Liberalised land leasing through government Land Bank can ease exit of distressed farmers

Opening farmland for 'liberalised leasing' through government-run 'Land Banks' can be a 'win-win reform' in the Indian farm sector, stated the latest report of the National Institution for Transforming India (NITI) Aayog taskforce on agricultural development.

The report said it will ease the exit of those farmers who find farming unattractive or non-viable and economically strengthen those farmers who want to stay and raise the scale of operational holdings.

The report suggested that NITI Aayog should prepare 'model land leasing Acts' that can be used by various states to reform their existing land lease provisions.

Contract farming, restructuring of ineffective Agriculture Produce Market Committees (APMC), allowing farmers to sell produce directly in the market, extensive use of genetically modified (GM) crops, modern technology at every step including irrigation, direct subsidy transfer for fertilizers, crop insurance and Aadhar-linked bank-accounts to transfer the relief funds to farmers are among major drastic reforms suggested by the taskforce.

"With the corporate sector keen on investing in agribusiness to harness the emerging opportunities in domestic and global markets, time is opportune for reforms that would provide healthy business environment for this sector," highlighted the paper titled "Raising Agricultural Productivity and Making Farming Remunerative for Farmers".

"A well-functioning system of contract farming will go some distance towards providing a guaranteed price as well as necessary technical support to the farmer," says the paper adding that a few experiments of direct procurement backed with technical support have shown to benefit the farmers in some States.

Headed by the Aayog's vice-chairman Arvind Panagariya, the taskforce was constituted in March to frame policy recommendations in areas like land, national common market, crop prices, fertiliser use, genetically modified (GM) technology, and agrarian distress. Its final report is still awaited. Panagariya was unavailable for the comment.

Most tenancy in India is concealed and thus unofficial. Hence, benefits intended for the tenant farmer such as disaster relief or direct benefit transfers risk often gets disbursed to the owner of the land who appears as the cultivator in the official records.

"A transparent land leasing law that allows the potential tenant to engage in written contracts with the landowner is a win-win reform. The landowner will be able to lease land without fear of losing it to the lessor and tenant would be able to get loans and government relief," states the paper suggesting digitization of the revenue and registration records to ensure the land titles.

Suggesting restructuring of APMCs and linking them to national market, the paper says the agricultural markets have witnessed "limited reforms" during the last three decades and the mandi system is characterized by "inefficient physical operations", too many intermediaries, long and fragmented market chains and low scale.

"This is depriving farmers of fair share of the price paid by the final consumer. Consequently farmers are seeking MSP for almost all crops and everywhere, which is not feasible. The farmers must be given the full right to sell their produce to whomsoever they want in virtually all products. This will minimize the number of intermediaries and farmers will receive a higher fraction of the price paid by the ultimate consumer."

Taskforce was necessitated due to acute crisis in the farm sector owing to several factors, including rising input cost and drought, with thousands of farmers committing suicide under distress. Though agriculture (including forestry and fishing) still remains the largest sector of Indian economy, its output share fell from 28.3% in 1993-94 to 14.4% in 2011- 12 and employment share declined from 64.8% to 48.9% over the same period.

The sector's annual growth rates have been approximately 3% in the 10th Plan, 4% in the 11th Plan and just 1.7% during the first three years of the 12th Plan. Per hectare farm yield of India is 3,177 kg which is much less compared to China's 4,987, France 7,599 and Germany 7,328.