Farming leased land adding to rural stress in Punjab

Gurnam Singh, a farmer in Arrichan village in Punjab's Ludhiana district, owns 3 acres of land but farms 10 acres of rice and wheat. He competed with other small farmers to lease 7 acres at the rate of Rs 50,000 an acre for a year. That was the time when the price of basmati rice was skyrocketing, pushing up rents. "What I own is not enough to sustain my family. I am forced to take land on lease. Many farmers in my village compete for leases, pushing rents higher every year. Now that the price of basmati has collapsed, I do not know how I will be able to pay the rent on time," says Singh.

He says his village has nearly 200 families but not more than 10-12 per cent of them own enough land. Most others lease land. Income from land taken on lease is possible only when the monsoon is good, inputs costs are down, and prices of output grow steadily. If any one of the three conditions is not met, farmers end up making losses on leased land.

Many farmers in Punjab opt for land leases because the size of landholding has been shrinking all these years. With the monsoon playing truant for two years in a row and prices of farm produce fluctuating wildly, the financial position of such farmers is going to worsen in the coming months. According to official data, 65 per cent of farmers in Punjab own 1-4 hectares (1 hectare = 2.5 acre) of land. Only seven per cent own 10 or more hectares of land. Taking land on lease is increasingly becoming a necessity. Incidentally, the percentage of rural households in Punjab without land at nearly 65 per cent is one of the highest in the country, according to the socio-economic and caste census.

"Most of the farmers own less than 5 acres of land. Given the yield and average price of output in the last few years, they hope to make more by adding land to what they own. What you hear about farmer distress is largely among those who farm leased land," says Inderjit Singh, chairman of the Ludhiana Central Cooperative Bank. "It is not viable to cultivate leased land. We do it in the hope that even if we manage to save Rs 2,000 an acre, it is extra income," says Jagroop Singh of Sultanpur village.

The most a farmer can make by cultivating an acre of land is Rs 50,000 in a year. Higher prices of a particular crop make them believe they can earn more. Experts say there is another reason for farmers leasing land. "Most farmers in Punjab are heavily in debt. Having exhausted all limits from the formal banking channel, they turn to local money lenders. They have to show they are cultivating more land and are in a position to pay the lender back," observes a senior official with a leading government lending institution who did not wish to be named.

"Most of what farmers borrow from banks is spent on household expenses. They need working capital. After a while it becomes a vicious cycle. You borrow from one to pay the other and you end up in a debt trap," says Jagjeet Singh, sarpanch of Chankion Khurd village, 25 km from Ludhiana. The wife of a heavily indebted farmer in Salempur village says, "It is all up to the artiyas now." She owns 0.75 acres of land and has taken 7 acres on lease.

According to reports, the average debt of a farmer in Punjab is Rs 3.32 lakh and rising. The growth in priority sector lending in the state was 23 per cent in 2013-14 and nearly 30 per cent in 2012-13. What has added to farmers' woes is low growth in farm productivity in Punjab for the last 15 years. The average yield of rice in the state has grown marginally from 3,506 kg a hectare in 2000-01 to 3,952 kg in 2013-14. In the case of wheat, the growth has been from 4,563 kg a hectare to 5,017 kg in the same period.

"What Punjab needs is diversification of the rural economy. There has been some development in areas of fisheries and dairy but these are few and far between," says Nalin Rai, assistant general manager of the National Bank for Agriculture and Rural Development.