States need to revisit land leasing norms: Panagariya

At a time when the Opposition is gunning for the government over the proposed amendments to the Land Acquisition Act, 2013, NITI Aayog Vice-Chairman Arvind Panagariya has said that states need to revisit their land leasing and land use laws to boost industrialisation and enhance welfare.

“In the context of the difficulties in land acquisition under the 2013 law, states wishing to facilitate industrialisation can further benefit from liberal land leasing if they simultaneously liberalise the use of agricultural land for non-agricultural purposes,” he said in his blog on Monday.

The comments came a couple of days ahead of a meeting of the NITI Aayog governing council, headed by Prime Minister Narendra Modi.

The meeting, on Wednesday, is to take up the issue of proposed amendments to the land law, with experts and chief ministers of states.

According to Panagariya, state governments must seriously consider revisiting their leasing (and land use) laws to determine if they could bring about these simple but powerful changes to enhance productivity and welfare all around.

“The introduction of transparent land leasing laws that allow the potential tenant or sharecropper to engage in written contracts with the landowner is a win-win reform,” he said.

“The tenant will have an incentive to make investment in improvement of land, landowner will be able to lease land without fear of losing it to the tenant and the government will be able to implement its policies efficiently.”

Currently, conversion of agricultural land for non-agricultural use requires permission from the appropriate authority, which can take a long time.

The reform is likely to open another avenue to the provision of land for industrialisation: Long-term land leases that allow the owner to retain the ownership, while earning rent on the land.

“In addition, the owner will have the right to renegotiate the terms of the lease once the existing one expires,” he said.

In trying to force the transfer of ownership to the cultivator, many states -- through their laws -- abolished tenancy altogether.

Panagariya said that such a policy resulted in minimal land transfer and had the unintended consequence of ending any protection tenants might have had and forced future ones underground.

“Some states allowed tenancy but imposed a ceiling on land rent at one-fourth to one-fifth of the produce,” Panagariya said.

According to Panagariya, since this rent fell well below the market rate, contracts became oral in these states as well, with the tenant paying rent closer to half of the produce.

Proposed amendments to the land law have irked the Opposition, and Congress-ruled states are expected fire salvo at the Wednesday meeting.

Image: Arvind Panagariya; Photograph: Rediff Archives