Land systems need unconventional solutions for
Democracy to sustain and grow healthily
B. Yerram Raju*
Land in this country is the source of all problems – right from family to body politic. Landlords are the ruling elite and therefore no land reform would ever succeed. The Courts in India at all tiers hold around 3mn cases. Most such cases end up after decades of arguments with the either of the original disputants or both not surviving to hear the judgment. In fact, there are some who dare to buy the lands in dispute by taking the risk at a low price and invest in its development as well. Quite a few even made millions of rupees by the D-day. Corruption has its roots in land deals. In the rural areas, subdivision and Fragmentation of holdings has made operational holdings highly uneconomic. Small landholdings are denying the farmers access to technology, quality inputs, mechanization, post-harvesting facilities, integrated approach to farming and market intelligence as also the bargaining power for the farmers in the economy. The serious limitation for further progress in agriculture and for increasing farmers’ income therefore is lack of economies of scale. The farmer is caught in the vicious circle of low productivity, lower income, lower investment and low productivity leading to perpetual marginalisation. The problem exists in land tenures and the solution has to be sought there.
There is no alternative to providing economies of scale for our farmers to integrate farmers with the markets and make them the owners of the value chain in order to increase incomes. There was an aborted attempt of the Andhra Pradesh government aimed at consolidation of holdings on voluntary basis to maximize benefits to the farmers. It went into a spiral because of the tag of ‘cooperative’ attached. Such farming can be expected to integrate with animal husbandry, fisheries, sericulture, horticulture, post harvest operations and processing so that value addition takes place at the doorstep of the farmers. But voluntarism is hard to come by for such efforts. Institutionalisation of the initiative after a good public debate is the only solution.
The new initiative aims at (1) increased production and productivity; (2) reasonable remuneration for produce in time; (3) value addition; (4) linking production with processing and marketing within compact areas; (5) better access to credit; (6) Structuring a farmer-centric and farmer-participated reform in a novel fashion etc.,
There cannot be two opinions that a larger land holding is more suitable for adoption of modern agricultural technology. It is also agreed by all that flexibility in dealing with land issues in a manner that does not hurt the interests of farmers and also provides incentive for the next generation to continue in farming, holds the key to reform agenda in agriculture.
This new approach should be able to provide an alternative to the not-so-successful earlier initiatives of joint cooperative farming societies, contract farming and producer companies formed around a few agricultural products.
The Scheme I propose, seeks to promote the participation of all the farmers and persons with other occupations on the basis of a pari pasu charge on their assets and proportional returns to the participants. The Society, in other words, the General Body, would have the usufructory right on the land of all the members for implementing the new initiative. In other words, x,y,z farmers owning a,b,c tenures of land individually would pool together their lands for their own long term benefit and improved economic status. The land holding would be converted into a scrip at a value decided by the community in the General Body. There would be issues relating to valuation of lands: road-side lands, wet lands, lands having minor irrigation structures, undulated lands, lands with terrain differences, soil textures, and so on. All the lands in a pool or in a society therefore would have differences in valuation on varying parameters getting applied. A computer model could solve this issue. The value of land could be decided based on consensus as is being implemented in the case of Project Affected Persons under some projects. The Voting Rights will be proportionate to the share holding unlike in the cooperatives where each person would hold only one vote. Non-land owners who are admitted into the Society would have a single vote.
The Share Certificates represent the title to the property held by the individual member and are transferable only to another member of the Society with the approval of the General Body or its authorized Board. What happens in the process is that the land does not get divided without at the same time disturbing the hereditary rights to the property owned on one side and the production patterns on the other. Limited resources like water, soil health, etc would be protected for optimal utilization. Other ancillary activities like animal husbandry, horticulture, fisheries etc would mitigate the risks arising from crop losses.
The General Body consists of all the farmers and non-farmers and it is they who collectively own and manage all assets and a representative General Body ( each constituency in the general body either on the basis of ward or certain reserved categories and women etc could have one representative for a general body) would also elect the Board of Directors and designate the powers that the Board of Directors and the Executive Committee would have to run the Society.
This Society would thus be governed by a professional Board of Directors including those elected by the shareholders. The Board will be assisted by an Advisory Body and specialized Sub Committees consisting of experts from agriculture, allied activities and agro industries. This Society established at the village level itself with full autonomy would be governed by the vision, mission and objectives set out by the State level Advisory Council consisting of functional experts in Animal Husbandry, Fisheries, sericulture, Horticulture, Retailing, Rural Industries etc.
Every member of the Society should get the return no less than the best of the last five years’ return at the beginning and would get multiples of it at the end of every year proportionately distributed in accordance with their shareholding value. The Society should be run under PPP mode. The nitty-gritty of many of these aspects should find a place in a special Law that can be formulated.
Roles and responsibilities of various agencies:
• State Government should constitute a special Regulatory Authority to value and register the scrips.
• In the event of the death of the actual owner evidenced by the Death Certificate, the legal heirs would get the shares as per the Will if any of the deceased; And in its absence, the Society would retain the shares by transferring them in its own name and it should also be registered with the specified Authority. This would in effect enable all mutations recorded without having to subdivide the land.
• The Society should be registered with Articles and Memorandum of Association wherein the boundaries of functioning authorities and activities are clearly defined. If an existing PACS would like to perform these functions, it should be enabled through a transition clause in the proposed Law.
• The seed capital equivalent to the land value contributed by the farmers during the first 5 years should be mobilized at the rate of ten percent of the value from the landowners. Those who lack liquidity at the start should be helped out from the National Farm Equity Fund to be specially set up with a corpus of Rs.5000crores initially as a budgetary support.
• Banks should sanction loans to the society on a debt equity ratio of 4:1 with a moratorium of two years on a soft rate of interest.
• National Agricultural Insurance Corporation should insure Agricultural Loans.
• General Insurance Corporation should insure the other assets in conjunction with the Life and Health Insurance of all the shareholders and the premium would be part of the project cost.
• Initial project costs that include administrative and establishment expenses would be met out of the loan funds.
• Existing liabilities to institutional lenders and other statutory agencies should be pooled into a separate liquid asset and blocked for a period of three years, interest frozen as on the date of transfer. This pooled asset in financing bank’s books would be a funded asset repayable after the moratorium period in seven installments.
• The State as one time measure may write off the private moneylenders’ loans or de-recognize the usurious loans as part of the new Law.
• Lessee – whether oral or written – would have the scrip endorsed in favour of the lessee by the owner with attestation from the Society Management.
• NABARD field level executives should render technical help in projectisation and formulation of the village development plan.
• NABARD should be asked to administer the National Farm Equity Fund.
• NABARD should set up a district level and state level monitoring committee to oversee the project implementation.
• Specified Authority should be provided a list of chartered accountant firms to the Society at the village level for taking up half-yearly and annual audits. Each Village Society should display its accounts in the Notice Board duly signed by the CA and Management representative.
• In case natural calamities occur, and the village itself is washed out, the State Government after realizing from the Insurance Companies the insured amounts, should re-carve the village and distribute the land in accordance with the share register so that the rehabilitated village would carry on the economic activity undisturbed.
• In the case of continuing natural calamities like the cyclones, drought and periodical floods, insurance claims should be quickly settled in favour of the Society and the financing Bank; the deficit should be financed by the State Government and the Bank from out of the Natural Calamity Fund to be separately set up by the GoI with participation from the State Government in equal proportion and this fund would also be administered by the NABARD as the agent of GoI.
1. Sale/transfer of shares is restricted only to the Society in the absence of family members of the shareholder wanting to buy up such shares or access them as legatees.
2. At the end of every three years the shares get revalued in terms of the annual dividend passed on at the general body. The share register would thus be up dated in valuation terms once in every five years.
Each member should be provided credit support for consumption and social needs as decided by the Board of Directors on such terms and conditions as considered appropriate and in the best interests of members.
The hinterland of the village should be enveloped by adequate and appropriate storage and marketing facilities.
Integrated development of land-based and non-land-based activities providing value addition to the farm produce right at the doorstep of the farmer through this new initiative with appropriate law to support would usher in an era of prosperity for not only the farmers but for the entire village itself.
All the Societies should be computerised from the very start and appropriate management information system should be designed by NABARD with the help of outside experts.
There must be a firm resolve that the Governments would not indulge in loan write-off but would only facilitate financial unburdening through the specially set up funds. The whole scheme would thus help protecting property rights without impeding economic development and legal disputes would also be minimized. All disputes should be settled through local arbitration mechanism.
*. The author is an economist and Regional Director, Professional Risk Managers’ International Association, Hyderabad chapter. He is also Member, Expert Committee on Cooperative Banking, Government of AP. The views are personal. This paper is for presentation at the Symposium on Land Rights & Development, Organised by Liberty Institute, New Delhi, in association with Forum for Good Governance Hyderabad on the 26th December 2010