India's Land Reforms Agenda- Part I

FIRST GENERATION LAND REFORMS IN INDIA

(1947-1990)

(Part I of the two-part series on

Unfinished Agenda of Land Reforms in India)

SUBHASH CHANDRA GARG

(Economy, Finance and Fiscal Policy Strategist; Also, former Finance and Economic Affairs Secretary)

Prime Minister, in his address to the nation, on 12^th May, spoke about reforms of land, labour, liquidity and laws. Finance Minister was to spell out specific reform proposals. She proposed three reforms- agriculture produce marketing law, essential commodities law and another for quality assurance in agriculture produce. However, land reforms agenda has not been spelt out.

In this blog, I review the land reforms carried out in India in the first phase, the socialist economy phase which lasted until 1990, of India’s economic policy making.

I would examine the state of land reforms required in the second phase of economic policy making, post liberalisation of 1990s, in the blog that follows tomorrow.

State of Land Reforms in India

India, at independence, was basically an agrarian economy with more than 60% output generated in agriculture and more than 80% people dependent on agriculture for their livelihood. It was also a poor country with more than 80% people living below the poverty line.

Agriculture had been principal source of government revenue. Land was the main productive asset and landowners made India’s the wealthy class. Peasants tilled the land and lived in poverty. Landowners/intermediaries took most of profits.

Policy makers concluded that a lot was wrong with the system of land ownership, intermediaries and tenancy. It was also felt that small holder agriculture was better for not only more equitable pattern of asset distribution, but also for agriculture productivity.

The land reform agenda in first forty years centred on three principal planks:

First, confer ownership and tenancy rights in land to the tillers of the land;

Second, establish direct relationship between state and farmers by removing landlords and other intermediaries;

Third, ensure equitable distribution of agricultural land by imposing land ceilings and redistributing such acquired and government surplus lands to landless.

Considerable success was achieved in granting ownership and tenancy rights to the tillers of land. Some distribution of surplus government land also took place. Attempts to impose ceilings on agriculture land was, however, a big failure. Attempts to implement agriculture land ceilings were practically abandoned in 1980s.

First set of land reforms were almost completed or abandoned by 1980s. These land reforms during 1947-1990 could be termed as the first phase of land reforms in India.

Industry generates more a lot more value-add per unit of land in non-agriculture than in agriculture. Industrial development also requires urbanisation, transportation and building of distribution and housing infrastructure. All this require land to be transferred from agriculture use to non-agriculture use.

Total built up area- factories, roads, buildings- represent land used by non-agriculture economy. Based on satellite survey carried out of the entire Indian land mass, total area occupied by buildings, land and railways, which covered all the built-up area was found to be only 2.04 million hectares. It is less than 1% of the land mass of India. Agriculture Ministry reports about 25 million hectares as ‘area under non-agricultural uses’ in the agriculture statistics at a glance. This definition covers lands under rivers, water bodies, parks, social forestry and so on. The built-up land is only about 2 million hectares.

Agriculture, on the contrary, occupies about 140 million hectares- about 45% of reporting land area. The land under cultivation has expanded from about 115 million hectares in 1950. As irrigation facilities have expanded, including double cropped area, total cropped area is approximately 200 million hectare now.

Agriculture, mining and other directly land based productive activities contribute only 20% of GDP of India. The rest of the economy, which uses 1% of land mass, contributes 80% of the GDP. Productivity of land use in non-agriculture and agriculture is 1:200.

It makes tremendous economic sense for more land to be transferred to non-agriculture use- for urbanisation, for industrialisation and for creation of infrastructure in India for India’s growth. The jobs are also in the non-agriculture sector. India needs land reforms which can serve this broad objective of facilitating transfer of agriculture land to industrial and infrastructure use.

Expanding population has consistently reduced average size of operational land holding in India consistently. Average size of operational land holding has declined from 2.08 hectare in 1970 to 1.05 in 2015. While over 92% of 15 crore plus rural households hold some land, only 42% are cultivators. Lot of rural folks migrate to cities for non-farm work. Landholders do not farm but small operational holdings force others to take more fields for contract cultivation.

Leasing of land is however not legally permissible in most part of the country. Indian ingenuity makes all lot of farming under lease informal.  

Agriculture is also modernising. There is greater use of technology and equipment in agriculture now. Preponderance of small farms make agriculture produce un-brandable. Farmers’ lack of capacity to invest in good quality seed, produce large quantities of alike produce and packing at the farm makes farmers realise very low value of their produce. Efforts like forming farmers companies like marketing cooperatives earlier are not serious business solutions.

This calls for reforms of land leasing in India.

Essentially, there are five sets of land reforms issues which constitute India’s unfinished land reform agenda.

First, Creation of a National Land Record Registry.

Second, Abolition of all restrictions on agriculture land leasing and sale.

Third, Freely permissible conversion of agriculture land into non-agriculture use, subject only to environmental considerations.

Fourth, Purchase and Sale by free will to be the default mode of land transfer; acquisition under eminent domain only for exceptional situation.  

Five, Better management of Government lands; allotment or auction of government land encroached upon.

Land- The First Asset Class

An asset produces output or income. Real assets like land, building, machines etc. produce goods and services. Financial assets like equity, debt etc. generate financial income.

Earth was the factor of production before human labour started converting forests and grasslands into agriculture fields to produce crops. Land is the first asset which humanity ‘created’. Wild land (forests, grasslands) was domesticated to be turned into agricultural fields to produce crops, vegetables, fruits and clothing. A part of the domesticated land was used for building shelters to live in. Ownership of agricultural land became asset owned by individuals, families, estates and communities. 

Land became the basis of human settlements as well. Land produced income. Land produced crops which produced surplus. At some point in evolution, man started possessing and owning land. Land became the asset. Land ownership was the manifestation of wealth.  Agriculture land and rights in agriculture land were the first real assets owned by people.

Agriculture lands produced crops, vegetables, fruits and clothing- the output required for sustaining human lives. Over millennia, agriculture lands got concentrated in fewer and fewer hands. Estates symbolised concentration of landed asset in fewer number of people. Most people turned into labour. Land and labour were the two principal factors of production in pre-industrial societies.

As civilisation progressed, manufacturing of goods grew. Manufactured goods produced more value per unit of land, especially after the invention of steam engine. Along with manufacturing, urbanisation expanded. Transportation came along to allow people to move over large distances.

Buildings built over land became the new real asset class. Industrial world led to further accumulation of capital/wealth in still fewer hands. Land and buildings still remain a very dominant part of the assets and wealth portfolio of the rich.

FIRST GENERATION LAND REFORMS IN INDIA

India at Independence- A Poor Populous Country with Low Per Capita Land

Indian population was 360 million strong in 1951. Net land area sown in 1951 was a little less than 120 million hectares out of total reporting area of about 305 million hectares. Indians had, on an average, only .85 hectare of land per capita in 1951. Compared to any other part of the world, Indian had a very small per capita availability of agriculture land. 

More than 82% (295 million out of total counted population of 357 million in 1951 census) Indians lived in rural areas. Census 1951 counted 104 million Indians as self-supporting- those who depended for their livelihood on income generated by themselves. About 70% self-supporting persons (71 million) derived their income from cultivation of land. Land was the principal source of livelihood for about 75% Indian households.

Census 1951 made a very interesting classification of the 71 million people dependent upon cultivation of land. About 46 million (64%) cultivated land wholly or mainly owned by them. These were categorised as owner-cultivators. Only 8.8 million (12%) people were counted cultivating lands which was wholly or mainly ‘un-owned’. These were ‘tenant-cultivators’. There were 15 million (21%) cultivating labourers. Finally, there were 1.6 million (2.3%) self-supporting persons who were ‘non-cultivating owners of land’ also described as ‘agricultural rent receivers’.

Real gross value added at factor cost in agriculture, forestry, mining, and quarrying at current prices was Rs. 5274 crores (53% of total Gross Value Added of Rs. 10036 crores. Per capita income of 295 million people living in rural areas in 1950-51 was only about Rs. 180.  

Too many people living in rural area dependent upon land cultivation for their livelihood earning very low level of income was the root cause of India’s abject state of poverty at India’s independence. Poverty, malnutrition and disease was rampant in rural India.

India also inherited a highly lopsided distribution of land at independence. A great majority of people, the peasants, worked on the lands controlled by relatively fewer landlords. They earned pittance as wages and share in produce of their back breaking work. Much of the crop or proceeds of the crop went to landlords and the government as revenue. Too little per capita availability of land, also unevenly distributed, provided a fertile ground for creating sentiments of class injustice.

Reform Imperative at Independence

There were four fundamentally disturbing situations in British India and in the Independent India, as regards land and agriculture:

First, the Government, significantly dependent upon tax revenue from agriculture- the land revenue- was taxing poor farmers forcing a vast majority to live life of penury. Land revenue was also fixed heaping further misery on farmers in the years of droughts. It was universally felt that the land revenues have to be reduced drastically.  

Second, the Government collected land revenue mostly through intermediaries- the zamindars, who exploited peasants. Rich zamindars and poor peasants demonstrated stark inequality of India. This disturbed the conscience of everyone. While the zamindars would do everything to protect their ownership/hold over lands, there was widespread sympathy for abolition of zamindari system and establishing direct relationship with the state.

Third, while per capita availability of land was low, unequal ownership and possession of land made the matters worse socially. It was also widely felt that land was basic source of livelihood. This called for fairer redistribution of land- take away from large owners to give to the landless or those having very small land.

Fourth, lot of peasants worked on others land as tenants. As land formally belonged to the State- the Raj- and intermediaries had also some title over it, the real peasants’ status as land owner or tenant was unclear. This called for conferring permanent tenurial titles on peasants.

This state of unequal distribution of land, unproductive application of land for agriculture and livelihood, unfair and excessive taxation and existence of exploiting intermediaries had to be reformed.          

Land Reforms Agenda Had No Unanimity Before Independence

There was no unanimity in Indian freedom movement about the land reform agenda to be taken up post-independence. Indian National Congress (INC), in fact, had an ambivalent attitude towards land reforms even pulled as it was in different directions by conflicting interests.

INC resolution in 1931 talked of ‘substantial reduction in agriculture rent or revenue paid by the peasantry and in case of uneconomic holdings, exemption from rent for such period as may be necessary, relief being given to small Zamindars wherever necessary by reason of such reduction’. This resolution affected zamindars’ interest only indirectly. Yet, in the next session, a clarificatory resolution was passed. The Working Committee assured the Zamindars that rent proposals in the previous session were not aimed at them. Another Resolution passed in 1936 also focused on rent remission.

The National Planning Committee, headed by Jawahar Lal Nehru, made the most forthright recommendation in 1938. It said ‘no intermediaries between the State and cultivators should be recognised, and that all their rights and titles should be acquired by the State paying such compensation as may be considered necessary and desirable. Where such lands are acquired it would be feasible to have collective and cooperative organisation.” This was not endorsed by the INC.  

The difference in the INC and its leadership on the question of land reform measures continued after independence. These differences were shared not only by the federal leadership but by the party’s rank and file.

The Congress party appointed an Economic Programme Committee in 1947, with Prime Minister Nehru as Chairman. The recommendations of the Committee pertaining to land reforms failed to gain complete acceptance at the Annual Session of the Congress which met at Jaipur in December 1949.

Land Reforms Find No Mention in the Constitution

The Congress Party, the Constituent Assembly and the Leadership did not develop a commonly shared understanding of the land reform agenda even after independence. In fact, there was widespread disagreement within the party.

As a result, no land reform agenda was built into the Constitution. There was no declaration about abolition of zamindari in the Constitution and establishing direct relationship between the state and the tiller of the land. There was no provision about any agriculture ceiling. There was no provision also about converting tenancy into ownership.

All that the Constitution incorporated were two aspirations in the directive principles of the state policy. Even these directive principles did not refer to land reforms and agriculture in particular. Article 39 (b) enjoined the State to direct its policy towards securing ‘that the ownership and control of material resources of the community are so distributed as best to subserve the common good’.  Article 39(c) expected the State to secure ‘that the operation of economic system does not result in the concentration of wealth and means of production to the common detriment’.

The land was a provincial subject in 1935 Government of India Act. It was continued as a state subject in the Constitution. The constitutional provisions, in effect, did not envisage any large-scale central government leadership and interference in matters concerning land reforms.

It Took 25 Years to Build Some Consensus on Land Ceiling

Land redistribution by imposing ceiling on large landlords was the most contentious of the land reforms. It meant taking away lands of many powerful people, who also had lot of say in party and government affairs. Several Committees examined the matter and made recommendations over and over again.

Conferring ownership or permanent tenancy rights on the tillers of land and removal of intermediaries proved less contentious. The Government accepted very early that the land revenue was not the tax to finance governments in post independent India.    

A Congress Agrarian Reforms Committee was appointed in 1947 with J. C. Kumarappa as Chairman. The Committee made clear recommendations on the question of removal of intermediaries and conferring tenurial rights, but not explicitly on land ceilings. Its key recommendations were:

(i)          In the agrarian economy of India there is no place for intermediaries and land must belong to the tiller;

(ii)          Those who have been cultivating land continuously for a period of six years should get full occupancy rights;

(iii)    Only those who put in a minimum amount of physical labour and participate in actual agricultural operations would be deemed to be cultivate land personally.

The Planning Commission appointed a Panel on Land Reforms under the Chairmanship of Guljari Lal Nanda in May 1955. The Panel made recommendation on land holding ceiling. The ceiling had a very close relationship with the members in a family.

Nanda Panel recommended that the family should be taken as real operative unit in land ownership and, for this purpose, the aggregate area held by all the members of a family should be taken into account. Panel defined family widely to consist of husband, wife and dependent sons and daughters and grandchildren and to exclude land held by married daughters and earning-sons.

The Penal was quite generous in recommending exclusion of several categories of land holders from the ceiling- sugarcane farms owned by sugar factories, orchards, plantations, special farms such as cattle breeding, dairy farms etc., farms in compact block, efficient farms and mechanised farm and farms with heavy investment.

The Panel recommended that 12 years of peaceful enjoyment for land only should entitle a tenant to get his ownership recognised.

The issue of the appropriate basic unit for land ceiling, definition of family, exemptions from ceiling and related issues remained undecided for a long time.

A Central Land Reforms Committee (CLRC) was constituted in August 1971 with Fakhruddin Ali Ahmed, then Minister of Food and Agriculture, as Chairman. This Committee recommended that the ceiling on land holding should be applicable to family as a whole; the term ‘family’ being defined to include husband, wife and minor children only.

CLRC recommended to fix ceiling for a family of five members within a range of 10 to 18 acres for various categories of land. It recommended an absolute ceiling for a family of five at 54 acres. It also recommended withdrawal of exemptions in favour of mechanised farms, well managed farms etc.

Recommendations of CLRC were reviewed by another high-powered committee (HPC). HPC disagreed with CLRC on the crucial issue of definition of family. The HPC was of the view that ceiling should be applied to the family of five as a unit, consisting of husband, wife and three children, whether major or minor. The major sons were included in the family unit of five persons. It recommended that if actual members in a family were less than five, the ceiling should be reduced by a fifth per person. Going with the CLRC’s broad thrust, HPC recommended that exemptions be further restricted by (a) rigidly defining plantations, (b) withdrawing blanket exemptions in case of lands held by trusts, institutions etc.

A new dimension brought in by the HPC, which later created controversy, related to assignment of differential ceilings for lands irrigated from public and private sources. It recommended an allowance of 15% to be given to the landowner with land irrigated from private sources. In the Annual Report of Agriculture Ministry 1971-72, the land ceiling was sought to be diluted for the privately irrigated lands by limiting applicability of ceiling to land to “perennially irrigated land from government source capable of growing two crops”.

Land Ceilings Finally Gets Implemented

The Government finally released its guidelines to the States on the question of ceiling in 1971-72.  The Constitution was also amended in 1971 to replace the requirement of paying ‘compensation’ for acquiring land in excess of ceiling by an ‘amount’ to be fixed by laws, which were also made non-challengeable by putting such laws in the 9^th Schedule of the Constitution.

The States enacted their land ceiling laws building on these Guidelines and aligning their laws with new Constitutional mandate regarding compensation. The States which had enacted their land ceiling laws earlier, modified their laws.

For determining the level of ceiling, the Guidelines suggested broad principles and left actual determination to the States.

The Guidelines proposed that a ‘family holding’ may be considered from two aspects, namely (a) as an operational unit, and (b) as an area of land which can yield a certain average income. If the States find it difficult to correlate a family holding to a given level of money income adjusted to a supposed level of prices, the States could exercise their judgement to decide the area of land that might be declared to be a family holding.

The States were also delegated authority to decide whether the ceiling should apply to individual holdings or to holdings of families, and especially in the latter case, the basis on which the size of the family should be allowed in the application of the ceiling.

The guidelines paved the way for implementation of agricultural land ceiling in the country.  Rajasthan enacted ‘The Rajasthan Imposition of Ceiling on Agricultural Holding Act, 1973. Punjab enacted Punjab Land Reforms Act, 1972. Many other States also did.

Those States which had enacted their land ceiling laws earlier, brought their laws in line with new Guidelines and the Constitutional provisions. Tamilnadu had enacted Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961. This was modified in 1970 and ceilings were made applicable from 1970. Maharashtra also had adopted land ceiling in 1961, which were extensively modified in 1970s.

The States, in all, declared 2.7 million hectares land as surplus i.e. the land which was found to be in excess of land ceiling. Out of this declared surplus land, 2.3 million (87%) hectares were taken possession of and 1.9 million hectares distributed to 5.5 million households (37 percent to the SCs and 16 percent STs).

The land ceiling issue was largely forgotten after 1980s. A Committee on Land Reforms appointed by the UPA Government in 2008 last reviewed the matter.

This Committee quoted estimates made by IAS Academy, the LBSNAA, to put the potential of ceiling surplus land at approximately 21 million hectares. The Committee reported that there was no progress in the implementation of land ceiling legislations after 1980s. It vigorously argued for taking up the ceiling agenda again but the Committee’s report has not make any progress.

The Planning Commission captured the policy flip-flop in designing and implementing land reforms most poignantly.

Its Task Force noted in its report in 1973- “in no sphere of public activity in our country since independence has the hiatus between the precept and practice, between policy-pronouncements and actual execution, been as great as in the domain of land reforms.”

Land Reforms of Conferring ‘Ownership’ Rights on Tillers of Land and Abolition of Intermediaries Gets Mostly Completed in 1950s and 1960s

The land belongs to the King and to their replacement, the State. The peasants, in olden times, had permission from the State to till the land on the pain of paying tax- usually a part of the produce. As agriculture grew, the Kings and the State started granting ownership/ rights to landlords to get the land tilled, collect taxes and pay it to the treasury.

Two systems defining these two relationships of the tiller to the land he tilled were quite prominent in India at the time of independence.

First, in large part of the country, especially under what came to be known as Zamindari System (applicable in West Bengal, Orissa and a few other States), the intermediary the Zamindar had considerable ownership rights in land given by the State. The farmers were given permission to till assigned lands and pay the tax to the Zamindar, who would in turn pay a part of it to the State. These farmers had no ownership of land they tilled. They did not have even permanent right of tenancy in the land. They could be ejected from the lands at the will of the Zamindar. These peasants had no direct relationship with the State in any manner. Zamindar was the intermediary.

Second, in the rest of the country, under the system called ryotwari system, there was no formal intermediary and the farmer was in direct relationship of tax payment with the State. However, in practice, there were numerous intermediaries, acting under different authorities granted and assumed, who lorded over the farmers. The tenurial standing of the farmer was also not very clear and coded in laws.

States started enacting their land tenancy laws in 1948. Erstwhile Bombay State, which later became applicable to Maharashtra and Gujrat, passed land tenancy law in 1948. Rajasthan passed it in 1955. Bihar amended its long- standing Bihar Tenancy Act 1885 in 1950s and 1960s to provide for tenancy, land consolidation and other reforms.

West Bengal went a step ahead. Share-cropping was a very common arrangement in rural India. The farmer would take land from the recorded land owner and pay a share of the produce to the owner- the share depending on several factors like who would provide inputs etc. This share-cropping was an economic necessity as many landholders did not cultivate themselves. It was also becoming very common as operational land holdings had become very small and the farmers dependent on agriculture for its livelihood would take others’ holdings for cultivation.

As land leasing was illegal in almost entire country, the share cropping system was all informal. It existed everywhere but nowhere was formally recognised. West Bengal decided to convert share-cropper cultivators (called bargadars) into permanent tenants. Approximately 1.5 million bargadars were provided permanent tenancy in Operation Barga in West Bengal, which concluded sometime in 1980s.

The legislations abolishing zamindaris and intermediaries achieved a significant transformation of the countryside by enlarging the base of land ownership. As a result of the implementation of these laws, the ownership of nearly 40% of cultivable land was transferred to the direct producers. Further, under the tenancy laws nearly 12.4 million tenants obtained secured rights or ownership rights over an area of 6.16 million hectares (i.e. about 4.4% of cultivated area).

India has seen the end of Zamindari, who were the biggest symbol of landlordism. India has also seen tillers of land of 1950s getting land recorded in their names giving them the ownership title.

Agricultural Land Situation at the End of 1980s

Bringing more land under agriculture was the stated policy of the government in the first 40 years post-independence. Land which was not quite suitable for agriculture was also allotted to farmers/ landless labourers with the hope that these lands would expand the agriculture in the country.

On the eve of independence, state owned vast tracts of land, to which were added large areas of uncultivated wastelands taken over during abolition of intermediaries. These lands were ‘lands which are degraded and cannot fulfill their life-sustaining potential’. the Total area of wastelands was estimated to be 63.85 million hectares which is 20.17% of the total geographical area. Some of these wastelands were also allotted to the landless. Till March 2002, 5.97 million hectares of wastelands have been distributed to the landless poor households.

Agriculture land grew by about 20 million hectares to reach an average of about 140 million hectares in 1970s. It has almost stayed there for last four decades. Net irrigated area was smaller at 21 million hectares in 1950. It grew to be 48 million hectares at end 1990.  

India’s population increased to about 900 million in 1990. Per capita availability of agriculture land came down to about .15 hectare in 2011.

Urban Land Ceiling was Badly Conceived- Failed but Left Lot of Mess

Driven by misguided notion that urban land prices could be controlled by acquiring excess urban land and nobler objective of providing land for affordable housing, the Urban Land (Ceiling and Regulation) Act was enacted in 1976. The subject matter of law passed by the Parliament in Emergency did not fall in Centre’s domain but about a dozen States passed resolutions allowing Centre to bring this common law.

Law provided for a specific ceiling limits for urban vacant land. The land in excess of ceiling was to be acquired by the state governments on payment of a meager amount.

A large number of exemptions were provided which included public charitable or religious trusts, housing cooperative societies, educational, cultural, technical and scientific institutions and clubs, societies registered under societies registration acts etc. The list of exempted institutions was large and amenable to ready misuse.   

Substantive discretionary exemption powers were vested in state governments. If the state government was satisfied that it was necessary or expedient in the public interest to exempt any land considering its location or the purpose for which such land was being used or was proposed to be used, it could do so. The state governments could also exempt if it was satisfied that the acquisition under the law would cause undue hardship to the affected person, it could exempt such land.

About 50000 hectares of land is vested in state governments in about 20 years of the existence of the law. Actual possession was taken for only 20000 hectares. Utilisation of land acquired for affordable housing was almost negligible.

This law was repealed in 1999. It was a miserable failure. Urban land which was scarce in India became still scarcer. A vast corruption industry grew up in getting excess urban land exempted and handing over the excess lands in such manner that it defeated the purpose. The Repeal Act allowed the States to pass resolutions in their assemblies and repeal the Ceiling Act in their respective states. States took long time. Repeal Act saved the acquisition made and the conditions under which exemptions were given. The battle over the acquisitions made, the use of the acquired land and the conditions under which exemptions were granted is still not over in the country. 

First Generation Land Reforms Were a Mixed Bag

Our track record of land reforms in the period 1947-1990 was mixed.

Quite impressive land reforms took place in the matter of conferring tenancy/ownership rights to the tillers of land and abolition of intermediaries. Both land ceilings laws were quite a failure.

Under Land Tenancy Laws passed by all the States, the farmers were conferred permanent tenancy rights over the lands which they tilled or possessed. Abolition of Zamindaris or like laws saw the intermediaries like Zamindars mostly vanished from the country.

Agriculture Land Ceiling laws were at best a partial success. Only small amount of land in excess of ceiling- the surplus land- was actually acquired and distributed. Agriculture land ceilings literally got relegated to the background by the end of 1980s. Urban Land Ceiling laws were an abject failure.

First generation land reforms were mostly done or done in by the end of 1980s.   

SUBHASH CHANDRA GARG

NEW DELHI 25/05/2020