Context
The experience of states like Andhra Pradesh is encouraging and some other states are already experimenting with empowering tenant farmers.
Dual challenge
Author states that more than half of India’s labour force is still connected directly or indirectly to agriculture for its livelihood. This sector gets one-seventh of the national income. Its income share is shrinking rapidly but its employment share is not. Hence the dual challenge is to
- Increase income share of Agriculture sector
- Increase the rate of employment absorption into industry and services
Unique development model
Author points out that India will perhaps have to forge a new and unique development model.
- Increasing the income as well: This would mean that unlike in the West or even in China, our aim should not be solely to decrease the number of households that depend on agriculture, but in fact increase the incomes accruing to them
Credit flow to agriculture
- The 70th round of the National Sample Survey on the “Situation of Agricultural Households” shows that 48% of the households do not get any credit
- The remaining 52% borrow from banks, cooperatives, landlords, shopkeepers, relatives and friends
Author presents us with a questions that,
Despite decades of effort at extending credit to agriculture, ambitious targets, schemes of financial inclusion, systems of banking correspondents and facilitators, kisan credit cards, why is it that almost half the households have no recourse to credit?
Peculiar nature of economic activity in agriculture
The economic activity in agriculture is peculiar, because
- Upfront investment: It requires upfront investment (in seeds, irrigation, fertilizer, pesticides) and the income is received only after three-four months.
- Price crash in case of a bumper crop: If there is a bumper crop, then prices crash, which has an adverse impact on net income to the farming household. There are other attendant risks such as weather, pests and monsoon failure.
Absentee landlordism or tenancy farming
Author states that one particular aspect of agriculture needs attention,
- Tenancy farming: Leasing of farmland is quite common in India.
- No legal status: In most parts of India, the tenant farmer has no legal status, much like the slum-dweller in cities. Hence reliable statistics are difficult to get. In Andhra Pradesh, almost 30% of farming is done by tenants
- Most are landless, hence no banking access: Data collected a few years ago showed that of 1.7 million tenants, more than one-third are landless and almost half of them have landholdings of their own of less than 0.5 hectares. Such farmers have no access to bank loans, crop insurance, loan waivers or subsidies
- In fact, in 2013, of the Rs23,000 crore given away as loan waivers, only 0.1% went to tenant farmers, although their share in farmer suicides is almost 80%
- Most are landless, hence no banking access: Data collected a few years ago showed that of 1.7 million tenants, more than one-third are landless and almost half of them have landholdings of their own of less than 0.5 hectares. Such farmers have no access to bank loans, crop insurance, loan waivers or subsidies
- No legal status: In most parts of India, the tenant farmer has no legal status, much like the slum-dweller in cities. Hence reliable statistics are difficult to get. In Andhra Pradesh, almost 30% of farming is done by tenants
Access to credit: Empowering tenants
How then do these farmers access credit?There is a small reform that can a go a long way in enabling credit flow to tenants. Such an act was, in fact, passed by Andhra Pradesh in 2011. It is called the Land Licensed Cultivators Act, which empowers tenants with annual loan eligibility cards
- Avail the loan: The name of the tenant is penciled on the land record (as a tenant), on the basis of which he can avail of a bank or cooperative loan
- No property rights:This reform doesn’t give any property rights on the leased land to the tenant, but just gives him a sound “borrower status”
Conclusion
Author concludes by stating that the experience of states like Andhra Pradesh is encouraging and some other states are already experimenting with this tenancy empowerment. Hence while we wait for tenancy farming to regain legal status, this reform of enabling institutional credit flow to tenants should be enabled by the Central government and be adopted nationwide.
