LARGE FARMERS IN THE LEASE MARKET - How and Why Do They Enter the Market? Are Marginal Farmers Affected in the Process?

C. S. Murty
Working Paper No. 55 April, 2004
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1. The importance of economically dominant farmers is increasing in the lease market for agricultural land. This is particularly evident from the NSS data of 1981-82 and 1991-92 on the percentage of operational holdings and operated area under tenancy and on the shares of large farmers in total tenanted holdings and tenanted area. Increase in the significance of large farmers in the lease market is a disquieting development because: m Taking advantage of tenancy laws the farmers can get conferred ownership or occupancy rights on tenanted lands under their control. m They can take advantage of the laws and cause hardship to petty lessors (landlords) and, in particular, to institutional lessors. m They can displace petty peasants from the lease market. m They can expose poor tenants to a process of self-exploitation by vying with them for land in the lease market. 2. The once isolated incidents of the practice of large farmers taking land on lease by now (1991-92) spread to new regions and got intensified in certain others. Thus in the states of AP, Assam, Haryana, Karnataka, Kerala, Punjab, Rajasthan, and to a lesser extent in MP, UP and TN large farmers have become a force to reckon with in the lease market. 3. The modus operandi of large farmers seeking to edge-out their competitors in the lease market is that they offer rent in fixed cash, invariably at the beginning of the season, to their lessors in return for the lease of land. The farmers appeal to the compulsions of the lessors for secure rental receipts by offering to pay fixed cash rents. Petty peasants, being less able to do so, lose out to these farmers in competition for tenanted land. 3 4. The increasing dominance of large tenants does not, however, appear to be at the expense of the poorest of the poor marginal tenants. Although marginal tenants got dislodged in some states consequent upon an increase in the importance of large tenants between 1981-82 and 1991- 92, there are also states where both classes of tenants secured greater hold on the lease market. The proportions of holdings and area under tenancy with large farmers and those with marginal farmers bear no relationship whatever in the 1991-92 cross-section data of major states. But it should not come as a great relief, for it is possible that marginal tenants are now obliged to pay higher rents than earlier in trying to stay in competition with large tenants. 5. The notion that the costliness of new technology compels poor peasants to voluntarily opt out of the lease market and the resultant increase in the supply of land for lease enables large farmers to gain ascendancy in the lease market has little support in the data of recent times. There is only one state, Haryana, where the increase in the real cost of cultivation between 1981-82 and 1991-92 culminated in a decrease in the hold of marginal farmers and a simultaneous increase in the importance of large farmers in the lease market. The cost factor is also found unimportant in influencing the leasing behaviour of marginal farmers even when the crosssection data of Indian states pertaining to 1991-92 is examined. The peasants do not appear to be opting out, rather, they are being driven out. 6. High wage rates seem to favour mechanization of farming operations and with it the operation of large holdings. Farmers who are constrained to increase their ownership holdings because of ceiling laws are, therefore, making their way into the lease market for agricultural land. 7. The entry of large farmers into the lease market may further capitalist development in the agricultural sector. But in the process numerous prospective tenants from the poorer sections can get distanced from the lease market. The institution of land tenancy which derives its legitimacy on the ground that it would help poor peasants to gain access to tenanted land and thereby would fulfill their hope of advancing on the agrarian ladder 4 will be of no avail. It can also give rise to a situation where, petty tenants, in trying to compete with large tenants for tenanted land will end up paying rents higher than the usual to their landlords. Besides, sooner or later, the process can have a dampening effect on real wages of agricultural labour and can stunt the growth of rural employment. 8. Therefore, it seems important to make tenancy laws sufficiently stringent to restrict the entry into the lease market only to petty peasants. The quantitative significance of the incidence of tenancy among large farmers is high enough, though in a relative context, to enact and enforce such exacting laws. The surplus land distributed in the country up to September, 1991 was 19.48 lakh hectares while the tenanted land under the control of large farmers (with operated land in excess of 10 hectares) as of 1991- 92 was 21.63 lakh hectares. Apart from the land leased-in by this class of farmers there is also the land which was leased-in by other relatively higher classes of farmers. And what is more, even the NSS estimates of land under lease, though are on a far higher side compared to the leased-in land as per Agricultural Census, are admittedly underestimates themselves. By preventing large farmers from entering into the lease market, it should be possible to bring down inequity in the distribution of operated land, an objective which is sought to be achieved by allowing tenancy. Such a step is also desirable in the interest of wages and employment in the agricultural sector. Also, as a means to increase the access of land to the rural poor, the policy of barring large farmers from the lease market assumes importance, in view of the closing-in of the possibilities to acquire and distribute land accruing on account of ceiling laws. 9. In sum, it is necessary to rid the large tenant of the lease market in the interest of the poor peasant, who yearns to lease-in a piece of land. The notion that the petty peasant is opting out of the lease market because of costliness of new technology seems unfounded. The peasant is not opting out, rather the large farmer is forcing him to withdraw from the market by appealing to the need of his lessor for secure rental receipts and by paying him rent in fixed cash. It is in the interest of the large farmer to drive out the petty cultivator from the lease market and thereby gain control over it, be5 cause mechanization of farming operations, in the context of high wages, is making heavy demands on him to expand the size of his operational holding. With the scope to enlarge the ownership holding having decreased, more because of the deterrent effect of the land ceiling laws, the large farmer has no option but to lease-in land to expand the size of holding to put his capital assets to optimum use. Large farmers may contribute to capitalist development in agriculture. But development of capitalist relations may lead to proletarianisation of large sections of the rural working classes.