THERE is no doubt that agricultural land leasing laws in India should be amended to make land leasing lawful and easier. The NITI Aayog Report (2016) proposed, on the grounds of efficiency and equity, a formal model law on leasing (Model Agricultural Land Leasing Act, 2016) and even a model land leasing agreement. The draft Punjab Land Leasing and Tenancy Bill, 2019, seeks to open up the land lease market in the State. The Bill, once enacted, will replace six laws, pertaining to tenancy, occupancy rights of tenant, security of tenure, and colonisation of government land, which were enacted during the 19th century and the 1950s.
Although prima facie one would have no issues with such a law, the context of Punjab and the nature of the Bill raise concerns. The Bill does not even, unlike NITI Aayog’s model land leasing Act, 2016, give the rationale for the drastic change of regulation from a ban on tenancy and ceiling on landholdings to a “free for all” land leasing system.
It is common knowledge that leasing happens on a large scale in Punjab, although illegally or informally. Punjab is also known for reverse tenancy where, unlike most of the rest of India, large and medium farmers lease in lands of marginal and small farmers, who then become landless labour. Reverse tenancy, according to a recent research by H.S. Shergill (2019), can be seen in the fact that the average size of tenant landholding, including one’s own land, was double (17 acres) that of the pure owner average landholding (8 acres). Further, on average 48 per cent of the tenant farm area was on leased land. Moreover, 82 per cent of the leased area was with those owning more than 10 acres each (those who are officially termed medium or large landholders in India); such holdings accounted for 55 per cent of the total operated area of the State. Small and marginal farmers leased in only 5 per cent of the total leased area. Significantly, 83 per cent of the lessee farmers had tractors, 78 per cent had electric tubewells and 56 per cent employed permanent labour.
Further, the overwhelming proportion of the tenancy in Punjab—95 per cent—was cash rent based. Punjab is one of the five States in India, along with Haryana, Tamil Nadu, Telangana and Andhra Pradesh, where cash rent tenancy accounts for more than half the number of all lease deals. This makes it even more significant to examine the provisions of the Bill.
It is shocking that the Bill does not set any limit or range on leased area and the amount of rent per acre, that too when rents in Punjab are exploitative, especially in the case of small lessees who cannot compete with large land lessees. Further, the landless trying to lease in their share of panchayat lands have suffered from an unfair competition even though they have to pay one-third of the actual rate for general category bidders when bidding for such lands. The NITI Aayog’s model Act at least suggested limits on leasing by corporate entities by setting ceilings on land ownership in each State.
Lease for 15 years
The mention of the term “company” in the Bill clearly points to its intention to “corporatise” farming in the State. Rather, it is more about giving an already existing illegal practice legal protection, recognition and sanction. It is as if the proposed legislation seeks to allow corporate farming without it having to actually own the land. This is facilitated by the proposal for the term of lease to be up to 15 years.
This is completely unreasonable as it is the time frame of a generation. Why would individual farmers need such long-term leases? And why would an individual want to bear the risk of leasing for such a long term? It also points to the opening of a window for corporates to invest in agribusiness around farms and secure captive supplies without actually owning the land or having to make the required investments that would entail.
The Bill exempts from its purview land owned by the Central government, State government, urban local bodies and panchayati raj institutions, including land owned by a gram panchayat. The move to keep outside the scope of regulation any land owned by trusts, religious institutions such as temples and those owned by panchayats does not appear to make sense. If groups and agencies can lease in, why cannot groups and institutions lease out? In fact, most institutional land has been kept out of the ambit of the proposed law.
Unwritten lease agreement
Like NITI Aayog’s model land leasing Act, this Bill allows an unwritten lease agreement, which goes against the very intention of the Bill. The Bill justifies this on the pretext that unwritten leases have been there for many years. If an oral lease can be legal, then why should a written lease agreement be prescribed? The Bill does not even provide a model agreement, unlike the NITI Aayog model Act.
The Bill allows tenants/lessees to use the land lease agreement to avail themselves of loans. It states that the lessee shall, without creating any encumbrance on the land, have the right to raise crop loans or any loan from a bank, cooperative society or any other financial institution to carry out agriculture and allied activities.
However, a lessee, on the commencement and during the period of lease, shall not be entitled to sublet or part with the possession of the land in favour of any person other than the lessor. So, the critical question of how a mortgage can be raised has escaped the attention of the draft Bill. The Bill also allows the engagement of employees in any capacity or labour for cultivation of land by excluding it from the definition of subletting, underletting or parting with possession of the leased land.
More importantly, the Bill states that the lessee shall be entitled to take land on lease from one or more than one lessor and cultivate any extent of land for agriculture and allied activities. This will lead to concentration of land under lease. What is important today is not ownership, but control of land;this is what the Bill facilitates. This would lead to skewed benefits from farming as those who have resources would not let others access land on lease.
In order to prevent excessive concentration of land in the hands of a few persons, the land ceiling limits for ownership in the State should have been considered as ceiling for leasing in of land. The Bill, by design, renders the land ceiling legislation ineffective and irrelevant. To appreciate the enormity of what is being done, one needs to only understand that agribusinesses are more interested in gaining control of land on a long-term basis. They are not interested in ownership. This is exactly what the Bill facilitates.
The proposed legislation will also have adverse consequences for contract farming and direct purchase of produce from farmers. Once companies have access to leased land, they will engage in corporate farming rather than deal with hundreds of small and medium contract and non-contract farmers for their raw materials or other produce requirements. That will only mean accumulation without dispossession.
Finally, it is important to remember that marginal and small farmers cultivate only 8 per cent of the land in Punjab. If this Bill—a caricature of the NITI Aayog model Act—is passed into law as it is, it would result in the elimination of small and marginal farmers in Punjab.
Prof. Sukhpal Singh is Chairperson, Centre for Management in Agriculture, Indian Institute of Management-Ahmedabad.