High land lease rentals crippling cultivators
Surinder S Kukal
ABOUT one-third of Punjab’s farmers are involved in farming on leased land. This land generally belongs to NRIs or those who are settled in urban areas of Punjab or other states. This practice accounts for more than half of the land under cultivation in Punjab and Haryana. Such land lease deals are usually made without any paperwork. A major reason why farmers take land on lease is the ever-shrinking landholdings.
Farmers have to pay half of the land lease amount in April (before the paddy season) and the remaining in September (before sowing of the wheat crop). As per official data, 65% of the farmers in Punjab own less than 10 acres. Also, 65% of the rural households in Punjab are without agricultural land. The lease amount in the state varies from Rs 45,000 to Rs 65,000 per acre, the highest being in Malwa. Farmers generally take loans from private and/or public sector institutions to pay for the land lease.
Injudicious use of inputs
Farmers who have taken land on lease at very high rentals are not in a position to ensure judicious use of inputs, including water, as they fear loss of the crop yield. Such farmers prefer higher input use. They also avoid crop diversification due to assured procurement of rice and wheat at the minimum support price (MSP). High land lease rentals force them not to take the ‘risk’ of diversifying away from rice and wheat. For instance, if a farmer cultivating leased land opts for basmati rice in the hope of getting higher returns, he is bound to incur huge losses if the basmati prices crash.
No protection against calamities
Agriculture is prone to natural calamities. Any compensation for losses is paid by the government to the owner of the land and not to the cultivator who has taken it on lease. The farmer cultivating the leased land is not sure whether he will get a share or the full amount of compensation from the owner. Nor can he claim it in the absence of any lease document.
Due to high rentals, farmers are not able to earn proportionate income from the leased land and hence are not able to pay back the loan taken for this purpose, thereby leading to ever-increasing debts. Such farmers have no access to government schemes, including crop loans and subsidies, as the land they cultivate is not owned by them.
The fierce competition among these farmers to take land on lease pushes up the rentals. The proxy farmers tend to make the most of such rivalry. Thus, the owners who do not work on their lands not only derive maximum benefit but also dictate the terms.
Three conditions
A good income from land taken on lease is possible only when there is adequate monsoon rain, input costs are low and the prices of the produce grow steadily. If any of these conditions is not met, farmers end up suffering losses. Farmers know that it is not viable to cultivate leased land, but they do it in the hope that even if they manage to save Rs 2,000 per acre, it would add to their income. This saving can be due to better utilisation of resources. Thus, there is a dire need to cap land lease rentals, coupled with other pre-conditions, so as to balance the rights and responsibilities of landowners and tenants.
A policy in this regard needs to be framed by the government, thereby repealing the existing tenancy laws so as to bring major reforms in the land lease system. The aim should be to allow the landowner to enter into a written agreement with the tenant, especially to incentivise the latter to make long-term investments to improve land productivity and benefit from government-run credit and subsidy schemes.
Such a land lease policy should take care of the following:
Capping of rentals: The policy should evolve a mechanism to cap the lease amount in such a way that the tenant farmers must get a profit of at least 15-20% over and above their investments in the form of various inputs, including labour. The land lease rentals could be variable across the state, depending on the location, the type of crop, its assured procurement, water availability and its quality, etc.
Tenant’s claim on credit and subsidy schemes: The farmers who have taken the land on lease must be the direct beneficiaries of various government schemes related to credit and subsidies, besides the compensation for crop losses due to extreme weather events.
Income tax on land lease amount: The policy should emphasise that only the farmers who actually cultivate the land should get income tax exemption on the income obtained from cultivation on leased land. On the other hand, the landowners who lease out their land should not get such exemption on the income earned due to leasing of land. The policy should clearly have clauses to safeguard the absolute ownership of the landlord.
Farmer-farmer social responsibility: Those who lease out their land to fellow farmers must realise that injudicious use of inputs, especially water, may render their land infertile in the near future in the absence or lack of water for irrigation. Also, proxy farmers must help out the cultivators during a natural calamity by reducing the land rentals.
Such a policy, if implemented in letter and spirit, could prove to be a boon for input use efficiency in agriculture. Higher input use efficiency will ensure lower expenditure and higher profits.
The author is member, Punjab Water Regulation & Development Authority
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