Leasing a farmland is "no symbol of feudalism" and legal limitations on such an arrangement have proven to be anti-growth and anti-poor, an expert panel appointed by NITI Aayog has said in its latest report.
The "bargaining power" of tenant farmers has, in fact, increased significantly since Independence, said the 11-member panel.
"Lease farming is an economic necessity and not a symbol of feudalism, as it was thought before. It is no longer true that a formal tenancy relationship would be exploitative," said the panel.
The definition and various dynamics of land leasing as understood in the past have lost their relevance today, the panel said, making a case for allowing land owners to lease out agricultural land to tenant farmers without the fear of losing it.
Liberalising the leasing of farmland will allow landowners more latitude to move out of agriculture while allowing their land to be worked by more efficient cultivators who, in turn, would be able to access credit and insurance facilities, argued panel.
"There is a limit beyond which agriculture cannot productively absorb any additional workforce. It is, therefore, absolutely necessary that there is transfer of population from agriculture to non-agriculture," it said.
"Legalisation of land leasing could be an important contributing factor in this respect."
Small and marginal farmers would also be better off leasing out their land to more viable farmers for rent, said the committee that includes representatives from Maharashtra, Uttarakhand, Andhra Pradesh, Punjab and Rajasthan.
Under a legalised mechanism of land leasing for agriculture, land owners will be encouraged "to lease out land without fear of losing their land ownership rights and invest in non-farm enterprises (with appropriate capital and technology support), which is vital for occupational diversification," it said.
Land leasing can, in fact, fetch marginal farmers paid employment "within or outside agriculture" and would help them to maximise incomes by way of rentals as well as wage incomes, the panel noted.
Panel members spoke to officials from various state governments like West Bengal where land leasing has been part of an active polity.
It suggested that the government and the NITI Aayog should frame a Model Land Leasing Act, 2016, to permit and facilitate leasing of agricultural land, to improve agricultural efficiency and access to land by the landless.
Suggested system, if implemented, would help provide recognition to farmers cultivating the agricultural land on lease to enable them to access loans through credit institutions, insurance, disaster relief and other support services provided by the government, it said.
"There is ample research evidence to suggest that economic forces drive land leasing, while ban or restrictions have only reduced the extent of land available in the lease market and have reduced the welfare of poor tenants by forcing them to enter into informal arrangements," the committee said.
"Informal tenants are most insecure, as they either have short duration oral leases or get rotated from plot to plot each year so that they cannot prove continuous possession of any particular piece of land for any specified period," it pointed out.