REFORM IN THE LAND POLICY FOR ACCELERATED AGRICULTURAL GROWTH AND POVERTY REDUCTION

1. REFORM IN THE LAND POLICY FOR ACCELERATED AGRICULTURAL GROWTH AND POVERTY REDUCTION

2. SOME DISABLING FEATURES OF AGRICULTURAL ECONOMY • ABOUT 85 PERCENT OPERATIONAL HOLDINGS ARE SMALL AND MARGINAL LACKING ACCESS TO CAPITAL, TECHNOLOGY AND MARKET FOR GROWTH • INSTITUTIONAL ARRANGEMENTS AND POLICY SUPPORT FOR BACKWARD AND FORWARD LINKAGES ARE HIGHLY INADEQUATE • RESTRICTIVE LAND LAWS HAVE REDUCED OCCUPATIONAL MOBILITY OF PEOPLE AND ALSO THE POOR PEOPLES’ ACCESSIBILITY TO LAND DUE TO ABSENCE OF ACTIVE LEASE MARKET

3. MANY PEOPLE PREFER TO KEEP LAND FALLOW THAN TO LEASE OUT • THERE IS LACK OF MUTUALLY SUPPORTIVE AGRICULTURE - INDUSTRY SYMBIOTIC LINKAGES THAT COULD LEAD TO BETTER POST HARVEST MANAGEMENT AND HIGHER VALUE ADDITION IN THE AGRICULTURE SECTOR

4. TASKS AHEAD • REFORM IN THE LAND POLICY FOR ACCELERATED AGRICULTURAL GROWTH AND POVERTY REDUCTION • A PARADIGM SHIFT FROM SUBSISTENCE FARMING TO MARKET ORIENTED COMMERCIAL AGRICULTURE • IMPROVE VIABILITY OF SMALL AND MARGINAL FARMS • ENABLE SMALL FARMS TO BENEFIT FROM AGRICULTURAL DIVERSIFICATION AND VALUE ADDITION

5. MEANS • PROMOTE CONTRACT FARMING • LEGALIZE AND LIBERALIZE LAND LEASING • PROMOTE LAND SHARE COMPANIES IN AGRICULTURE • THESE WILL FORM PARTS OF A BROAD BASED AND INTEGRATED REFORM OF LAND POLICY FOR ACCELERATED AND SMALL FARMERS FRIENDLY AGRICULTURAL GROWTH

6. CONCEPT OF CONTRACT FARMING • CONTRACT FARMING REFERS TO A SYSTEM OF FARMING IN WHICH AGRO-PROCESSING OR TRADING UNITS ENTER INTO A CONTRACT WITH FARMERS TO PURCHASE A SPECIFIED QUANTITY OF ANY AGRICULTURAL COMMODITY AT A PRE-AGREED PRICE • IT PROVIDES AN ASSURED MARKET AND PRICE FOR AN AGRICULTURAL COMMODITY WHICH IS CRUCIAL FOR DIVERSIFIED AGRICULTURAL GROWTH • IT HELPS IMPROVE CROP YIELDS AND INCOME • IT ENABLES THE SMALL AND MARGINAL FARMERS TO PARTICIPATE IN COMMERCIAL FARMING, AS THE COMPANY WILL PROVIDE THEM WITH QUALITY INPUTS AND TECHNICAL GUIDANCE

7. SOME EXAMPLES OF CONTRACT FARMING • HIDUSTRAN LEVER LTD/PEPSICO IN TOMATO IN PUNJAB • PEPSICO IN BASMATI RICE IN PUNJAB • MAXWORTH IN HORTICULTURE CROPS IN ANDHRA PRADESH, KARNATAKA AND TAMIL NADU • VST NATURAL PRODUCTS LTD. IN CUCUMBER/PEPRIKA IN ANDHRA PRADESH • NDDB IN BANANA IN MAHARASHTRA • CADBURY IN COCOA IN KARNATAKA • SEVERAL OTHERS IN SUGARCANE, TOBACCO, OIL PALM DAIRY, POULTRY, AQUACUTURE ON SMALL SCALE

8. MAJOR IMPEDIMENTS TO GROWTH OF CONTRACT FARMING • INFORMAL NATURE OF CONTRACT FARMING WITHOUT ANY LEGAL PROTECTION • SHARE CROPPERS AND UNDER-RYOTS WHO DO NOT ENJOY SECURITY OF TENURE FAIL TO PARTICIPATE IN CONTRACT FARMING • THE BARGAINING POWER OF UNORGANIZED FARMERS VIS-A-VIS THE COMPANY REMAINS WEAK • LACK OF EFFECTIVE LINKAGE BETWEEN THE COMPANY AND AGRICULTURAL RESEARCH AND EXTENTION SYSTEM IN MATTER OF TECHNOLOGY DIFFUSION

9. POLICY RECOMMENDATIONS ON CONTRACT FARMING • AN INSTITUTIONAL ARRANGEMENT TO RECORD/REGISTER ALL CONTRACTUAL ARRANGEMENTS TO PROMOTE CONFIDENCE BETWEEN THE PARTIES AND ALSO HELP SOLVE ANY DISPUTE, ARISING OUT OF VIOLATION OF CONTRACT • DISPUTE SETTLEMENT MACHINERY • NEED FOR TRANSPARENT, PARTICIPATORY, COMPREHENSIVE AND FLEXIBLE CONTRACT • A PROVISION FOR BOTH FORWARD AND BACKWARD LINKAGES • BANK ACCOUNT OF ALL CONTRACT FARMERS AND AVAILABILITY OF AEQUATE CREDIT FACILITY

10. CONTRACT FARMERS’ SELF-HELP GROUPS OR ASSOCIATION OR COOPERATIVES AT THE PLANT LEVEL WHICH WILL IMPROVE THEIR BARGAINING POWER VIS A VIS THE COMPANY • SELECTION OF APPROPRIATE PLANT VARIETY FOR HIGHER YIELDS AND INCOME • COVERAGE OF CONTRACT FARMERS BY INSURANCE PREMIUM BEING SHARED BY BOTH THE FARMERS AND THE COMPANY • LEGALIZE AGRICULTURAL TENANCY FOR ENABLING THE TENANT FARMERS TO BENEFIT FROM CONTRACT FARMING • POLITICAL CONSENSUS TO PROMOTE CONTRACT FARMING

11. A CONDUCIVE POLICY ENVIRONMENT FOR ENCOURAGING NATIONAL AND INTERNATIONAL COMPANIES TO PROMOTE CONTRACT FARMING BY CREATING AN APPROPRIATE LEGAL, POLITICAL AND ADMINISTRATIVE SYSTEM AS WELL AS NECESSARY INFRASTRUCTURE • AMEND APMC ACTS AND OTHER RELEVANT LAWS TO PERMIT FORWARD TRADING/CONTRACT FARMING / DIRECT MARKETING AS AN ALTERNATIVE TO REGULATED MARKETS • EXEMPT AGRO-PROCESSING UNITS FROM LOCAL TAXES, MARKET FEES ETC. • IDENTIFICATION OF SOME COMMODITIES BY GOVERNMENT IN EACH STATE FOR INITIAL EXPOSURE AND RAPID IMPLEMENTATION OF THE CONCEPT, IN COLLABORATION WITH THE PARTICIPATING COMPANY

12. DEVELOP ADEQUATE INFRASTRUCTURE FACILITIES SUCH AS ROADS, PUBLIC TRANSPORT, TELEPHONES, POSTAL SERVICES, STABLE POWER AND WATER SUPPLIES, GODOWNS, COLD STORAGE FACILITIES ETC. • REFORM PUBLIC RESEARCH AND EXTENSION SYSTEMS • PROVIDE NECESSARY GUIDELINES FOR LAND USE PLANNING IN DIFFERENT REGIONS IN ORDER TO PREVENT ANY EROSION OF BIODIVERSITY DUE TO CONTRACT FARMING

13. LEGAL RESTRICTIONS ON LAND LEASING IN VARIOUS STATES • STATES/REGIONS WHERE LEASING OUT OF AGRICULTURAL LAND IS LEGALLY BANNED, EXCEPTING BY THE DISABLED, ARMED PERSONNEL ETC. • TELENGANA AREA OF ANDHRA PRADESH, BIHAR, KARNATAKA, MADHYA PRADESH, UTTAR PRADESH • STATE WHERE LEASING OUT OF AGRICULTURAL LAND IS TOTALLY PROHIBITED, WITHOUT ANY EXCEPTION • KERELA • STATES WHERE LEASING IS NOT BANNED, BUT THE SUB-TENANT ACQUIRES A RIGHT TO PURCHASE THE LEASED IN LAND WITHIN A SPECIFIED PERIOD OF CREATION OF TENANCY • GUJARAT, MAHARASHTRA, PUNJAB AND HARYANA

14. STATES/REGIONS WHERE THERE ARE NO RESTRICTIONS ON LAND LEASING • ANDHRA AREA OF ANDHRA PRADESH, ORISSA, RAJASTHAN, TAMIL NADU AND WEST BENGAL, ALTHOUGH IN WEST BENGAL ONLY SHARE CROPPING TENANCY IS PERMITTED

15. MAIN ARGUMENTS IN FAVOUR OF LEGALIZATION OF LAND LEASING • LEGALIZATION OF LEASING WOULD INCREASE OCCUPATIONAL MOBILITY OF PEOPLE • IT WILL IMPROVE THE AVAILABILITY OF LAND IN THE LEASE MARKET AND ALSO POOR PEOPLES ACCESSIBILITY TO LAND TRHOUGH LEASING • IT WILL DISCOURAGE LAND BEING KEPT FALLOW AND RESULT IN BETTER UTILIZATION OF LAND, FULLER UTILIZATION OF LABOUR AND INCREASED FARM OUTPUT • IT WOULD PROMOTE BOTH FARM AND NON-FARM DEVELOPMENT BY IMPROVING THE LAND OWNERS ABILITY AND INCENTIVE TO INVEST

16. MAJOR RECOMMENDATIONS ON LAND LEASING • REVIEW, SIMPLIFY AND LIBERALIZE LAND LEASING LAWS TO PROMOTE BOTH AGRICULTURAL EFFICIENCY AND EQUITY • LEAGALIZE LAND LEASING IN ALL AREAS WITHIN EXISTING CEILING LIMITS • REMOVE THE CLUASE OF ADVERSE POSSESSION OF LAND IN THE LAND LAWS OF VARIOUS STATES AS IT INTERFERES WITH FREE FUNCTIONING OF LAND LEASE MARKET • RECORD ALL CASES OF LAND LEASING • ALLOW AUTOMATIC RESUMPTION OF LAND AFTER THE AGREED LEASE PERIOD

17. ENTITLE AND FACILITATE ALL TENANTS INCLUDING SHARE CROPPERS TO ACCESS SHORT TERM BANK CTREDIT, AGAINST PLEDING OF EXPECTED OUTPUT • REPLACE THE SYSTEM OF SHARE CORPPING BY FIXED CASH OR FIXED PRODUCE SYSTEMS OF LEASING WHICH ARE RELATIVELY MORE EFFICIENT • ABOLISH THE EXISTING SYSTEM OF REGULATION OF RENT BY THE STATE. THE MARKET RENT, AS AGREED UPON IN WRITING BY THE LESSOR AND LESSEE SHOULD PREVAIL

18. CONCEPT OF LAND SHARE COMPANY IN AGRICULTURE • THIS IS A RELATIVELY NEW CONCEPT • IN RECENT YEARS, THE PEOPLE’S REPUBLIC OF CHINA HAVE EXPERIMENTED WITH A LAND STOCK SHARE SYSTEM IN SOME PROVINCES. ALSO, RUSSIA HAS PASSED A LAW TO FACILITATE SUCH EXPERIMENTS • LAND SHARE COMPANIES COULD BE ON THE LINE OF EITHER PRODUCER COMPANIES OR JOINT STOCK COMPANIES OR COMPANY - FARMER PARTNERSHIP WHERE THE FARMERS COLLECTIVELY MOBILIZE THEIR RESOURCES, GAIN ACCESS TO MODERN TECHNOLOGY AND EMPLOY PROFESSIONALS TO MANAGE ENTERPRIZES THAT SERVE THEIR NEEDS

19. THIS WILL HELP IN REALIZING THE FULL POTENTIALS OF ECONOMIC GROWTH IN RURAL AREAS IN GENERAL AND CREATING ADDITIONAL EMPLOYMENT OPPORTUNITIES AND INCOME FOR THE EXISTING NON-VIABLE SMALL AND MARGINAL LANDHOLDERS

20. SUGGESTED RULES/GUIDELINES FOR THE FORMATION OF LAND SHARE COMPANY • THE ACCESS TO SHARES OF LAND SHARE COMPANY SHOULD BE LARGELY RESTRICTED TO FARMERS/LAND HOLDERS ONLY, WHO ARE PREPARED TO LEASE OUT LAND TO THE COMPANY ON LONG TERM BASIS AGAINST ISSUE OF SHARE(S). • ALSO THERE SHOULD BE A PROVISION TO INCLUDE ALL FARMERS OF A VILLAGE OR OF ANY CLUSTER OF VILLAGES.

21. EACH FARMER I.E. LAND HOLDER WILL BE ALLOTTED SHARE(S) OF THE COMPANY ACCORDING TO THE MARKET VALUE OF THE LAND BEING BROUGHT IN (ON LEASE TERMS) BY THE FARMER AS SHARE CAPITAL • THE LAND SHARE COMPANY WILL OPERATE ON COMMERCIAL BASIS • THE MANAGEMENT OF THE AFFAIRS OF THE LAND SHARE COMPANY WILL BE IN THE HANDS OF AN ELECTED BOARD OF DIRECTORS. AS IN THE CASE OF COOPERATIVE AND OTHER PRODUCER COMPANIES, VOTING WILL BE ON THE BASIS OF ONE MEMBER ONE VOTE, IRRESPECTIVE OF THE VALUE OF SHARE OF EACH MEMBER. HOWEVER, THE GENERAL BODY OF MEMBERS WILL BE THE ULTIMATE AUTHORITY IN MATTERS OF POLICY

22. EACH SHARE HOLDER (LAND OR CASH) WILL RECEIVE A SHARE IN THE TOTAL PROFIT/DIVIDEND OF THE COMPANY IN PROPORTION TO HIS SHARE HOLDING. • SHARES SHOULD BE HERTIABLE. IT SHOULD ALSO BE TRANSFERABLE TO OTHER SHARE HOLDING MEMBERS. HOWEVER, THE SHARES SHALL NOT BE PUBLICLY TRADED IN ORDER TO AVOID ANY RISK OF TAKEOVER BY CORPORATES OR OTHER NON-FARMING INTERESTS • THERE COULD BE A CONTRACT FARMING ARRANGEMENT BETWEEN THE COMPANY AND THE SHARE HOLDING FARMERS. THE COMPANY WILL PROVIDE NOT ONLY ASSURED MARKET FOR THE FARM PRODUCE, BUT ALSO ENSURE SUPPLY OF QUALITY SEEDS, INPUTS AND CREDIT TO THE FARMERS OPTING FOR CONTRACT FARMING

23. THE COMPANY BASED ON LAND SHARE SYSTEM SHOULD BE ELIGIBLE TO RECEIVE CONCESSIONAL CREDIT AND OTHER INVESTMENT SUBSIDIES/TAX EXEMPTIONS ALLOWED FOR THE PROMOTION OF AGRO-PROCESSING ENTERPRISES • THE COMPANY SHOULD HAVE THE RIGHT TO CONVERT AGRICULTURAL LAND FOR NON-AGRICULTURAL USES, INCLUDING FOR PLANT SITES AND OTHER NECESSARY INFRASTRUCTURE FOR THE PURPOSE OF ITS BUSINESS WITH THE CONSENT OF MAJORITY OF SHARE HOLDERS. TO THE EXTENT POSSIBLE, THE COMPANY SHOULD AVOID CONVERTING AND USING AGRICULTURAL LAND BELONGING TO SMALL AND MARGINAL FARMERS AND TRIBAL FARMERS TO NON-AGRICULTURAL USES • IN THE EVENT OF LIQUIDATION OF THE COMPANY, THE SHARE HOLDERS, PARTICULARLY SMALL AND MARGINAL FARMERS AND TRIBALS SHOULD GET BACK THEIR LAND RIGHTS IN RESPECT OF LAND COVERED BY THE SHARE HOLDING

24. CONCLUSIONS • THE ABOVE MENTIONED REFORMS WOULD BE CRUCIAL FOR THE GROWTH OF MARKET ORIENTED AGRICULTURE,. RURAL DIVERSIFICATION AND VALUE ADDITION • THESE WILL IMPROVE THE VIABILITY OF SMALL OFARMS AND ENABLE THEM TO BENEFIT FROM MARKET LED COMMERCIAL AGRICULTURE • THESE WILL HELP PROMOTE BOTH FARM AND NON-FARM DEVELOPMENT

25. THANKS