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The NITI Aayog is considering a proposal for model law that will help increase farm productivity by reviving lease farming through securing the rights of the agricultural land owners and helping them lease their land to tenant farmers, who can then access credit and insurance from the government. The law has been mooted by an expert committee led by T. Haque, former head of the Commission for Agricultural Costs and Prices, that was formed in September 2015 to look into ways to liberalise land leasing.

Most state governments have either legally banned or imposed restrictions on agricultural land leasing. Restrictive land leasing laws have forced tenancy to be informal, insecure and inefficient. Informal tenants are most insecure and inefficient, as they do not have legal sanctity and access to institutional credit, insurance and other support services

According to the report states impose varying degrees of restrictions on leasing of farm land. While Kerala prohibits leasing altogether, states like Bihar, Madhya Pradesh and Uttar Pradesh allows leasing out farm land by certain category of land owners who are disabled, widows or are in the armed forces.

In Punjab, Haryana, Gujarat and Maharashtra tenants have the right to purchase land from the owner after a period of tenancy, a rule that discourages leasing or force owners to change tenants frequently.

Across the country over 20% of land holdings are farmed by tenant farmers who cannot access facilities like credit, in states like Andhra Pradesh this could be over 60%.

Current restrictions on land leasing have reduced the occupational mobility of landowners who wants to take up employment outside agriculture but are forced to stick to their land due to the fear of losing it.

Legal ban or restrictions on land leasing has led to ‘concealed tenancy’ due to which tenant farmers do not have any incentive to invest in land improvement. Land leasing laws framed in the wake of independence have lost their relevance today.

Lease farming is an economic necessity and not a symbol of feudalism, as it was thought before. The growth of an active land lease market, would be helpful for the rural poor to get out of poverty trap. The fear that liberalization of land leasing may result in concentration of operational holdings in a few hands, can be allayed by allowing leasing in within the existing ceiling limits in a state (if needed).

Marginal and small farmers would be better off leasing out their land to more viable farmers for rent, while seeking paid employment within or outside agriculture.

The proposed law needs to be more protective for the tenant farmer like the Licensed Cultivator’s Act in Andhra Pradesh and Telangana where state departments play an active role to record tenancies so that tenant farmers can avail credit, insurance and disaster relief.

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At present, farm marketing varies not only from state to state but also within the states, with each wholesale mandi being governed by its own Agricultural Produce Marketing Committee (APMC). These mandis require separate licences and they charge different marketing fees. The use of technology is low, which means that there is very little transparency in transactions, which eventually hurts farmers.A pan India trading portal , E-National Agricultural Market (NAM) is designed to create a unified national market for agriculture commodities. The first-ever National Policy for Farmers brought out in 2007 by the United Progressive Alliance government also mentioned this need.  The new integrated electronic platform begins, in a limited way, to address many of these problems. Some features of E- NAM as follows:

  1. Farmers can showcase their produce online from their nearest market and traders can quote price from anywhere.
  2. Results in increased number of traders and greater competition.
  3. This would allow them to escape the cartels that dominate local mandis and strangle the freedom to trade.
  4. Ensure open price discovery and better returns to farmer.
  5. Will cover 585 markets across country in three years during first phase. India has 2477 principal mandis and 4843 submarkets  created by the APMCs.

Limitation in implementation of E-NAM: Wide quality variation in farm produce within a state , and even wider variations across states, pose a challenge for the new market. Commodities with similar standards nationally are few. Wheat in Punjab and Haryana is of medium quality while in MP and  Gujrat it is of superior. An electronic platform can only trade standardise commodities. For the rest , the NAM might not be the right platform. A state agriculture market model launched in 2009 by the NCDEX , provide some lessons in market integration. The Karnataka Model  a joint initiative of govt of Karnataka and NCDEX e- Markets, was the first such initiative.

But it is dangerous to presume that a model that has worked well at the state level will automatically succeed at the national level as well. There are too many prerequisites for that to happen. The three most critical among them are a single wholesale trading licence valid across the catchment area, a single-point levy of market fees, and e-auction as the mode for price discovery. Currently, there are too few warehouses equipped with facilities for weighing, grading and standardisation of stocks sold through the electronic platform. Moreover, aggregators would need to emerge that pool together small marketable surpluses of individual farmers for sale to bulk buyers to attract competitive bidding. The Small Farmers Agribusiness Consortium (SFAC), the nodal agency for running the new electronic platform, can serve as an aggregator through its existing or specially created local units.

Getting states on board for full agricultural marketing reform will also be difficult.

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Rural Distress is growing (Due to falling market prices of agri produce, unseasonal rains, faulty MSP(Minimum Support Price) regime while inadequate supply of fertilisers add to this ). Ramesh Chand committe report on MSP shows some way out. Some of its recos as below:

a)committe suggested  “Deficiency Price Payment mechanism” for crops to which MSP is declared but purchases are not materialised. Because CACP recommends price policy of 24 crops but purchase of only six takes place and even this happens where government procurement system is good and person has surplus to sell . In such a situation govt can provide difference b/w market price and MSP to farmers in case market price is below MSP.This would not have negative impact on the market price and subsidy given to farmer in such a way would not attract any WTO sanction.

b) Need to change the current methodology for calculating cultivation cost as it has lacunae. It dose not involve full value of family labour, the rental value of land, the interest on capital, the depreciation of fixed assets, etc. So committee suggested that Head of a family engaged in farming should be valued at skilled-wage rates,the interest on working capital should be estimated for whole, not half, of the period of a crop season,the land rental values should be based on actual rates prevailing in the sample villages and Interest & depreciation on fixed capital be projected by raising them at the rate of inflation in construction material etc.

c) CACP be consulted in Export – Import decisions as they are generally taken in the interest of consumer rather than the farmers.

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