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Land leasing reforms can prove to be very advantageous for states

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By Arvind Panagariya

Land leasing laws relating to rural agricultural land in Indian states were overwhelmingly enacted during decades immediately following the independence. At the time, the abolition of Zamindari and redistribution of land to the tiller were the highest policy priorities.

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Top leadership of the day saw tenancy and sub-tenancy as integral to the feudal land arrangements that India had inherited from the British. Therefore, tenancy reform laws that various states adopted sought to not only transfer ownership rights to the tenant but also either prohibited or heavily discouraged leasing and sub-leasing of land.

Politically influential landowners were successful in subverting the reform, however. As P.S. Appu documents in his brilliant 1996 book ‘Land Reforms in India’, till as late as 1992, ownership rights were transferred to the cultivator on just 4 percent of the operated land. Moreover, just seven states, Assam, Gujarat, Himachal Pradesh, Karnataka, Kerala, Maharashtra, and West Bengal, accounted for some 97 per cent of this transfer.

In trying to force the transfer of ownership to the cultivator, many states abolished tenancy altogether. But while resulting in minimal land transfer, the policy had the unintended consequence of ending any protection tenants might have had and forced future tenants underground.

Some states allowed tenancy but imposed a ceiling on land rent at one-fourth to one-fifth of the produce. But since this rent fell well below the market rate, contracts became oral in these states as well, with the tenant paying closer to 50 per cent of the produce in rent.

Many large states including Telangana, Bihar, Karnataka, Madhya Pradesh and Uttar Pradesh ban land leasing with exceptions granted to landowners among widows, minors, disabled and defence personnel. Kerala has for long banned tenancy, permitting only recently self-help groups to lease land.

Some states including Punjab, Haryana, Gujarat, Maharashtra and Assam do not ban leasing but the tenant acquires a right to purchase the leased land from the owner after a specified period of tenancy. This provision too has the effect of making tenancy agreements oral, leaving the tenant vulnerable.

Only the states of Andhra Pradesh, Tamil Nadu, Rajasthan and West Bengal have liberal tenancy laws with the last one limiting tenancy to sharecroppers. A large number of states among them Rajasthan and Tamil Nadu, which otherwise have liberal tenancy laws, do not recognize sharecroppers as tenants.

The original intent of the restrictive tenancy laws no longer holds any relevance. Today, these restrictions have detrimental effects on not only the tenant for whose protection the laws were originally enacted but also on the landowner and implementation of public policy. The tenant lacks the security of tenure that she would have if laws permitted her and the landowner to freely write transparent contracts.

In turn, this discourages her from making long-term investments in land and also leaves her feeling perpetually insecure about continuing to maintain cultivation rights. Furthermore, it deprives her of potential access to credit by virtue of being a cultivator.

Landowner also feels a sense of insecurity when leasing land with many choosing to leave land fallow. The latter practice is becoming increasingly prevalent with landowners and their children seeking non-farm employment.

Public policy too faces serious challenges today in the absence of transparent land leasing laws. There are calls for expanded and more effective crop insurance. Recognizing that such insurance is likely to be highly subsidized, as has been the case with the past programs, a natural question is how to ensure that the tenant who bears the bulk of the risk of cultivation receives this benefit.

The same problem arises in the face of a natural calamity; if tenancy is informal, how do we ensure that the actual cultivator receives disaster relief.

In a similar vein, fertilizer subsidy today is subject to vast leakages and sales of subsidized fertilizer in the black market. In principle, these leakages could be sharply curtailed by the introduction of direct benefit transfer (DBT) using Aadhar seeded bank accounts along the lines of the cooking gas subsidy transfer. But in face of difficulty in identifying the real cultivator and therefore intended beneficiary, DBT cannot be satisfactorily implemented.

In the context of the difficulties in land acquisition under the 2013 land acquisition law, states wishing to facilitate industrialization can further benefit from liberal land leasing if they simultaneously liberalize the use of agricultural land for non-agricultural purposes.

Currently, conversion of agricultural land for non-agricultural use requires permission from the appropriate authority, which can take a long time. State governments can address this barrier by either an amendment of the law to permit non-agricultural use or by the introduction of time-bound clearances of applications for the conversion of agricultural land use in the implementing regulations.

The reform will open up another avenue to the provision of land for industrialization: long-term land leases that allow the owner to retain the ownership while earning rent on her land. In addition, she will have the right to renegotiate the terms of the lease once the existing lease expires.

Therefore, the introduction of transparent land leasing laws that allow the potential tenant or sharecropper to engage in written contracts with the landowner is a win-win reform. The tenant will have an incentive to make investment in improvement of land, landowner will be able to lease land without fear of losing it to the tenant and the government will be able to implement its policies efficiently.

Simultaneous liberalization of land use laws will also open up an alternative avenue to the provision of land for industrialization that is fully within the state’s jurisdiction and allows the landowner to retain ownership of her land.

A potential hurdle to the land leasing reform laws is that landowners may fear that a future populist government may use the written tenancy contracts as the basis of transfer of land to the tenant and therefore would oppose the reform. This is a genuine fear but may be addressed in two alternative ways.

The ideal way would be yet another major reform: giving landowners indefeasible titles. States such as Karnataka that have fully digitized land records and the registration system are indeed in a position to move in this direction. For other states, such titles are a futuristic solution.

Therefore, in the interim, they can opt for the alternative solution of recording the contracts at the level of the Panchayat eschewing acknowledging the tenant in the revenue records. They may then insert in the relevant implementing regulations the clause that for purposes of ownership transfer, only the tenancy status in revenue records would be recognized.

State governments must seriously consider revisiting their leasing (and land use) laws to determine if they could bring about these simple but powerful changes to enhance productivity and welfare all around. We, at the NITI Aayog, stand ready to assist them in this endeavour.

(IANS)

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Remarkable Insight into How Governance in India Ought to be Upgraded

It is presumed that the Director LBSNAA, who was part of the planning of this important event, would have the full address of the PM placed

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Governance, India, Prime Minister
The profound message coming from him was that the officers of the All India Services were meant to work with a 'national mindset' regardless of what posts they held and that they must rise. Wikimedia Commons

With a remarkable insight into how the governance in this country ought to be upgraded, Prime Minister Modi while addressing the Probationers of Indian Civil Services attending the Foundational Course, outlined the big picture of ‘the mission and delivery’ that the officers manning the famed ‘steel frame’ of India were expected to measure up to in their long years of duty ahead. In a first time event, the officers who were in the early phase of their training were assembled at a place outside of the LBSNAA Mussoorie — at Kevadia in Gujarat, the venue of Sardar Patel’s statue — for the Prime Minister’s address on October 31 marking the National Unity Day.

The Prime Minister, in fact, spent the better part of the day with them. The profound message coming from him was that the officers of the All India Services were meant to work with a ‘national mindset’ regardless of what posts they held and that they must rise above domestic divisions of caste, creed and region to always decide on what would be in the larger interest of the nation and the common man. It is presumed that the Director LBSNAA, who was part of the planning of this important event, would have the full address of the PM placed in the libraries of the Mussoorie Academy as well as the premier training institutes of all national civil services.

The three most important points of strategic guidance that Prime Minister Narendra Modi presented to the young officers were that they should consider themselves primarily as service providers, that they should work for the higher objective of promoting ‘ease of living’ keeping the poorest in view and that they must not get into the habit of shunning decision making and yielding to the status quo. He reminded them that the bigger opportunities ‘that the nation was providing them’ also exposed them to higher responsibilities and told them upfront that negative perceptions about bureaucracy had to be ended. Perhaps the most incisive comment the Prime Minister made was that governance should neither have a ‘suppressive impact’ nor should it be ineffective to the point of creating the illusion that there was ‘no government’ in place. This last is the crux of what needs to happen in India by way of a demonstrable reform in governance.

Bureaucracy likes to work on the borrowed strength of its political masters and not on the foundation of sound judgement dictated by its own in-depth experience of years of public service. There is no other country that provides the equivalent of IAS and IPS in terms of the high starting point of a career in civil service that a meritorious young person gets — making one the Collector, a virtual ‘king’ of a big territory called the District and the other the SSP, a Commander in Chief of thousands of armed men in uniform and personnel of the civil police there — all in the course of just 5-6 years of service.

Governance, India, Prime Minister
The Prime Minister, in fact, spent the better part of the day with them. Wikimedia Commons

It is ironic that in their journey up the promotion ladder, they become reclusive and desk bound and tend to lose out on their role as a mentor for their juniors. Prime Minister Modi did not forget to remind the probationers that their outreach to the people must not diminish and convey it to the seniors in the administration and the police that the old tradition of an outgoing officer leaving behind instructive ‘notes’ for his successor deserved to be restored. It is difficult to find another example of the chief of the political executive governing a big democracy like India’s, himself giving such explicit apolitical advice to the bureaucracy on how to improve upon its working.

In a subtle mentoring of the young officers done by the Prime Minister himself, he enthused them to believe that they were uniquely placed to improve the ‘ecosystem of governance’ for the nation’s ‘capacity building’. He suggested that in the first years of their posting amongst the people in a district, they should work for ‘one district, one problem, total solution’. This is an extremely thoughtful way of getting the most productive results out of the initial years of the civil services officers when they were still fired with passion for work and relatively unspoilt by extraneous influences.

In fact, there is a case for India ‘going back to the districts’ for governance as the collector and SSP between themselves can monitor both development and security in their district segment. This tradition has broken down because their seniors — chief secretary and DGP — do not back them for reasons that are known. The centre must find a way of having a say in the appointment of these two top officials — the Supreme Court has already facilitated this process in respect of the DGP which should be replicated for the appointment of the chief secretary as well. The crucial point is about UPSC drawing up a panel in consultation with the state government for the purpose — an idea supported by the apex court implicitly on the ground that the centre had a responsibility for tracking the performance of IAS and IPS officers whom it recruits and trains before it allocates them to the states.

Prime Minister Modi’s address at Kevadia touched on a basic principle of governance — it should provide stability without becoming suppressive. In the name of sending out a message that India had a ‘strong’ government, the bureaucracy including the enforcement agencies are beginning to exercise their power in a manner that impacted adversely the average law abiding citizen — not primarily the big offenders. The two major coercive instruments of a democratic state — police and tax collectors — need to be on a responsible course to avoid creating the impression that they were out to ‘rule’ the people and not serve them.

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In Delhi, the traffic police is busy sending over speeding notices without specifying the excess speed recorded in each case while no effort is made to detect ‘lane surfing’ — a dangerous form of driving — that would require hard work on the part of the policemen. On the tax front, a long retired senior official, an octogenarian, who had received appreciation letters for tax payments was hauled up for some omission in the IT return that he had filed 11 years ago. The old man had to endure a long correspondence to establish that it is the computerised IT system that had failed to record certain entries.

Apparently an army of junior functionaries deployed for making a ‘total scan’ is exercising no discretion about concentrating on high income businessmen and professionals rather than on government servants. In the Modi regime, the responsibility of supervising senior officers has to be pushed up in the interest of governance. Just as Home Minister Amit Shah is directly overseeing the functioning of the internal security machinery, other ministers must take charge of the performance of their bureaucrats in terms of their public service orientation and pro-people decision making. (IANS)