on leasing led to concealed / informal tenancy in most part of the country. Such tenancy is insecure and informal and counterproductive. Most informal tenancy are either oral or rotation basis {one plot one year, another plot next year, so that the tenant does not prove continuous possession}. Due to this, a tenant farmer would not make efforts / investment in improvement of the soil/ productivity. Thus, if land leasing is legalized, it would secure the ownership, and tenant would be incentivised to make efforts towards improving productivity.
  • Insecure land leasing would reduce the mobility of land owners who have the desire and capability to do a business/ job outside agriculture. This is because they need to stay where their land is; for they may lose the land if they lease out and migrate. This is anti-growth and anti-poor. Legalization will result in formal tenancy documents which can be used to access institutional credit.
  • Due to legal restrictions, the land owners would prefer to keep their lands fallow (so that they don’t lose the land). Keeping land fallow results in underutilization of the land and low farm output.
  • The restrictive land has prevented the optimum allocation of land resources and denied the poor access to land. The ban on leasing has forced the poor to enter into informal arrangements.

Learning from Examples

The T Haque committee report has cited examples of Kudumbashree in Kerala and AP Licensed cultivators Act, 2011. The learning from these two are as follows:

  • Even if land leasing is illegal in Kerala, the Kudumbashree mission in Kerala is assisting the poor by organizing Joint Liability Groups (JLG) of women and assisting them to land lease, though informal. This has benefitted the women.
  • Recognizing the need of the informal tenants, AP government enacted the AP Licensed cultivators Act, 2011 to provide license to cultivators including tenants so that they can access institutional credit. However, this law did not get desired result because of objection by the land owners, fearing that they would lose land of tenants are registered as licensed cultivators.

Thus, model Land Leasing Act was also draft keeping in view the below questions.

  • How to remove fears from the minds of the landowners that they will not lose land right if they lease out their land.
  • How to build a trust between land-owners and tenant so that land leasing is a win-win solution for both.

Salient Features of the model draft

  • This model act proposes to legalize land leasing to promote agricultural efficiency, equity and poverty reduction.
  • The legalising will be in all areas to ensure complete security of land ownership right for land owners and security of tenure for tenants for the agreed lease period.
  • Remove the clause of adverse possession of land in the land laws of various states as it interferes with free functioning of land lease market;
  • Allow automatic resumption of land after the agreed lease period without requiring any minimum area of land to be left with the tenant even after termination of tenancy, as laws of some states require;
  • Allow the terms and conditions of lease to be determined mutually by the land owner and the tenant without any fear on the part of the landowner of losing land right or undue expectation on the part of the tenant of acquiring occupancy right for continuous possession of leased land for any fixed period.
  • Facilitate all tenants including share croppers to access insurance bank credit and bank credit against pledging of expected output.
  • Incentivize tenants to make investment in land improvement and also entitle them to get back the unused value of investment at the time of termination of tenancy.

Questions to Analyse

  • What is the extent of tenant farming in India? To what extent this model laws can achieve its stated objectives?
What is the extent of tenant farming in India? To what extent this model laws can achieve its stated objectives?

Tenants cultivate almost a fifth of the agricultural land in India. In some state, the percentage of tenants is higher than 60%. Further, the share of tenant farmers is rising with increase in migration from rural to urban areas. This has led to flourishing oral leases which are insecure and informal. This proposed law not only gives a win-win solution for land owners and tenants but also:

  • Can speed up migration of people from farm to non-farm sector as those land owners who wish to move to other sectors / places can do so without losing their peace of mind. The government is also working on several models to shift people from agriculture to non-agriculture activities and thus this law also serves that purpose.
  • The law will also help tenants and share croppers to access insurance and bank credit.
  • It will also help the companies to take land on lease from small and marginal farmers with less than two hectares, who constitute 80 per cent of India’s total farming community, and aggregate these leaseholds for large scale commercial farming.
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