Reforms for Agricultural Growth and Rural Development

Author(s): T. Haque
Source: Economic and Political Weekly, Vol. 38, No. 48 (Nov. 29 - Dec. 5, 2003), pp. 5031-
5033
Published by: Economic and Political Weekly
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 Contract farming is different from corpo-

Reforms forAgricultural Growth rate farming, inasmuch as the land rights

of contract farmers remain fully protected.

and Rural Development

The spread of contract farming could
significantly help increase the income of
small farmers and also help promote
agricultural diversification and value
Land reform policies aimed to promote agricultural growth and addition. Aggarwal however mentioned
alleviate rural poverty have had limited success. As a recent that promotion of contract farming would
require an appropriate institutional arrange-
workshop on land reform suggested, the potential of new reform ment at the local level, for speedy settle-
approaches such as contract farming, legalising procedures for ment of disputes, if any.
land leasing, sanctioning homestead-cum-garden plots for the poor In his own presentation, the author made
and landless need to be suitably examined and exploited. a plea to legalise land leasing, as legal
restrictions on leasing out of agricultural
land in several states, have defeated the
T HAQUE nature. Besides, the reform in land policy
very purpose of land reform. It has re-
should address the problem of landlesssulted in the existence of concealed ten-
he department of agriculture and agricultural labourers. There should beancy which is more exploitative and less
cooperation, government of India, efforts to allot homestead-cum-gardenproductive. Legalisation of land leasing
in collaboration with the depart- plots to each landless family instead of
will help improve occupational mobility
ment of rural development, government of of people and also aid poor people's
either only homestead plot or constructed
India and rural development institute, uni-house, as in Indira Awas Yojana. Theseaccessibility to land through the growth
versity of Washington, Seattle organised new approaches to land reform would not of active land lease market. At present,
a national workshop on Reforms in Landonly accelerate the pace of diversified many farmers prefer to keep their lands
Policy for Accelerated Agriculturalagricultural growth, but would also helpfallow than to lease them for fear that they
Growth and Rural Development on Sep-alleviate rural poverty. would lose their land rights in case if they
tember 1, 2003 in New Delhi. Nearly 50 Roy Prosterman and Jennifer Brown ofdid so. The fear expressed by some people
senior level officers of government of Indiathe Rural Development Institute, Seattle, that legalisation of leasing would lead to
and various state governments mainly from who presented a paper on the benefits of the growth of reverse tenancy and greater
the department of agriculture, revenue andhomestead-cum-garden plots mentioned concentration of landholding, seems to be
rural development, and experts partici- that Indian policy-makers concerned with unfounded, as necessary safeguards can
pated in the workshop. Among those who rural development are faced with a seriousbe provided in law to allow leasing in and
attended the workshop were R C A Jain,challenge today. On the one hand, rural leasing out of agricultural land within the
secretary, department of agriculture and landlessness remains a substantial prob- ceiling limits fixed in different states.
cooperation, government of India, M lem at the root of much of India's rural Keeping in view the fact that there is little
Shankar, secretary, department of ruralpoverty; on the other hand, there is littlescope and even will-power on the part of
development, government of India, Roypolitical will to address the problem the government to implement redistributive
Prosterman, chief, Rural Developmentthrough redistributive land reform. Basedland reform, improvement in the poor
Institute, Seattle, US. on the results of a comprehensive house- people's access to land through an active
In his inaugural address, M Shankarhold survey in Kamataka and West Bengal,land lease market would be crucial for
mentioned that the main objectives ofRoy and Jennifer said that allotment ofpoverty alleviation and raising farm in-
reforms in land policy should be to pro-about 7-cent rural house and garden sitescomes.
mote agricultural growth and alleviate ruralto landless agricultural labourers would The representatives of the state gov
poverty. In the past, we have achievedmake a significant contribution to improv-ments expressed the view that pro
very limited success in land reforms anding their livelihoods. A properly conceivedreforms are essential for rapid agricu
scheme of allotment of homestead-cum-
poverty alleviation. Therefore, the poten- growth and rural transformation. The
tial of new reform approaches such asgarden plots can significantly improvecipal secretary, agriculture, govern
contract farming, land leasing and home- income and food and nutritional securityof Gujarat said that contract farmin
stead-cum-garden plots in acceleratingof poor landless families. This could bea win-win situation for both farmers and
agricultural growth and poverty allevia-a better substitute for the current Indira
the company. The small farmers who are
tion should be properly examined andAwas Yojana and would also require less currently deprived of any market and price
exploited. R C A Jain, presented a keynoteresources, while benefiting greater num- support would immensely benefit from it.
paper which highlighted the need for ber a of landless familites. This could also As some political leaders in the country
paradigm shift from subsistence farming be thought of as a viable scheme for agri- have a preconceived notion that contract
to market-orientedcommercial [Link] diversification and value addi- farming is similar to corporate farming,
He pointed out that agricultural growthtion, involving marginal farmers and land- the term 'contract farming' could be sub-
rate can be accelerated only through less agricultural labourers. stituted by 'contract for marketing of ag-
mutually supportive forward and back- P K Aggarwal, joint secretary in the ricultural produce' which could bring it
ward integration leading to better postministry of agriculture, presented a paper
greater appeal and acceptance.
harvest management and higher valueon contract farming. Aggarwal said thatVinod Aggrawal, department of survey,
addition in the agricultural sector. Thisthe ministry of agriculture, had prepared
settlements and land records, government
would require substantive reforms in thea model of contract farming, the adoption
of Andhra Pradesh and S Bhattacharya,
land policy of the country. These reformsof which would immensely benefit small secretary, agriculture, government of
should be directed to legalise land leasingand marginal farmers in accessing tech-
Andhra Pradesh felt that ban on leasing
and promote contract farming as well asnology, quality inputs and assured price out of agricultural land was probably
the system of land share company. Theand market support. He also pointed out relevant in the period immediately after
whole process of market orientation shouldthat contract farming is not corporate independence when there was a demand
be farmer friendly and participatory infarming, as it is commonly [Link] need for abolition of intermediaries/

Economic and Political Weekly November 29, 2003 5031

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All use subject to [Link]
zamindari. But in the present context, it government of Bihar expressed the view benefit due to improvements in yield and
was essential to liberalise land leasing in that opposition to the proposed reforms,income because of his access to techno-
order to enable the large farmers to lease namely, contract farming and legalisation
logy, quality inputs and assured price and
out land and take up non-farm activities, of land leasing is basically due to fixed
market support. Similarly, the company
while allowing the marginal and small mindset of people. According to him, thegains from assured supply of quality raw
farmers to lease in land and improve their proposed reforms would help improve the material at a pre-agreed price. However,
size of holding. The legalisation of land the success of contract farming would
socio-economic condition of the rural poor.
leasing would help in rapid rural transfor- The representatives of the government of depend on the following factors:
mation. S K Goel, principal secretary, Madhya Pradesh, Punjab and Haryana(a) There should be an institutional ar-
agriculture, government of Maharashtra accepted the reform proposals without any rangement to record/register all contracts,
felt that even though contract farming and reservation. In fact, Madhya Pradesh has may be with the local panchayat or some
legalisation of land leasing would appear already drafted a model bill, almost on the
government machinery. This will promote
to negate the benefit of earlier land reform same lines, as indicated in the paper pre-confidence between the parties and also
measures, it is not really so. These are new sented by P K Aggarwal. It was also
help solve any dispute, arising out of
land reform approaches, which will help violation of contract.
interesting to observe that representatives
promote the growth of both agricultural of all the state governments welcomed the (b) The contract should be managed in
and non-agricultural enterprises in rural idea of allotment of homestead-cum-gar- a more transparent and participatory
areas and create additional employment den plots as a potentially viable scheme manner, so that there is greater social
and income opportunities for the farmers. consensus in handling contract violation
for rural poverty alleviation. This could be
Prasadranjan Ray, principal secretary, adopted either in lieu of the existing Indira
from either side without getting involved
revenue and land reforms commissioner, Awas Yojana or even as a new scheme of in costly as well as lengthy process of
government of West Bengal pointed out agricultural diversification and povertylitigation.
that government of West Bengal was open alleviation. (c) The contract farming should have a
to any reform proposal that aims at bene- The main conclusions of the workshop provision for both forward and backward
fiting the small and marginal farmers and can be highlighted as follows: linkages. Unless both input supply and
landless farmers. He also said that there market for produce are assured, small
was lot of misunderstanding at some levels Contract Farming farmers will not be in a position to par-
about some proposed reforms in land ticipate in contract farming.
policy for which much more debate and The contract farming arrangement is a (d) In case of crop loss due to either pests
sensitisation process would be [Link]-win situation for both the company and diseases or adverse weather condition,
Ashok Vardhan, additional member, and the contract farmers. The farmers contract farmers should be adequately

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5032 Economic and Political Weekly November 29, 2003

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covered by crop insurance, for which the rent should be the market rent, as agreed (f) Each shareholder (land or cash) will
premium should be paid equally by the receive a share in the total profit/dividend
upon in writing by the lessor and the lessee.
farmers and the company. of the company in proportion to his share-
(e) In many states, agricultural tenancy Land Share Company holding. In respect of land shares, the
is legally banned, although concealed in Agriculture company could guarantee a minimum
tenancy exists. Tenants who do not enjoy return on capital.
security of tenure are not able to participate (a) The concept of land share company(g) There could be a contract farming
in contract farming. Hence, legalisation of in agriculture does not exist in India. arrangement between the company and the
tenancy would be a precondition for en- shareholding farmers. The company will
However, it is possible to float a land share
abling the tenant farmers to benefit from agro-processing company in which farm- provide not only assured market for the
contract farming. ers of all categories may have the option farm produce, but also ensure supply of
(f) APMC acts and other relevant laws to become shareholders in proportion qualityto seeds, inputs and credit to the
should be amended to permit forward their size of holdings. farmers opting for contract farming.
trading/contract farming/direct marketing (b) There would be a provision to include (h) The company-based on'land share
as an alternative to regulated markets. system should be eligible to receive
all farmers of any specified village orcluster
(g) In order to promote contract farming, concessional credit and other investment
of villages as shareholders. In order to become
the government should identify some a shareholder, the farmer leases out his landsubsidies allowed for the promotion of
commodities in each state for initial ex- to the company and receives a share in the agro-processing enterprises.
posure and rapid implementation of the equity of the company. At the same time(i) In the event of liquidation of the
concept, in collaboration with the partici- he can lease in his own land as also addi- company, the shareholders, particularly
pating company. small and marginal farmers and tribals
tional land for cultivation from the company
by paying a fixed rent. should get back their unincumbered land
(c) It is expected that development of rights in respect of land (leased to the
Land Leasing
such participatory land share companies incompany) covered by the shareholding.
(a) The existing laws, governing landagriculture would accelerate the pace of The liabilities of the company should be
leasing in various regions should be re- both agricultural and non-agricultural met by disposing of non-land assets of the
viewed, simplified and liberalised in order development in the rural areas. The fear company.
to promote both agricultural efficiency and that such a move may alienate the poor
equity. from his land, in case the company suffers Allotment of Homestead-Cum-
(b) The land leasing should be made a loss or liquidation, can also be addressed
Garden Plots
legal in all areas, subject to the provision by taking necessary safeguards.
that the size of operational holding of a Several state governments in the past
farm should not be above the ceilings fixed have allotted homestead land to poor
Suggested Rules/Guidelinesforthe rural
in respect of various categories of land in households. However, the size of home-
Formation of Land Share Company
each state. In states where ownership stead plot is too low in most cases and is
holding is the basis for ceiling, the law enough only for house construction. In
(a) The land share company in agriculture,
should be accordingly amended. based on land stock share system should becases where the size is relatively large, the
(c) The clause of adverse possession of formed and governed under the Companies poor people benefited by growing veg-
land in the land laws of various states
Act to be amended for the purpose. etables and horticultural crops. It was
(b) The access to shares of land sharetherefore, suggested that government
should be done away with, as it interferes
company should be largely restricted to localshould (i) initiate programmes that allo-
with free functioning of land lease market.
(d) Leases could be for any duration,
farmers/landholders, who are prepared to cate homestead and garden plots of at least
namely, seasonal, annual or for more lease
thanout land to the company on long-term 7 cents and up to 10 cents in size to rural
a year. Also the land owners will havebasis
the against issue of a share(s). However, landless families; (ii) consider reallocating
up to 25 per cent of the authorised/paid up
right of automatic resumption of land after some or all of the government resources
the agreed lease period. capital of a company can be subscribed to for 'rural housing' towards the purchase
in cash by landholders as well as otherof larger-size homestead and garden plots;
(e) All such cultivators who have leased
(iii) include a component of government
categories of shareholdei . There should
in land even for a season or year should
be entitled to access short-term bank credit.
also be a provision to include all farmerspurchase of appropriately located land in
of a village or of any cluster of villages.a homestead and garden allocation scheme;
(f) As far as possible, the system of share
cropping should be replaced by fixed cash (c) Each farmer, i e, landholder will beand (iv) provide legal rights to homestead
or fixed produce systems of leasing. Parti-allotted share(s) of the company according and garden land in the joint names of
cularly, the state like West Bengal which to the market value of the land being husband and wife.
recognises only share cropping tenancies brought in (on lease terms) by the farmer Allocating sufficiently sized homestead
and not the fixed rent tenancies, should as share capital. and garden plots to the poorest of India's
suitably amend the law in this regard. By (d) The land share company will operate rural poor can provide them with enhanced
and large, fixed rent tenancies are more on commercial basis. Its main function status and give them the opportunity to use
efficient and also favourable to a tenant, would be to produce, process, manufacture their own labour and ingenuity to increase
as he does not have to share the result of and sell agricultural and allied produce. their income, augment their food supply,
his extra efforts put in farming. (e) The management of the affairs of improve
the their access to credit and slowly
(g) Land leasing policy should be such land share company will be in the hands build up capital assets. This deserves
as to promote contract farming so that of an elected board of directors. As in theconsideration as part of a revised agenda
small farmers could benefit from adoption case of cooperative and other producer for land reform in India. At the end repre-
of new technology and assured market companies, voting will be on the basissentatives
of of several state governments
provided by the company one member one vote, irrespective of suggestedth
the that there should be similar
(h) The existing system of regulation value
of of share of each member. However, sensitisation exercise at the state level,
rent by the state should be done away with the general body of members will be involving
the local level policy-makers and
in regard to land leasing. In principle theultimate authority in matters of policy. administrators. 3l1

Economic and Political Weekly November 29, 2003 5033

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