Budget 2016: Tenant farmers to be recognised as genuine cultivators as part of PM Modi’s push to end rural woes

Millions of India's tenant farmers are set to be recognised as genuine cultivators as part of Prime Minister Narendra Modi's push to alleviate rural distress through a mix of reforms and a focus on groundlevel delivery.

The package will include a rural credit drive and innovative financing through a dedicated fund within the National Bank for Agriculture and Rural Development (Nabard) to build irrigation facilities, senior officials said.

An e-platform for trading animal germplasm, development of high-yielding varieties for the dairy sector, animal wellness and tagging of livestock are other ideas that are being discussed.

"We are working on a package that will build on the steps already taken to boost the rural economy," a government official told ET, adding that this segment will get the lion's share of attention in the upcoming budget.

Two successive bad monsoon seasons have created severe stress in India's villages. Farm sector output contracted 0.2% in FY15 and grew only 2% in the first half of FY16.

Over 60% of Indians depend on agriculture for livelihood. Finance Minister Arun Jaitley is set to announce a model legislation for changes to tenancy of agricultural land in the budget. This will recognise tenant farmers and land owners as cultivators, ensuring that the first group gets institutional credit besides insurance and other benefits that are available.

The idea is to lift investment in the farm sector. The law will also provide for digital registration of tenancy agreements between the land owners and farmers. While tenancy is officially pegged at just 4%, this is a vast underestimate. More than 25% of farming in India is through tenants who bear all the risks for meagre rewards and little access to government benefits.More than 90% of the farmer suicides cases in the country were of those who were tenants, according to data available with government. Tenancy is allowed in some states and banned in others. But that hasn't stopped it from rising, keeping long-term investment in the farm sector low. Tenancies are kept informal as owners fear that anything official will make evictions difficult after a few years.

"Recognition of tenants and owners will remove the fear in minds of owners," said one of the officials cited above. "It would allow tenants to access institutional support." The model law will have to be adopted by state governments and complemented with digital registration facilities. A Niti Aayog panel is expected to issue its report on the matter next month.

Capital will flow into agriculture once it becomes remunerative, experts said. "I hope it does not meet the same fate as APMC (Agricultural Produce Market Committee), which we are still trying to implement," said leading agriculture economist Ashok Gulati. "To meet the objective of investment in agriculture, all you need is" for it to become remunerative.


The government is also looking at creating a dedicated fund in Nabard through the issuance of taxfree bonds to meet the large funding requirement for irrigation infrastructure. This will ensure that funding of more than Rs 30,000 crore can be generated within a year without stressing the budget.

The budget is also expected to boost farm credit, especially to small and marginal farmers who are most vulnerable to rural stress. As much as Rs 50,000 crore may be directed at this category along with efforts to computerise primary agricultural cooperative societies.

"The government is keen to build on and marry its earlier initiatives to ensure delivery," another official said. The Pradhan Mantri Jan Dhan Yojana and the RuPay Card, both elements of the government's financial inclusion efforts, will be used to provide credit in the rural hinterland, he said.

ET view: Step up investment in farming

The government's intent is laudable. A significant part of the credit flow is cornered by assetowing farmers due to leakages and also because of the ineligibility of tenant farmers for bank loans.
These farmers are forced to rely on money lenders. This must change. The sector need long-term credit for investment and productivity. The government should step up investment to build efficient irrigation systems, accelerate the farm-to-fork retail supply chains and incentivise states to exempt perishables from the APMC Act. Acting on farms and on infrastructure are a must to reduce agrarian distress and to lift growth.



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