Land leasing

Topic: Land Reforms, the Green Revolution and Farm Subsidies · NCERT: Beyond NCERT

Meaning

Land leasing is the legal renting of farmland by its owner to a cultivator for a fixed period, at a rent the two agree on. At the end of that period the land goes back to the owner.

It matters because in India a lot of leasing is hidden. Hidden tenants have no papers, so they cannot get bank credit, crop insurance or government support. Legal leasing with safeguards moves land to farmers who will use it well, which raises efficiency. It also brings tenants into the formal system.

Explanation

How a lease works

• Tenancy: a farmer (the tenant) cultivates land owned by someone else (the landlord) and pays rent for it.

• Rent can take three forms: 1. Fixed cash rent: a set amount of money, for example ₹10,000 a season. 2. Fixed rent in kind: a set quantity of grain, for example 5 quintals a season, whatever the harvest. 3. Crop share (sharecropping): a fixed fraction of the harvest, often half.

• Who bears the risk of a bad harvest?

• With a fixed rent, the tenant bears all of it.

• With a crop share, the landlord and the tenant share it.

• Lease period matters. A time-bound lease tells both sides when the land will come back. This removes the owner's fear of losing the land for good.

Why lease terms decide investment

• Marshallian inefficiency (named after the economist Alfred Marshall): under sharecropping, the tenant pays the full cost of inputs but keeps only part of the extra output, so the tenant under-invests.
• Rule of thumb: the tenant invests only if (tenant's share × extra output) > cost of the input.
• Worked example (50:50 crop share):
• A fertiliser dose costs ₹100 and raises output by ₹150.
• For the economy as a whole: ₹150 − ₹100 = +₹50, so the dose is worth using.
• For the tenant: 50% × ₹150 = ₹75, minus ₹100 = −₹25, so the tenant does not use it.

• Under a fixed rent, the tenant keeps the full ₹150, gains +₹50, and uses the fertiliser.

• Security of tenure (protection from being evicted without a fair reason) also matters:

• A tenant who may be evicted next season will not dig a well or level the field.
• A tenant who is sure of staying for the lease period gets the benefit later, so the tenant invests.

Why a ban hides leasing instead of stopping it

• Owners are afraid to lease: strict tenancy laws let a recorded tenant claim ownership, so owners fear losing their land.
• So they let land only through oral, unrecorded deals. This is concealed tenancy.

• Some pressured tenants into "voluntary surrenders" of land, which on paper looked voluntary. Many tenants were then evicted.

• The exclusion chain for a hidden tenant:

• There is no record that the tenant farms the land.
• So the tenant cannot get a Kisan Credit Card, crop insurance or disaster relief.

• So the tenant borrows from moneylenders at high interest and has less to invest.

• The legal-leasing logic: a legal, time-bound lease keeps the owner's title safe. So owners stop hiding leases, and tenants get recorded.

In India

• Leasing bans: many large states, including Telangana, Bihar, Karnataka, Madhya Pradesh and Uttar Pradesh, have banned leasing. They allow exceptions only for owners who are widows, minors, persons with disabilities or defence personnel [3].
• Evidence of the problem:
• The NSS 48th round (Land and Livestock Holdings Survey, 1992) found that land reforms seem to have discouraged exploitative tenancy. But a high share of the land farmed in India was still leased [4].

• An RBI expert group on investment credit named absentee ownership, insecure tenancy and slow land reforms as major causes of low investment and low farm productivity. It recommended a law for fixed-tenure leases and allowing tenants to mortgage lease rights. It said this would sharply reduce oral leases [5].

• NITI Aayog's Model Agricultural Land Leasing Act 2016:

• It was drafted by the Expert Committee on Land Leasing (Chair: Dr T. Haque) and submitted on 31 March 2016 [1].
• Aim: to make farmland leasing easier, so that landless and marginal farmers get better access to land, and to recognise lease cultivators so they can get institutional credit [1][2].
• Terms: the owner and cultivator agree the lease period and rent between themselves. The model Act fixes no rent ceiling [1].
• Owner protection: the lease gives no protected tenancy right and is not entered in the record of rights (the official land ownership register). At the end of the lease, the owner gets automatic possession, and the tahsildar (a revenue officer) makes sure the land is returned [1].
• Cultivator protection: the cultivator can take bank loans without mortgaging the leased land and gets compensation for improvements made to it. The cultivator cannot sub-lease or mortgage the land [1].
• Termination: the lease can be ended if rent is still unpaid after a 3-month grace period, if the land is used for another purpose, or if the cultivator sub-leases or damages it [1].
• Disputes: these go first to mediation, the gram panchayat or the gram sabha, then to the tahsildar, who must decide within 4 weeks. Appeals go to the collector. A Special Land Tribunal, headed by a retired High Court or district judge, has the final say. Civil courts have no jurisdiction [1].

• Stated goals: security of title for owners, security of tenure for tenants during the lease, better efficiency, equity and productivity, and bank credit and insurance for all tenants [2].

• Andhra Pradesh Land Licensed Cultivators Act 2011: gave "loan eligibility cards" to tenant cultivators so they could borrow from banks. It did not touch ownership.

• Patchy adoption: Madhya Pradesh enacted a separate leasing law based on the model Act. Uttar Pradesh and Uttarakhand changed their existing leasing laws. Odisha, Andhra Pradesh and Telangana were at an advanced stage of drafting (PIB, 2018) [3].
• Subsidy gap: PM-KISAN (₹6,000 a year, from 2019) goes to the landowner on record, not the tiller, so hidden tenants are left out.

Don't confuse with

• Tenancy reform (1950s–80s): it aimed to make the tiller the owner, through rent ceilings, security of tenure and ownership rights. The 2016 model Act does the opposite: it keeps ownership with the owner and returns the land automatically at the end of the lease [1].
• Sharecropping (bataidari/bargadari): this is one form of rent, a share of the crop. Land leasing is the legal contract itself, and it can use any form of rent.
• Rent ceiling under the First and Second Plans: the Plans suggested rent of at most one-fourth to one-fifth of gross produce. The 2016 model Act fixes no rent ceiling, and owner and tenant agree the rent themselves [1].
• Operation Barga (West Bengal, 1978): it registered existing sharecroppers and gave them heritable tenure (the right to farm passes to their heirs) and a fixed share. The model Act lease is time-bound and gives no protected tenancy [1].

Prelims Hooks

• The Model Agricultural Land Leasing Act 2016 was drafted by the T. Haque committee under NITI Aayog. It is a model law, and states choose whether to adopt it [1].
• Trap: under the 2016 model Act, the lease does not create a protected tenancy and is not entered in the record of rights [1].
• Under the 2016 model Act, the lease cultivator can get bank loans without mortgaging the leased land, but cannot sub-lease or mortgage it [1].
• The final authority for disputes is a Special Land Tribunal. Civil courts have no jurisdiction. The tahsildar must decide within 4 weeks [1].
• AP Land Licensed Cultivators Act 2011 → "loan eligibility cards" for tenants, with no change in ownership.
• PM-KISAN (₹6,000 a year, from 2019) goes to the landowner, so concealed tenants are left out.

Mains Points

• Ban versus legalise (GS-III, land reforms): strict tenancy laws meant to protect tenants ended up harming them.
• Owners responded with "voluntary surrenders" and oral, concealed tenancy.
• Legal, time-bound leasing protects the owner's title and brings the tenant into the formal system.

• So a ban hides leasing instead of stopping it.

• Leasing and the reach of farm support (GS-III, agricultural credit and subsidies): credit, insurance, relief and PM-KISAN depend on land records, so support reaches the owner, not the tiller. Recording tenants (the Andhra Pradesh cards) and allowing lease rights to be mortgaged, as the RBI expert group recommended, would close this gap [5].

• Efficiency and equity together, but adoption is weak (GS-II, state-subject laws): legal leasing with secure tenure for the lease period removes the Marshallian disincentive, so tenants invest more and yields rise. Tenants also get fair access to land. But states have adopted the model Act only partly [3], which shows the gap between a model law and its use on the ground.

Related concepts

• Tenancy
• Sharecropping
• Tenancy reform
• Security of tenure
• Concealed tenancy

Read more

• Tenancy reform, sharecropping and land leasing