Tenancy reform

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

Meaning

Tenancy reform means laws that do three things for a tenant (a farmer who cultivates land owned by someone else and pays rent for it): control the rent, protect the tenant from eviction, and give the tenant ownership of the land.

After Independence, it was one of the three parts of land reform. The other two were abolition of intermediaries and land ceilings. It matters because a tenant who pays high rent and can be evicted at any time will not invest in the land, so output stays low.

Rule of thumb for tenant investment: the tenant invests only if (tenant's share × extra output) > cost of the input.

Explanation

Why tenancy needed reform

• The colonial legacy. Under the zamindari system, zamindars were intermediaries who collected rent from cultivators.
• Zamindars took as much rent as they could and spent almost nothing on improving the land.
• The cultivator had too little left to invest.

• So farm output stayed stagnant.

• There are three forms of rent. Each puts the risk on a different person: 1. Fixed cash rent (for example ₹10,000 a season): the tenant keeps all extra output but bears all the risk of a bad harvest. 2. Fixed rent in kind (for example 5 quintals of grain a season, whatever the harvest): the tenant again bears all the risk. 3. Crop share: the landlord takes a fixed fraction of the harvest. Landlord and tenant share the risk, which is one reason poor tenants accept it.

Sharecropping and the Marshallian inefficiency

• Sharecropping (bataidari, or bargadari in Bengal) means the tenant pays a share of the crop as rent. The share is often half.
• The Marshallian argument is named after the economist Alfred Marshall.
• The tenant pays the full cost of extra inputs such as fertiliser, water and labour.
• The tenant keeps only part of the extra output, because the rest goes to the landlord.

• So the tenant under-invests, and output is lower than it could be.

• Worked example (50:50 share):

• A fertiliser dose costs ₹100 and raises output by ₹150.
• For the economy, the net gain is ₹150 − ₹100 = +₹50, so the dose is worth using.
• The tenant gets 50% × ₹150 = ₹75 but pays ₹100. That is a net loss of −₹25, so the tenant does not use the fertiliser.
• Under a fixed rent, the tenant keeps the full ₹150, gains +₹50 and does use it.

The three planks of tenancy reform

1. Regulation of rent

• The First and Second Five-Year Plans suggested that rent should be no more than one-fourth to one-fifth of gross produce (the total harvest, before costs are deducted).
• Worked example: gross produce is 40 quintals.
• At 1/4, the maximum rent is 10 quintals. At 1/5, it is 8 quintals.
• A 50% crop share would take 20 quintals, which is double the 1/4 limit or more.

2. Security of tenure

• Security of tenure means the tenant is protected from arbitrary eviction (being removed from the land without a fair reason).
• A tenant who may be evicted next season will not dig a well or level the field.
• A tenant who is sure of staying gets the benefit of today's investment later, so the tenant invests.

3. Ownership rights for tenants

• The aim was to make "the tiller the owner".
• Landlords could "resume" (take back) a limited area of land for personal cultivation. This loophole was widely misused.

Why reform often failed

• "Voluntary surrenders". Landlords pressured tenants to formally give up their land. On paper this looked voluntary. In practice many tenants were then evicted.
• Concealed tenancy. This is leasing that is oral and never recorded.
• Many states ban or restrict leasing, so owners fear that a recorded tenant may claim ownership.
• Owners therefore let land only informally.

• The tenant gets no security of tenure and has no papers to show a bank or insurer.

• The exclusion chain for an unrecorded tenant:

• There is no record that the tenant is the cultivator.
• So the tenant cannot get bank credit (Kisan Credit Card), crop insurance or disaster relief.
• The tenant borrows from moneylenders at high interest, so the tenant has less to invest.

In India

• Official evidence:
• The NSS 48th round (Land and Livestock Holdings Survey, 1992) found that land reforms appear to have discouraged the growth of exploitative tenancy. It also found that a high share of the land farmed in India was still leased [4].

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

• 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].

• Kerala: the Kerala Land Reforms (Amendment) Act 1969 came into force on 1 January 1970.
• It abolished tenancy, so tenants became owners.

• Kudikidappukars (landless families living in huts on another person's land) got rights over their house sites.

• West Bengal, Operation Barga (1978):

• Officials held camps in villages to register sharecroppers (bargadars), instead of waiting for poor tenants to come to offices.
• Registered bargadars got heritable tenure (the right to cultivate passes to their heirs) and a fixed crop share.

• Ownership was not transferred. Registration alone shifted bargaining power towards the sharecropper.

• The new approach is to legalise leasing, not ban it. NITI Aayog's Model Agricultural Land Leasing Act 2016 was drafted by the Expert Committee on Land Leasing (Chair: Dr T. Haque) and submitted on 31 March 2016 [1].

• Aim: to make leasing easier so that landless and marginal farmers get better access to land, and so that lease cultivators can get institutional credit [1][2].
• Terms: owner and cultivator agree the lease period and the rent between themselves. The model Act fixes no rent ceiling [1].
• Protection for the owner: 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) enforces the return [1].
• Protection for the cultivator: the cultivator can take bank loans without mortgaging the leased land and gets compensation for improvements. 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, is the final authority. Civil courts have no jurisdiction [1].

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

• State adoption has been patchy. Madhya Pradesh enacted a leasing law based on the model Act. Uttar Pradesh and Uttarakhand changed their existing laws. Odisha, Andhra Pradesh and Telangana were at an advanced stage of drafting (PIB, 2018) [3].

Don't confuse with

• Abolition of intermediaries: this removed zamindars who stood between the cultivator and the state. Tenancy reform regulates the relationship between a landlord and a tenant who farms that landlord's land.
• Land ceilings: these cap how much land one owner may hold and share out the surplus. Tenancy reform does not cap holdings. It controls rent, tenure and ownership for tenants.
• Operation Barga compared with the Kerala reform: Operation Barga registered sharecroppers but did not transfer ownership. Kerala abolished tenancy and made tenants owners.
• Classic tenancy reform compared with the 2016 model leasing Act: classic reform aimed to give tenants protected tenure and ownership. The 2016 Act deliberately gives no protected tenancy right, and the land returns to the owner automatically [1].

Prelims Hooks

• The three planks of tenancy reform are regulation of rent, security of tenure and ownership rights for tenants.
• The First and Second Plans suggested a rent ceiling of one-fourth to one-fifth of gross produce. Trap: it is gross produce, not net produce.
• Marshallian inefficiency (named after Alfred Marshall): a sharecropper pays the full cost of inputs but keeps only a share of the extra output, so the sharecropper under-invests.
• Operation Barga (1978), West Bengal: registered bargadars, gave them heritable tenure and a fixed share, and did not transfer ownership.
• Model Agricultural Land Leasing Act 2016: a NITI Aayog model law drafted by the T. Haque committee. States choose whether to adopt it. The lease is not entered in the record of rights, and the cultivator can borrow without mortgaging the leased land [1].
• PM-KISAN (₹6,000 a year, from 2019) goes to the landowner, so concealed tenants are left out. The AP Land Licensed Cultivators Act 2011 gave tenants "loan eligibility cards".

Mains Points

• Banning leasing compared with legalising it: strict tenancy laws meant to protect tenants often harmed them.
• Owners responded with "voluntary surrenders" and oral, concealed tenancy.
• Legal, time-bound leasing, as in the 2016 model Act, keeps the owner's title safe and brings tenants into the formal system [1][2].

• Use this in GS-III answers on land reforms or farm credit.

• Tenancy and the reach of farm support: credit, insurance, disaster relief and PM-KISAN are tied to land records, so support reaches the owner, not the person who farms the land.

• This weakens the reach of farm subsidies.

• It supports recording tenants (the Andhra Pradesh cards) and allowing lease rights to be mortgaged, as the RBI expert group recommended [5].

• Efficiency and equity, and the role of political will:

• Fair rent and security of tenure remove the Marshallian disincentive. So tenancy reform raises investment and yields (efficiency) as well as giving tenants fair shares (equity).
• Kerala and West Bengal succeeded because of peasant mobilisation and village-level registration.
• Other states failed because landlords had political power and land records were weak. This is useful for GS-II answers on implementation gaps in state-subject laws.

Related concepts

• Tenancy
• Sharecropping
• Security of tenure
• Concealed tenancy
• Land leasing

Read more

• Tenancy reform, sharecropping and land leasing