Tenancy reform, sharecropping and land leasing

Detail

Background: why tenancy mattered in 1947

• Under colonial rule, much land came under the zamindari system. Zamindars were intermediaries who collected rent from cultivators.
• Zamindars took as much rent as they could. They spent almost nothing on improving the land.

• The cultivator was left with too little to invest. Farm output stayed stagnant.

• So after Independence, tenancy reform was one part of land reform. The other parts were abolition of intermediaries and land ceilings.

Forms of tenancy

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

• Rent can take three forms: 1. Fixed cash rent: a set amount of money, for example ₹10,000 a season. The tenant keeps all the extra output. 2. Fixed rent in kind: a set quantity of grain, for example 5 quintals a season, whatever the harvest. 3. Crop share: a fixed fraction of whatever is harvested.

• Who bears the risk?

• With a fixed rent (cash or kind), the tenant bears all the risk of a bad harvest.
• With a crop share, the landlord and tenant share the risk. This is one reason poor tenants accept sharecropping.

Sharecropping and the Marshallian inefficiency

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

• So the tenant under-invests. Output is lower than it could be.

• Worked example (50:50 share):

• A fertiliser dose costs ₹100. It raises output by ₹150.
• For the economy as a whole, the net gain is ₹150 − ₹100 = +₹50, so the dose is worth using.
• The tenant gets only 50% × ₹150 = ₹75, but pays ₹100. For the tenant the net result is −₹25, so the tenant does not use the fertiliser.

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

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

The three planks of tenancy reform

Tenancy reform: laws to control rents, protect tenants from eviction and give tenants ownership.

1. Regulation of rent

• The First and Second Five-Year Plans suggested that rent should not be 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 or more the limit.

2. Security of tenure

• Security of tenure means the tenant is protected from arbitrary eviction (being thrown off the land without a fair reason).
• Why it 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 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, as the next section shows.

What actually happened

• "Voluntary surrenders". Landlords pressured tenants to formally "surrender" their land. On paper this looked voluntary. In practice many tenants were then evicted.
• Concealed tenancy.
• Meaning: leasing that is oral and never recorded. Tenancy restrictions push it underground.
• Why it happens: many states ban or restrict leasing. Owners fear that a recorded tenant may claim ownership, so they let land only informally.

• Effect on the tenant: no security of tenure. The tenant 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.
• Transfers linked to land records go to the owner, not the tiller. PM-KISAN (₹6,000 a year, from 2019) is one example.

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

• Evidence from official reports:

• The NSS 48th round (Land and Livestock Holdings Survey, 1992) found that land reforms since Independence appear to have discouraged the growth of exploitative tenancy. But it also found that a high share of the land farmed in India was still leased [5].
• An RBI expert group on investment credit named absentee ownership, insecure tenancy and the slow pace of land reforms as major causes of low investment and low farm productivity [6].

• It recommended a law for fixed-tenure leases and allowing tenants to mortgage lease rights. It said this would sharply reduce oral leases [6].

• 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 [4].

Successes

Kerala

• The Kerala Land Reforms (Amendment) Act 1969 came into force on 1 January 1970. It abolished tenancy.
• Tenants became owners of the land they farmed.
• Hutment dwellers (kudikidappukars, landless families living in huts on another person's land) got rights over their house sites.

West Bengal: Operation Barga (1978)

• Sharecroppers (bargadars) were registered through camps held in villages. Officials went to the villages, instead of waiting for poor tenants to come to offices.
• Registered bargadars got:
• Heritable tenure, meaning the right to cultivate passes to their heirs.

• A fixed crop share, so the landlord could not raise the share at will.

• Key point: title (ownership) was not transferred. Registration alone shifted bargaining power towards the sharecropper.

The new approach: legalise leasing, do not ban it

• Land leasing: legal renting of farmland for a fixed period. With safeguards, it can:
• move land to farmers who will use it well, which raises efficiency; and

• give tenants access to credit and government support.

• The logic:

• A ban does not stop leasing. It only hides it.
• A legal, time-bound lease removes the owner's fear of losing the land. So owners stop hiding leases, and tenants get recorded.

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 [2].
• Aim: to allow and make easier the leasing of farmland, so that landless and marginal farmers get better access to land. It also recognises lease cultivators so that they can get institutional credit [2][3].
• Main provisions:
• Lease is a contract between owner and cultivator for farming and allied activities, for a period both agree on [2].
• Owner and cultivator agree the lease period and rent between themselves. The model Act fixes no rent ceiling [2].
• The lease gives no protected tenancy right and is not entered in the record of rights (the official land ownership register). So the owner's title stays safe [2].
• At the end of the lease, the owner gets automatic possession of the land. The tahsildar (a revenue officer) enforces the lease terms and makes sure the land is returned [2].
• The cultivator can take bank loans without mortgaging the leased land. The cultivator gets compensation for improvements made to the land. The cultivator cannot sub-lease or mortgage it [2].
• 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 the land [2].

• Disputes 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 [2].

• Stated goals:

• security of title for owners and security of tenure for tenants during the lease period;
• better efficiency, equity and productivity;
• reasons for tenants to invest in the land;
• access to bank credit and insurance for all tenants [3].

Andhra Pradesh's Land Licensed Cultivators Act 2011

• It 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 separate land-leasing law based on the model Act. Uttar Pradesh and Uttarakhand changed their existing leasing laws. Odisha, Andhra Pradesh and Telangana were described as being at an advanced stage of drafting leasing laws (PIB, 2018) [4].
• (NCERT: Madhya Pradesh and Tamil Nadu have enacted leasing laws on these lines, and other states have moved partly. Verify the current status.)

Prelims Hooks

• Bargadar = sharecropper in Bengal. Operation Barga (1978) registered bargadars, gave them heritable tenure and a fixed share, and did not transfer ownership.
• Marshallian inefficiency: under sharecropping, the tenant pays the full cost of inputs but gets only a share of the extra output, so the tenant under-invests. It is named after Alfred Marshall.
• The First and Second Plans suggested a rent ceiling of one-fourth to one-fifth of gross produce, not of net produce.
• The three planks of tenancy reform are regulation of rent, security of tenure and ownership rights for tenants.
• 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 [2].
• Trap: under the 2016 model Act, the lease does not create a protected tenancy and is not entered in the record of rights. The land returns to the owner automatically [2].
• Under the 2016 model Act, the lease cultivator can borrow without mortgaging the leased land [2].
• The Kerala Land Reforms (Amendment) Act 1969 came into force on 1 January 1970. It abolished tenancy and gave house-site rights to kudikidappukars.
• AP Land Licensed Cultivators Act 2011 → "loan eligibility cards" for tenants.
• PM-KISAN (₹6,000 a year, from 2019) goes to the landowner, so concealed tenants are left out.

Mains Points

• Ban versus legalise. Strict tenancy laws that aimed to protect tenants ended up harming them:
• Owners responded with "voluntary surrenders" and oral, concealed tenancy.
• Legal, time-bound leasing, as in the 2016 model Act, protects owners and brings tenants into the formal system.

• This fits a GS-III answer on land reforms or on agricultural credit.

• Tenancy and farm support. Credit, insurance, relief and PM-KISAN are tied to land records, so support reaches the owner, not the tiller:

• This weakens the reach of farm subsidies.

• It supports the case for recording tenants (the Andhra Pradesh cards) and for allowing lease rights to be mortgaged, as the RBI expert group recommended [6].

• Political will decided success. Kerala and West Bengal worked because of peasant mobilisation, village-level camps and 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.

• Efficiency and equity together. Security of tenure and fair rent remove the Marshallian disincentive. So tenancy reform is an efficiency measure (more investment, higher yields) as well as an equity measure (fair shares for tenants).