Legalising land leasing across states continues to face multiple hurdles

While the Economic Survey last month hailed a Kerala model of land leasing, there exist multiple blocks to a comprehensive policy, in part due to differing state laws

Legalising land lease and ensuring trouble free leasing for mutual benefit has been a vexed issue in India for long. However, the Economic Survey tabled in Parliament on January 31 took note of a new model of land leasing which Kerala has adopted wherein Self-Help Groups (SHGs) can lease their land for horticulture cultivation for a fixed period of three years. The model was highlighted in the Survey as an innovative way through which agricultural land could be leased without much controversy.  

 

The Central government has since 2015 been trying to encourage states to adopt a model land leasing act to bring about some sort of uniformity and transparency in the process and ensure that tenant farmers also get benefit of government programmes and subsidies. 

 

As per the Economic Survey of FY25, under the Kerala model of land leasing, the agreement for leasing is made under the Indian Contracts Act of 1872 in which the lessee offers agriculture as a service to the landlord and shares profits or pays fixed compensation. 

 

The Gram Panchayat (GP) becomes a party to the transaction, and the agreement is notarised in the GP. Since the agreement usually lasts for three to five years, it is well-suited for cultivating horticulture crops, the Survey said. 

 

The model also encourages the lessee to maintain and nurture the quality of the land, with findings indicating an increase in farm efficiency in terms of input-output ratio in the case of group-leased land compared to owned and self-cultivated land as well as individually-leased land. 

 

This could possibly be due to better convergence achieved with central and state government support for group farming activities. 

 

The initiative has also improved land access for the poor, as more than 85 per cent of the members are in the low-income category, the Survey said. The model has been in action for the last several years in Kerala. 

 

Extent of tenant farmers in India 

 

According to the National Statistical Office’s (NSO) ‘Situation Assessment of Agricultural Households’ survey for 2018-19, 17.3 per cent of the total estimated 101.98 million operational holdings (i.e. farms) in rural India were on leased land. The share of such leased-in lands in the total area used for agricultural production was 13 per cent. 

 

Earlier NSO surveys had pegged the share of leased-in lands at 11.3 per cent in 2012-13 and 6.5 per cent in 2002-03, respectively. .  

 

However, several experts said the NSO numbers are grossly under-estimated. The actual number of tenant holdings or leased holdings, they say, is much more as most of these leases are oral agreements and do not have recorded details. 

 

For example, in Telangana, the NSO survey of 2018-19 says around 17.5 per cent of total operational holding in the state is under tenancy, but independent surveys by civil society groups have found that the number to be as high as 35 per cent. 

 

Former Commission for Agriculture Costs and Prices (CACP) chairman the late Dr Tajmul Haque had in a study done a few years back shown that almost 57 per cent of the leased land in kharif season and 54 per cent in the rabi season was on short-term leases that did not have tenurial security or stability. 

 

Efforts to legalise tenancy 

 

The Central government and states have been making multiple efforts to legalise tenancy for the past several years. Those efforts got a boost when the central government circulated a model land leasing act to states to adopt which would have paved the way for the legalisation of tenancies. 

 

Land governance is a state subject as per the seventh schedule of the constitution wherein land revenue governance system is governed by state specific acts and rules. 

 

A special land policy cell was created in the NITI Aayog, then headed by Haque, to spearhead the Centre’s efforts to convince state governments to modernise their land leasing laws and update and digitise land records. At the time, the measure was seen in many quarters as the first big reform on land after the Modi government failed to reach a consensus on amendments to the Land Acquisition Act-2013. However, after several rounds of discussions and lots of consultation, the efforts faded away. 

 

Several commentators say that the passing away of Dr Haque, who championed the cause of legalising land leases, a few years later dealt a body blow to the efforts. There is no clarity as to whether the NITI Aayog land policy cell, which had a three-year term, currently exists or not. 

 

“Generally, there is a lot of mistrust between the administration and farmers and others when it comes to issues related to land (and) until that is resolved none of the initiatives like digitisation of land records or legalising the land will be successful,” a senior policy expert said.  

 

Lack of trust, overt politicisation of land related issues, and inherent fear of losing one land has killed several innovative proposals over the last several years, this expert added. 

 

Laws that govern tenancy 

 

As per the draft report on land leasing prepared by Dr Haque, all Indian states were to be grouped into five categories based on their current status of land leasing. 

 

It found that states such as Kerala, Jammu and Kashmir and Manipur have legally prohibited leasing out agricultural land without any exception. 

 

States such as Bihar, Karnataka, Madhya Pradesh, Chattisgarh, Uttar Pradesh, Uttarakhand, Himachal Pradesh, Tripura, Telangana and Odisha allow leasing out only by certain categories of land owners, such as those suffering from physical or mental disability, widows, unmarried, separated or divorced women, members of armed forces etc. 

 

In Karnataka, only seamen and soldiers are allowed to lease out their land. In some cases, privileged raiyats like Lord Jagannath in Odisha and other recognised trusts of a public nature are also allowed to lease out land. 

 

Then there are states such as Punjab, Haryana, Gujarat, Maharashtra and Assam that do not explicitly prohibit leasing, but the tenant (excepting in Haryana) acquires the right to purchase the leased land from the owner after a specified period of creation of tenancy. 

 

In Gujarat and Maharashtra, tenancy of a tenant belonging to the Schedule Caste (SC)/Scheduled Tribe (ST) categories cannot be terminated. 

 

In Punjab, the law does not ban leasing out, but provides that a tenant of a big land owner above the ceiling is entitled to purchase his tenanted land on continuous possession for six years. 

 

Similarly, in Assam, tenants who have held land for at least three years consecutively can acquire ownership rights on payment of 50 times the revenue rate. 

 

In Andhra Pradesh, Tamil Nadu, Rajasthan and West Bengal, there is no legal ban on leasing, but there are several restrictive clauses. In West Bengal, share-cropping is allowed but not leasing on fixed rent or fixed produce basis. 

 

In Andhra Pradesh, leasing has to be for a minimum period of six years and tenancy can be terminated only by an application to the special judicial officer on any of the specified grounds. In Tamil Nadu, there is no prohibition on leasing, but the cultivating tenants cannot be evicted except on application to Revenue Divisional Officer and on violation of conditions prescribed in the Act. 

 

In ST regions, transfer of tribal land to non-tribals and in some cases even to tribals on lease basis can be permitted only by a competent authority. 

 

Model Land Leasing Law 

 

The model act circulated among states by NITI Aayog in 2016, aimed to legalise land leasing to promote agricultural efficiency, equity, and to reduce poverty. 

 

“This will also help in much needed productivity improvement in agriculture as well as occupational mobility of the people and rapid rural change,” it said in its statement of objectives. 

 

It wanted to legalise leasing in all areas to ensure complete security of land ownership rights for landowners and security of tenure for tenants for the agreed lease period. 

 

It removed the clause of adverse possession of land in the land laws of various states as it interferes with free functioning of land lease market; allowed automatic resumption of land after the agreed lease period without requiring any minimum area of land to be left with the tenant even after termination of tenancy, as was required by the laws of some states. 

 

The model law also allowed the terms and conditions of lease to be determined mutually by the landowner and the tenant without any fear on the part of the former of losing land rights or undue expectation on the part of the tenant of acquiring occupancy right for continuous possession of leased land for any fixed period. 

 

The model law also facilitated all tenants including sharecroppers to access insurance bank credit and bank credit against pledging of expected output. 

 

It also incentivised the tenants to make investment in land improvement and entitled them to claim the unused value of investment at the time of termination of tenancy.