3. KEY ISSUES

The sections below address the following land issues:

1. Tenancy;
2. Land markets;
3. Small plots;
4. Women's access to and control of land;
5. The role of panchayats; and
6. Implementation of existing laws.

The sections discuss these issues from all three sustainable livelihood approaches: as development objectives, as means to eradicate poverty, and as starting points for analyzing the factors influencing an individual or community's ability to pursue its livelihood objectives.

Specifically, section 3.1 reviews the unintended effects of tenancy reform in India, describes the rural poor's expressed interest in creating new tenancy relationships, and imagines ways in which tenancy restrictions could be redesigned to benefit the poor.

Section 3.2 considers the reputation of land sales markets for excluding the poor and offers examples of ways in which the sales market could be used to assist the rural poor to access land.

Section 3.3 summarizes the potential benefits of small garden plots and the gathering political momentum that is fueling small plot projects in several states.^[12]

Section 3.4 provides a brief overview of the importance of women's role in rural livelihoods and the obstacles to women's access to and control of rural land. The section discusses options for processes and institutions that may ultimately reduce the gender inequality in the control of rural land and the assets that flow from such control.

Section 3.5's focus on panchayats describes the pivotal role local governing institutions could play in assuring land access and the need to clarify the authority of such institutions over land issues.

Finally, Section 3.6 highlights community education programs and legal aid services as processes and institutions necessary to assure that existing (and future) laws and policies supporting the land rights of the rural poor are implemented and effective.

As this brief overview reveals, the sections confront the challenges of land access in rural India at different stages and with approaches tailored to the nature of the individual issues. But while the approaches and perspectives may differ among issues, the core remains the same: the discussion of each issue is focused on and grounded in the interests and capabilities of the rural poor. Most importantly, each issue was selected for discussion because unique opportunities exist to influence the livelihoods of India's rural poor in a positive and sustained fashion.

3.1 Rethinking tenancy

Introduction: the limitations of tenancy reform

Several decades ago, most Indian states adopted tenancy legislation that either prohibits or regulates and restricts the leasing of agricultural land. Driving the legislation was an unequivocal intent to benefit poor tenant farmers. And some did benefit. India-wide, tenants acquired owner or owner-like rights to about four percent of the total operated area.^[13]

At the same time, however, tenancy reform has had the unintended consequence of depriving the rural poor of access to much larger amounts of land. The legislation limited land access for land-poor households, left some tenants stranded without legal protection and vulnerable to evictions, and prevented landowners and tenants from benefiting from the inherent equities and efficiencies of a land rental market.

Much of India may be approaching a point where some of the opportunities lost by the rural poor as a result of the well-intentioned legislation can now be reclaimed. This section summarizes the theory and comparative experience on the benefits of land rental markets, overviews the existing law, frequency, and nature of tenancy in the various Indian states, describes current status of policy dialogue on this topic, and identifies opportunities for donors and NGOs in three areas: (1) research; (2) policy dialogue; and (3) innovative land rental pilots.

Tenancy markets: theory and comparative experience

Throughout much of the 20^th century, tenancy in India (as in many parts of the developing world) was cast in the role of an exploitative institution and charged with negatively impacting socially optimal equity and productivity outcomes. Ascribing tenancy as exploitative in pre- and immediately post-Independence was understandable. In an agrarian setting characterized by strict social and economic hierarchy and where overwhelming numbers of rural poor lacked access to land and any other economic opportunity, tenants had little bargaining power and many landlords exploited their positions of social and economic privilege. As a result, in the decades following Independence, most Indian states passed legislation that imposed total bans or significant restrictions and regulations on tenancy. Two purposes fueled the legislation: uplifting the poor and achieving higher agricultural productivity.

Since the enactment of the legislation, a broader consensus in the economic literature concludes that land rental markets in general - and sharecropping relationships in particular - can play a substantial role in increasing land access for the poor. Rental markets can supply a critical rung on the "agricultural ladder" toward land ownership, particularly as growing economic opportunity (especially non-agricultural) and sociopolitical advancements begin to remove feudal-like vestiges and improve the bargaining position of poor tenants.^[14] Both land sales and land rental markets are capable of enhancing transfers of land from land-rich to land-poor households. Of the two, theory and empirical evidence indicate that the rental market supplies the more effective conduit.^[15] Land ownership remains desirable and conveys greater benefits (particularly concerning credit access, tenure security, and wealth), but access to land via land rental is often a local, first-best alternative to land ownership when the pre-conditions for the efficient and equitable functioning of land sale markets are absent.

Land tenancy markets can also reduce the vulnerability of poor households by offering a more stable livelihood source than frequently volatile and imperfect labour markets.^[16] As opportunities in the non-farm economy increase, tenancy markets can facilitate a broader choice of livelihood opportunities such as migration, specialization, and investment. Households better suited to pursue non-farm livelihoods will be benefited if they are able to rent out their land for others to cultivate. Looking to other countries, China's experience indicates that in a growing economy, the role of land tenancy will expand and increase incomes for all.^[17] Other research teaches that rental markets have more potential for providing access to the poor in settings where agriculture is not capital-intensive.^[18]

Tenancy in India: a bit of background

Broadly speaking, three major types of land reform legislation were enacted in most Indian states in the decades after Independence: the abolition of intermediary tenures, the redistribution of land via land ceilings; and the regulation of tenancy.^[19] The tenancy reforms were justified on grounds of equity and efficiency and aimed to transfer land to the tiller (often including a ban on landlord-tenant relations) and to increase tenants' tenure security (through establishing minimum tenancy terms, transforming tenants into owners or perpetual possessors, and registering informal tenancy agreements).

Land is largely a state subject in India, so the extent and nature of tenancy regulation and restriction varies from state to state. The states, however, do fall into four general categories:

• Virtual ban on all agricultural tenancies: Kerala, Jammu and Kashmir.

• General prohibition on agricultural tenancies, but exempt certain categories of persons such as widows, minors, marginal holders and/or members of the armed forces: Karnataka, Himachal Pradesh, Madhya Pradesh, Uttar Pradesh, Orissa, and Telangana area of Andhra Pradesh.

• No explicit prohibition on tenancy, but discourage tenancies by empowering tenants with protected rights on the tenanted land, either as perpetual tenants or through rights to purchase within a specific period: West Bengal, Punjab, Haryana, Gujarat, Maharashtra, Bihar, and Assam.

• Few restrictions on tenancies, although establishment of minimum lengths of tenancies and/or maximum rent levels: Rajasthan, Tamil Nadu, and non-Telengana areas of Andhra Pradesh.^[20]

Considering the country as a whole, various rounds of National Sample Survey indicate that the portion of area under tenancy has declined substantially since Independence, to about 8.3 percent of the total operated area in 1992. The NSS data also shows that the percentage of total operated area leased in varies significantly among states. In 1992 it ranged from 2.9 percent of total operated area in Kerala to 33.7 percent in Haryana. This NSS data on tenancy likely suffers from underestimation; the actual extent of tenancy is suggested by a more rigorous study in Bihar, which found the extent of tenancy in the state to be 34 percent of the operated area, compared to the 4 percent figure from the NSS data.^[21]

Currently, land rental markets play an important but probably under-utilized role in providing land access for the poor. As a consequence of tenancy restrictions and protections, landowners who rent-out must select tenants they trust not to reveal the relationship or assert their rights. Thus, it is generally considered that, all things being equal, larger farmers (who qualify for tenancy protections or because they belong to the same socio-economic class as the landowner) present lesser risks as tenants. If true, then liberalizing the tenancy markets could provide proportionally greater access to the poor.

According to NSS data, marginal farmers (those owning < 1 ha) lease-in 16 percent of the total leased-in area, despite comprising about 69 percent of all farm households. Their portion of leased-in land, however, is roughly equivalent to their portion of owned land. On the other extreme, large farmers (those owning > 4 ha) have a much larger share of leased-in area (43 percent) compared to their portion of owned area (32 percent).^[22] Table 2 shows the portion of households, leased-in area, and owned area for different sized farm households.

Table 2: Area Leased-in and Owned by Size Categories of Owned Holdings

Source: National Sample Survey 48^th Round (1991-1992)

The implementation of tenancy reform legislation has generally been weak, non-existent, or counterproductive, resulting in eviction of tenants, their rotation among landlord plots to prevent them from acquiring rights, and a general worsening of their tenure security. In one of the most comprehensive books on India's land reforms, P.S. Appu concludes that, as a result of all the various tenancy reform legislation, tenants acquired ownership or owner-like rights in only about 4 percent of the country's operated area (and 97 percent of this in only seven states). Meanwhile, tenancy reform legislation led to the large-scale eviction of tenants on about 30 percent of the operated area. These evictions took place even (and perhaps more often?) in the states that benefited large numbers of tenants with ownership or owner-like rights.^[23] These substantial costs of tenancy reform, that have already been realized, do not receive enough attention, particularly in the states that have significant numbers of tenancy reform beneficiaries.

Apart from the past costs of large-scale evictions, many commentators point to the ongoing costs of this large body of tenancy reform legislation. These include: (1) reduced supply of land available for rent, resulting in decreased land access for poor (and other) households who would like to rent-in; (2) non-use or under-utilization of land by landowners who are unwilling or unable to cultivate their land and fear losing their land if they rent it out; and (3) lack of any legal protection for most tenants who are forced to operate in concealed, informal tenancies.

RDI team members, although quite sympathetic to the pro-poor agenda objectives of those who promote continued or even stronger tenancy regulation/restriction, have seen more and more evidence and become increasingly convinced that the tenancy reform legislation operates to restrict livelihood opportunities for the poor.

For example, in an RDI survey of 400 rural households in Karnataka we found:

• 91 percent of respondents answering definitively state that the existing tenancy restrictions harm landowners.

• 94 percent of respondents answering definitively state that existing tenancy restrictions harm the landless.

• 38 percent of respondents answering definitively report that at least one farmer in their village keeps land fallow rather than renting it out because renting may lead to the loss of such land.

• 45 percent of respondents answering definitively state that tenancy prohibitions should be lifted.^[24]

In the course of Rapid Rural Appraisal research in various states, we generally find that:

• Knowledge of the specific tenancy reform provisions in law is low, but most rural households recognize that landowners risk losing some (often substantial) rights to their land when they rent it out. Thus, when land is rented, it is given to people who can be trusted not to assert rights and, for an extra measure of protection, those tenants are typically rotated, often every year.

• Although tenancy reform laws are rarely implemented, they often play a major role in landowner decisions about renting out land and lead to less active rental markets than would otherwise be expected and to some sub-optimal utilization of land.

• Land-poor households almost always wish that more land was available for rental.^[25] They do not fear exploitive landlord practices near as much as they fear not being able to access land to improve their livelihoods.

The tenancy liberalization debate: the current status

Liberalizing or removing tenancy reform legislation is a controversial issue in India. Most policymakers lack a balanced understanding of the tradeoffs and make ill-informed assumptions that the existing legislation protects the poor. They are unfamiliar with the potential that liberalization of tenancy restrictions has to benefit the poor, and they lack a pressing reason to alter their settled thinking on the subject.

Nonetheless, there are a growing (but still modest) number of voices advocating generally for tenancy liberalization. Some of those "pro-liberalization" voices point out that the debate cannot be reduced to a choice between status quo and liberalization. Rather, because different socio-economic-legal settings merit varying treatments, the option in each setting (or state) will necessarily reflect the nature and extent of ongoing regulation.^[26] The voices advocating some manner of liberalization have carried the day in some policy documents,^[27] but have not yet achieved significant changes in law or on-ground realities.

In the present policy dialogue on this topic, there is an overpowering tendency to view the tenancy debate within the twin context of the need to attract investment into agriculture and to facilitate a smooth process of land transaction during economic transformation without relying upon land sale markets. Particularly in government circles,^[28] a view that enhanced investment will cure agricultural backwardness dominates. Those promoting liberalization of tenancy restrictions often connect the desired liberalization to increased investment by (and benefits accruing to) large farmers or agri-business concerns, a connection that generates understandable resistance from those representing the interests of marginal/small farmers and agricultural labourers.

The Tenth Five-Year Plan recognizes the problems with state tenancy restrictions, but offers little in the way of specific policy guidance:

"[T]he prohibition of tenancy has not really ended the practice. On the other hand, it has resulted in agricultural practices that are not conducive to increased production. This, in turn, also depresses employment opportunities for the landless agricultural labourers." Section 3.2.73.

"The ban on tenancy, which was meant to protect tenants, has only ended up hurting the economic interests of the tenants as they are not even recognized as tenants. As a result, they are denied the benefits of laws that provide security of tenure and regulate rent." Section 3.2.35.

The policy dialogue and debates on agricultural land tenancy could benefit from: (1) more empirical evidence (translated into coherent policy recommendations) on current tenancy restriction impacts on the poor and the likely effects of liberalizing such restrictions; (2) a livelihoods perspective on the topic; and (3) a more coherent and consistent message from pro-poor constituencies that tenancy liberalization may make sense.

Opportunities for donors and NGOs

Research

Both Indian and foreign academics have conducted or are conducting research on the land tenancy topic in India, but not all of the work generated is useful. The land tenancy articles filling scholarly journals are often based on village studies conducted in relative isolation. Few have attempted to compile and summarize the findings (and policy implications) from the credible studies.

Perhaps more importantly, the great majority of the research related to tenancy in India is focused on productivity and efficiency concerns rather than on equity or land access issues. To the extent the research does consider equity issues, it tends to be focused on who is renting in or out with an emphasis on the poor's (landless, small, and marginal farmers) relative share of the tenancy market. Moreover, some such researchers often implicitly assume that tenancy relationships are zero-sum outcomes in which the larger farmer (whether as landlord or tenant) always wins and the smaller farmer always loses.

We are unaware of any research (other than our own very limited efforts) focusing on the perspectives of those whom tenancy restrictions are intended to protect. Research that includes the views on tenancy and tenancy restriction held by that population could provide valuable input to the policy dialogues on this topic.

We offer the following suggestions as particularly valuable research topics or approaches:

• Compiling and summarizing existing studies on tenancy in India, with a view towards informing the policy dialogue with a comprehensive overview.

• Research on views of the rural poor concerning tenancy. This might involve both quantitative and qualitative methods. What do those for whose protection tenancy restrictions were adopted think about the continued use of tenancy restrictions and how do they view the alternatives? Poor, rural individuals (male and female; tenants, small landlords, and wage laborers - who may be prospective tenants; etc) typically have useful, experienced-based, and highly relevant viewpoints on policy alternatives and their likely impacts. These should be explored in a variety of agro-climatic and socio-economic settings.

• Research focusing on links between livelihoods of the poor and tenancy or experience of the poor in tenancy markets from a livelihoods perspective. Such research should look at the participation of the poor in both renting in (on share and fixed) and renting out and the role that renting-in and/or renting-out plays relative to other livelihood activities pursued by such households. The research could explore how tenancy arrangements assist or inhibit a household's acquisition of other assets and the extent to which tenancy may (or may not) promote the livelihood objective of attaining secure access to land, reduce vulnerability factors, and diversify livelihood strategies.

Policy consensus building and advocacy

The policy dialogue around agricultural tenancies in India in recent years has been characterized by much smoke but little fire. Various groups have sponsored high-level national seminars on the topic in recent years (GOI Department of Rural Development 2003; National Institute of Rural Development 1992, 1999; Lal Bahadur Shastri National Academy of Administration 1999; National Centre for Agricultural Policy 1995, 1997; National Planning Commission, 1988). The efforts appear to have had little impact on actual legislative change.

Many of the recommendations and consensus statements resulting from such seminars and from studies do not distinguish between the treatment of those who have already realized protections from existing tenancy legislation and options for designing prospective tenancy relationships.^[29] This muddling of objectives and target populations has stalled progress; many opponents of tenancy liberalization assume that liberalization necessarily leads to an erosion of the rights previously secured by beneficiaries of tenancy reforms (e.g., recorded bargadars in West Bengal, "occupancy" tenants in Karnataka, etc.).

In addition, the policy dialogue, like the research, is characterized by overall productivity concerns more than by equity concerns. The most vocal advocates for tenancy liberalization tend to be those emphasizing agricultural productivity issues, while those supporting the status quo (or even more stringent tenancy reform laws or implementation) tend to be those emphasizing equity concerns. We are not aware of any representatives of agricultural labour or small and marginal farmers who promote liberalization of the tenancy laws.

Possible and extremely useful opportunities for donors and NGOs might include:

• Sponsoring workshops involving the rural poor and their representatives to discuss tenancy (perhaps in the wake of research of the type suggested above), with an aim to inform the policy dialogue, especially around issues of how to liberalize.

• Sponsoring workshops on the international experience concerning tenancy and tenancy reform, including what is appropriate regulation of agricultural tenancies (building on the recent FAO guidelines on leasing^[30]).

Innovative NGO land leasing activities

Several NGOs in India are using agricultural land rentals as a mechanism for benefiting poor households. One of those groups is the Deccan Development Society in Andhra Pradesh, which has supported groups of poor women in their efforts to access land through tenancy.^[31] These activities started in the mid-1980s when groups of landless, Dalit women mobilized through DDS activities took unutilized and degraded land on lease in order to improve their household food security. The women's groups invested their labour to make the land productive. While the women tenants benefited from the production (and low lease rates), the landowners benefited not only from the rental income, but even more significantly from the land improvements.

These group leasing activities took place in the Telengana area of Andhra Pradesh, where the law allows only small farmers to rent-out and where the tenancies must be for a minimum of five years with rent set at a maximum ranging from three to five times the land revenue. All of the DDS programme lease agreements have been oral, with terms of one to five years, and lease rates ranging from about Rs 1,000 to 4,000 per acre, well above the legal maximum. Neither the landowners nor the peasants perceive the extra-legal nature of the agreements as presenting a significant risk.

RDI visited these activity sites and interviewed several of the women that have participated in the leasing activities. All of the women appeared very satisfied with the activities and reported that the project had significantly increased their household food security. Several of the groups had gone on to purchase land through a Scheduled Caste Development Corporation land purchase programme and reported that their experience with leasing helped build their farming and farm management skills and their confidence to pursue the land purchase opportunity.

The experience of this DDS activity was of significant interest to the World Bank and its counterpart in designing a land purchase component to a large rural poverty alleviation project in Andhra Pradesh. Unfortunately, the legislative restrictions on land tenancy prevented the project from pursuing rental mechanisms for increasing land access. (UNDP may be supporting similar activities that help groups of women access land through leasing.)^[32]

We offer the following suggestions as possible opportunities for donors and NGOs:

• Within a livelihoods perspective, document and disseminate experience of DDS and (perhaps) other similar NGO leasing activities. For example, the extent to which leasing activities fulfill the objective of obtaining secure access to land and create opportunities to obtain other assets could be explored and programme participants surveyed regarding their perspective on the effectiveness of institutional support.

• In an appropriate setting (where the tenancy laws do not present constraints), collaborate with an NGO to conduct a leasing pilot, perhaps with written lease agreements that are informed by recent FAO study on lease agreement best practices.

3.2 The untapped potential of land sale markets

The land sale market may be the dark horse among the institutions capable of facilitating land tenure security for the rural poor. Land sale markets have a reputation to overcome: despite their theoretical efficiency, small farmers - and, particularly, landless households - typically face great difficulty purchasing land. As noted in the tenancy discussion, land rental markets usually play a more significant role than land sale markets do in assisting land-poor households to access land. Nonetheless, sale markets should not be discounted; when those markets operate for the benefit of the poor, the poor receive the most valuable of natural assets - land ownership.

This section discusses two land sale market issues that have potential to support the livelihood objectives of the rural poor: (1) land purchase schemes that benefit the land-poor; and (2) the enhancement or relaxation of restrictions on the alienation of certain categories of land.

The mixed bag reality of land sales markets

Explanations for why more radical reallocation of ownership holdings do not occur through land sale transactions abound. The following are the most prominent:

• Underdeveloped rural credit markets prevent development of land markets and constrain poor households' ability to finance land purchases;^[33]

• Land prices exceed the land's productive potential value because land is an important source of collateral, social status, and risk insurance;^[34]

• Government policies favoring large landowners (tax policies and agricultural or rural development programmes) prevent such landowners from selling land;

• High transaction costs;^[35] and

• Low levels of land sale market activity are self-perpetuating because farmers who might otherwise engage in interim transactions (selling land while intending to buy again in future) dare not because of the low supply of land on the market.

Land sale markets are often accused of increasing land concentration and tagged with responsibility for the downward mobility of many rural households. Actual practice often - but not always - proves otherwise. Land sale markets can result in either higher or lower land concentration and in either upward or downward mobility depending on the characteristics of buyers and sellers, their reasons for sale-purchase transactions (i.e. extent of distress sales), and their access to non land-based income sources.^[36] Grossly inegalitarian landownership patterns almost always result from an allocation of land by governmental or other authorities (e.g. feudal lords or colonial rulers) and not from the operation of land markets.^[37]

Although there is little evidence of increasing land concentration in rural India since the mid-19^th century,^[38] land sale markets are commonly believed to have operated to the detriment of India's small and marginal farmers. The combination of British colonial rule and accompanying 19^th century land settlements, freely negotiable land rights, and oppressive taxation did result in the dispossession of heavily indebted small cultivators through foreclosures to moneylenders. It is difficult, however, to elevate the role played by land sales markets to the driving force behind land dispossession in that set of historical circumstances.

A similarly mixed picture of the role played by land sale markets emerges from recent longitudinal studies conducted throughout India. The results of nine recent studies break down as follows:

• Four studies indicate that land sale transactions generally operated to reduce land access for small and marginal farmers (two in Punjab, one in U.P., and one in M.P.);^[39]

• Three studies indicate that land sales operated to increase land access for small and marginal farmers (two in West Bengal and one in A.P., M.P., Maharashtra and Gujarat);^[40] and

• Two studies showed little net change in the landholding structure, with both upward and downward mobility (in U.P. and Maharashtra).^[41]

Land purchase as a mechanism for broadening land access

In the early 1990's, international attention turned to the use of land sale markets to increase the rural poor's access to land. The attention resulted in a variety of schemes, variously identified as market-assisted land reform (MALR), community-driven land reform, and negotiated land reform. The World Bank in particular promoted pilot efforts in several countries over the past decade, and India has had experience (and mixed results) with similar programmes for the past 20 years. While such experience and the relevant lessons from international experience deserve further study, the "early" results suggest that these land purchase schemes provide some potential for increasing the poor's access to land.

The World Bank helped develop and promote larger-scale land purchase approaches to land reform in the 1990s as a potential solution to dilatory and politically cumbersome expropriative land reform.^[42] To date, large-scale land purchase programmes have been implemented on at least a pilot basis in Brazil, Colombia, Guatemala, Honduras, Philippines, and South Africa.^[43] Rather than using the machinery of government to expropriate and transfer land, land purchase approaches use the land sale market to redistribute land on a willing buyer-willing seller basis. Proponents of the land purchase approach emphasize that it is more cost-effective and efficient than traditional expropriatory land reform.

The land purchase approach is typically premised on the theory that the market can be successfully used to redistribute land to the land poor through a two-pronged effort: (1) increase the supply of land on the market by eliminating the subsidies favoring large farms and creating investment vehicles for the wealthy that are more attractive than land; and (2) help the poor to purchase land available on the market through a combination of grants and subsidized financing.

The case for this approach rests on the assumptions that:

• Left alone, land sale markets fail to transfer enough land to meet the needs of poor rural households that have the desire and ability to farm;

• To some extent this market failure is caused on the supply side by macroeconomic and sectoral distortions (e.g., inflation, subsidies, preferential access to government programmes, etc.) that push the price of land above the capitalized value of farm profits;

• Market failure is also due to lack of effective credit markets enabling the rural poor to access the capital necessary to purchase land; and

• If these market distortions were removed, land prices would be lower and the poor would be more able to buy land.

Market-based land purchase proponents^[44] point out that the approach differs from previous schemes, not only because the approach explicitly acknowledges the need to prime supply and demand, but also because market-based land purchase is non-coercive, relying on negotiation between willing buyers and willing sellers.^[45] While the government has a role to play, it does not expropriate land and then reallocate it to land reform beneficiaries. Rather, the government's role is limited to implementing policy reforms needed to increase the supply of land to the market; delimiting areas deemed to be inappropriate for farming; drawing up criteria for selecting beneficiaries; subsidizing land purchase (through grants and/or loans)^[46] and training for beneficiaries; funding complementary infrastructure; and monitoring and evaluating the land reform process.^[47]

Market-based land purchase approaches to redistributing land have numerous opponents. The main criticisms and proponent's answers to these criticisms are shown in Table 3.

The success of market-based land purchase approaches on the ground is still a matter of considerable debate. Most observers conclude that a market-based land purchase approach, if well designed and implemented, has some potential for redistributing land and increasing the poor's access to land.^[48] The World Bank continues to treat market-based land purchase as a cutting edge approach deserving of closely monitored pilot efforts.

Table 3: Criticisms of Market-Based Land Purchase Approaches

Land purchase programmes in India

SC and ST Development Corporations

Facilitating access to land through subsidized land purchase has been a strategy for enhancing livelihoods on a small scale in India for at least 20 years. The Scheduled Castes and Scheduled Tribes ("SC/ST") development corporations in various states have operated the longest running programmes. The programmes have been in existence for the past 20 years in Andhra Pradesh and past 14 years in Karnataka. More recently, Tamil Nadu, Kerala, the State Bank of India, and the National Bank of Agriculture and Rural Development (NABARD) have all adopted small land purchase programmes.^[51] The World Bank has begun working with state governments in Andhra Pradesh and Madhya Pradesh to expand access to land through land purchase projects linked to already existing self-help/micro-credit groups.

Under the SC/ST development corporation schemes in Karnataka and Andhra Pradesh, beneficiaries can purchase up to one acre of wetland or two acres of dryland.^[52] In 2000-2001 the maximum amount that the programme could spend on a single land purchase was Rs. 60,000 (roughly $1,300). Of this sum, the programme allots 50 percent as a loan (with 6 percent annual interest) and 50 percent as a grant. Beneficiaries must be: (1) landless; (2) below the poverty line; (3) belong to an SC or ST community; and (4) have no history of loan default. Land purchased under the programme is registered in the name of women alone.

RDI conducted limited research on the SC Cooperative Finance Corporation ("SCCFC") programme in Andhra Pradesh. RDI found that the process is usually initiated by a landowner who is aware of the programme and wishes to sell his land. The would-be seller informs the Mandal Revenue Officer (MRO) who, in turn, informs the SCCFC officials. The MRO acts as a mediator between the seller and the SCCFC. SCCFC officials conduct a spot inspection of the land, and if they find it suitable, an SCCFC committee establishes an offering price for the land based on government-assessed prices and prevailing market prices. The SCCFC extends an offer to the seller and conducts negotiations. If the parties agree on a price, the SCCFC initiates the beneficiary selection process. The SCCFC purchases the land directly from the seller, who is paid a lump sum, and distributes the land to the beneficiaries.

The Karnataka programme started in 1992 and is implemented by the Karnataka SC/ST Development Corporation. As of March 2001, the programme has provided 37,000 acres to 23,000 beneficiaries, which amounts to an average of 1.6 acres per beneficiary. Similar to the process in Andhra Pradesh, a land purchase committee identifies potential land (it is unclear whether they are initially approached by a landowner or whether they identify the land on their own) and negotiates the purchase price.

While well intentioned, the SC/ST development corporation land purchase schemes are flawed. Shortcomings of the schemes include:

• Failure of the beneficiary selection process to target the neediest.

• Technical assistance does not reach the beneficiaries, leading to potentially unsustainable farming operations.

• The scheme does not have an integral component for improving purchased land.

• Poor loan recovery rates due to high repayment amounts and lack of emphasis on importance of repayment.

• Beneficiaries do not drive the scheme; instead, those who are interested in selling (often unproductive) land initiate the process.

• Absence of an effective monitoring and evaluation component, contributing to a lack of improvement.

Andhra and Madhya Pradesh/World Bank Programmes

More recently, in conjunction with the World Bank the governments of Andhra Pradesh and Madhya Pradesh designed land purchase programmes that are at the cusp of implementation.

The Andhra Pradesh Rural Poverty Reduction Project (APRPRP),^[53] emphasizes increasing the rural poor's access and rights to land as a component of a larger project aimed at creating sustainable livelihoods through access to micro-credit. The project works with self-help groups to plan development projects for a village as a whole, groups of villagers, and households. Within a village, individuals who are interested in pursuing a common project form community interest groups (CIGs), which can include members of the self-help groups. These CIGs apply for funds from the community investment fund and can use the community investment fund for a range of income-generation and livelihood improvement projects, such as establishing a dairy or agricultural product processing unit. CIGs will also be able to access these funds to purchase land.

CIGs interested in participating in the land purchase component prepare a proposal that outlines their plan for the development and use of the land.^[54] The plan must include a computation of the rates of return expected from the land, an assessment of financial sustainability of the investment, a comparison of expected land productivity after beneficiaries improve the land, and a description of the potential risks of the plan including how the group will mitigate such risks. In addition to asking for funds for the land purchase, the plan should request funds for necessary land improvement, technical assistance, inputs and working capital.

Under the land purchase component of the project, CIGs purchase land together, but divide the land into equal-sized plots that members individually own. Once the land is in the group's possession, CIG members can farm it collectively or individually. There is no absolute cap on the price of land that can be purchased, but there is a per beneficiary household ceiling of Rs 20,000 ($435). Of this total, the project provides up to 75 percent as a grant.

The potential beneficiaries and the land must fit specific criteria. Beneficiaries must appear on the list of eligible beneficiaries created by the village poverty-mapping process, belong to a household that owns less that half an acre, be between 18 and 55 years of age, and be a member of an SHG.

Beneficiaries must directly negotiate the land purchase price with the current landowner. To ensure fairness and community acceptance, local APRPRP staff are required to be present for the negotiations. In addition, a village elder, gram panchayat member, or mandal revenue officer must also be present. Ultimately the APRPRP project director must approve the land purchase price based on its relationship to prevailing market prices.

The Madhya Pradesh land purchase scheme is in an earlier stage of development. Like the Andhra Pradesh project, groups of beneficiaries will negotiate to purchase land that is available on the market. In contrast to the Andhra project, the Madhya Pradesh project will purchase house and garden rather than agricultural land and field plots.

The general guidelines of the Madhya project are similar in approach to those in Andhra. Some differences include a smaller cost-sharing requirement of beneficiaries of 15 percent rather than 30 percent. The maximum funding per beneficiary family is much lower, at Rs. 12,000 rather than Rs. 20,000.

Land purchase: opportunities for donors and NGOs

The use of land purchase as a means of increasing the poor's access to land is growing in India, as evidenced by new donor-funded projects in Andhra Pradesh and Madhya Pradesh and state government projects in several states. Past projects to distribute land through purchase, such as the SC/ST development corporation schemes in Karnataka and Andhra Pradesh have been beneficial, but flawed. Perhaps more importantly, these programmes are widely perceived to be ineffective by senior bureaucrats. These perceptions alone, which are often based on nothing more than hearsay or anecdotal evidence,^[55] decrease the possibility that such programmes will become a significant tool for broadening land access in India. While the recently initiated World Bank funded programme in Andhra Pradesh includes a significant monitoring and evaluation component that should provide important feedback on both project processes and impacts, the projects without donor financing are not systematically assessed. Because of the growing interest in land purchase as a tool for increasing the poor's access to land in India, this is a prime time for more directed study of past and existing projects (with particular emphasis on their impact on beneficiary livelihoods), and dissemination of the results to inform policy dialogue and project design.

Research

Documenting the experience of one or more of the most significant non-donor-financed land purchase schemes in India and studying the impacts on beneficiary livelihoods could provide important information to the policy dialogue about the usefulness of such programmes in improving livelihoods of poor, rural households. Important research questions include the following:

• Is the land purchase scheme reaching appropriate beneficiaries? Are the poorest of the poor benefiting or do the economic viability requirements exclude them?

• What are the related livelihood impacts on beneficiary family assets? Has the scheme helped facilitate livelihood objectives, increased human, social, and financial assets (e.g., income, nutrition, credit access, status), and impacted vulnerability factors? If not, are the shortcomings due to programme design flaws?

• How do the livelihood impacts compare to the results of other possible interventions in terms of cost per beneficiary?

• Are beneficiaries' farming projects sustainable? Are they able to repay their loans? Are beneficiaries retaining the land they purchased? Does the ground reality meet the expectations of the plans created prior to the beneficiaries purchasing land?

• How has the scheme impacted local land markets?

Policy dialogue

Following up on the results of this research, donors might consider initiating workshops in which the research/study results are presented to a broad group of stakeholders, including government department heads, politicians, NGOs, and beneficiaries. The workshops would provide a forum for those stakeholders to respond to and discuss the results with an aim toward reaching specific policy recommendations. Those recommendations could be disseminated through various channels (mass media, directed mailings to politicians and bureaucrats, NGOs and other civil society organizations, and direct briefings to key officials).

Restrictions on alienation of land

Restrictions on alienation of land invite arguments at the extremes. On one hand, the free alienability of land is championed as essential to efficient land use and as a vanguard of a modern society. On the other hand, restrictions on alienation are relied on as a vital means of protecting the achievements of land reform, the land rights of the poor, and the unique and often threatened cultures of certain groups.^[56] As this section discusses, both positions have merit at a theoretical level, and both the enhancement and the relaxation of restrictions on alienation of land have the potential to impact the livelihoods of India's rural poor positively and negatively. What is absent from the debate (and is suggested as an opportunity for donor involvement) is any significant input from those people and communities that the imposed restrictions on alienation are designed to protect.

Restrictions on the alienation of land can gut the value of the asset by reducing its monetary value and limiting the owner's potential uses of the land to diversify livelihood options beyond those that are land-based. It is ironic, therefore, that the restrictions most often attach to land held by the poorest people, diluting its value even before receipt. Relaxing the terms of restrictions on alienation would potentially provide the rural poor with the full value of their land asset. In addition, while land purchase schemes usually require some investment by governments to support the participation of the poor in the land market, relaxing restrictions on alienation of land carries no implementation cost. Through legislative amendment alone, India could increase the value of the land held by some of its poorest farmers and allow them to pursue multiple livelihood strategies.

The step would not be without significant risk and controversy. Restrictions on alienation are designed to protect land ownership status, and in many cases ownership of restricted land may be preferable to one potential result of owning freely alienable land - having no land at all.

The nature of restrictions

Restrictions on alienation are legislative constraints that preclude certain transfers of, or encumbrances on, designated land. Legislation may limit the pool of people to whom land can be transferred (e.g. tribe members), delineate acceptable modes of transfer (e.g. gift v. sale), and require approval of a government official before a transfer. The restrictions may be perpetual or for a stated time period. A typical provision prohibits a grantee from selling, transferring, or mortgaging his land, except in very limited circumstances, for an indefinite period.^[57]

The cost of restrictions on alienation can be significant: in protecting the land asset, legislation potentially prohibits (or substantially limits) the use of land to acquire more assets and to diversify livelihood opportunities. That said, the legislative intent supporting restrictions can be equally compelling. Most Indian states have imposed restrictions on the alienation of two types of land: (1) land received from the government, such as ceiling surplus land and government wasteland^[58]; and (2) land owned by a member of a Scheduled Tribe.^[59] In both cases, the instinct underlying the restriction is the same: a desire to protect certain classes of people from losing the benefits of land ownership.

The numbers of people and amount of land subject to these restrictions add up. Through land reform programmes, over 12 million tenants countrywide received some form of tenure security covering 15 million acres, states distributed more than 14 million acres of wasteland, and another five million beneficiaries received shares of more than five million acres of ceiling surplus land. As of 1987, approximately 581,000 acres of land of ceiling surplus land had been distributed to members of Scheduled Tribes, and approximately half a million acres of tribal land has been restored to tribals or is subject to a pending action. Both of these figures are only a fraction of the amount of land held by tribals - most of which is subject to some form of restriction on alienation.^[60]

In the case of government granted land, the restrictions on the alienation are an effort to protect the gains of land reform. Government programmes provided land to beneficiaries who often had no prior experience owning and managing agricultural land, and a host of dangers could be anticipated. New owners may not have the agricultural skills, available labor, and necessary capital to invest in the land, thus reducing the land's productivity and the asset's ability to provide for a family's needs. The land may be the family's most valuable (and visible) asset, and a source for financing weddings, dowries, and addressing medical and other family emergencies. Many state governments considered the potential for loss of the asset - to the disadvantage of the land reform beneficiary - too great.

In the case of tribals, restrictions respond in large measure to the enormous amounts of tribal land lost in India over the last century. Tribals are highly dependent on land for their identity and livelihoods, and have been susceptible to domination by more sophisticated groups.^[61] The tribal practice of shifting cultivation made the land that they relied on vulnerable to settlement by immigrant farmers.^[62] In addition, various groups (including colonial powers and governments) have exploited tribal people at the cost of their land. In response, states enacted restrictions on the alienation of tribal land in order to protect the heritage and livelihood of some of the country's most marginalized people.^[63]

Unfortunately, despite most legislation being in place for more than forty years, restrictions on alienation have not been successful at protecting tribal land from alienation.^[64] Various accusations fly back and forth: some contend that the legislation is not restrictive enough, contains too many loopholes, and is not enforced.^[65] Others argue that the legislation is too restrictive, does not adequately address the realities of tribal life and diversity of the tribal populations, and has driven non-qualifying mortgages and sales underground, where there are no protections.^[66]

With approximately 642 tribal communities in India,^[67] some measure of truth can likely be found in all positions asserted on restraints on alienation of tribal land. The economic and social circumstances facing tribals in various states, the range of legislative restrictions in the states, and the implementation and enforcement efforts are so diverse and site-specific that few useful generalizations can be made about reasons for the ineffectiveness of the legislation or appropriate corrections.^[68]

However, some general observations can be made about the negative effects of the restrictions on alienation. First, not all transactions in tribal land and land received through land reform programs are inherently exploitative of the seller. The populations are heterogeneous and may increasingly include mixed economies and a diversity of livelihood strategies - one of which may include voluntary land sales.^[69] Land that is not freely transferable is less valuable than land that is. Thus, restrictions on alienation lower the market value of land and reduce the wealth of the beneficiary.^[70] In some cases, the value of the land may hinder an entrepreneurial class attempting to emerge from tribal communities and the tribals' efforts to diversify their livelihood strategies.^[71]

Second, where a landowner is prevented from complete use of his land asset - including the right to sell it or use it as collateral as he sees fit - the landowner has fewer options to diversify his assets and ultimately to pursue multiple livelihood strategies. The landowner and his family are tied to the land and unable to avail themselves of its full value. In some tribal communities, which may already be socially and economically isolated, this restriction can potentially strangle what might otherwise be the natural development of a healthy and diversified tribal economy.^[72]

Third, the purpose of restrictions on alienation may be fulfilled at some point short of an eternal ban on sales and transfers. To the extent that the restrictions are intended to protect beneficiaries from loss of their land resulting from inexperience or lack of sophistication, a five to ten-year ban would allow the new landowner time to learn the necessary skills and fully comprehend the value of his holding. To the extent that an externally imposed ban on land transfers to non-tribals is designed to protect the integrity of tribal culture, a more flexible restriction could allow a particular tribal community to reach a different conclusion about how best to preserve its heritage and enhance livelihood opportunities for its tribe members.

Research and policy advocacy opportunities

Whether a particular tribal population or group of land reform beneficiaries or government land grantees is better served by the protections offered by restrictions on alienation, by some form of enhanced restrictions, or by the options that may come with more relaxed restrictions is well worth exploring: a significant percentage of rural landowners are positively or negatively impacted by existing restrictions and the potential for an increase in rural wealth is substantial.^[73] However, despite the broad impact of the restrictions on rural communities, little research has focused on the opinions of individuals whose land was or is subject to restrictions on alienation. Through a variety of methods, including household surveys, key informant interviews, and focus groups conducted in selected communities within a single state,^[74] the realities of the restrictions can be explored. What are the vulnerabilities experienced by the community of landowners? What are the obstacles to enhancing their livelihoods? How are the restrictions on alienation of land understood by the community? Are the restrictions enforced? Should the restrictions be broadened? Do the restrictions on alienation impact the choices available to landowners? How do restrictions affect market values of land? What would be the likely consequences of relaxed restrictions?

Complementing these types of broad questions, several households in the community could be selected to compare the effect of land transfers (and land retention) on the families' livelihoods over time. Through in-depth interviews and investigation of land records, researchers could trace the experiences of households that had ownership of land that they transferred and document how those households fared following the land transfer. Those experiences can be compared with the experiences of households that retained land. This type of research could provide valuable insight into the effect of restrictions on alienation as they currently exist and suggest options for enhancing or relaxing those restrictions to meet the needs of the rural population.

3.3 Does size matter? A summary of the benefits of small plots

Most land reform efforts in India have been founded on the assumption that the government should give poor rural households at least one, if not two or three acres of land. That assumption has stalled most large-scale land redistribution efforts: the sheer numbers of landless people, particularly in relation to the limited amount of available land, render large plot schemes financially unfeasible and politically unpalatable.

Small plots offer a viable and increasingly attractive alternative. Using only a fraction of an acre of land, poor households can substantially improve their nutrition, diversify possible income and credit sources, and enhance their social status in the community. Small plot programmes are a much more practical and politically defensible means to impact the livelihoods of the rural poor in an immediate, positive, and sustainable fashion.

Small field plots

The role that small plots can play in enhancing the rural livelihoods is visible in the fields of West Bengal. As part of its land reform efforts, West Bengal redistributed 1.04 million acres of ceiling-surplus land to 2.54 million land-poor households.^[75] In recent years, the state has been allocating ceiling-surplus lands in very small plots, averaging less than one-third of an acre. In a small field study covering two districts, RDI interviewed 34 erstwhile landless land reform beneficiaries who had received plots averaging 0.16 acres (ranging from 0.07 to 0.38 acres). The majority of the households farmed their plots intensively and reported significant increases in food intake, income, and social status - a mix of human, financial, and social assets that they attributed to the small field plots.^[76] Other more comprehensive studies are consistent with RDI's findings: West Bengal's land reform beneficiaries have realized important benefits from plots of land much smaller than an acre.^[77]

Small plots are not without their critics. Some have questioned the potential impact of distributing small plots, noting that the income earned from the plot is not itself sufficient to raise the beneficiary households above the poverty line. From a livelihoods perspective, however, this is not a relevant standard. A sustainable livelihoods approach recognizes that people draw on a range of capital assets to further their livelihood objectives and acknowledges that in many cases, a diversity of assets provides the best buffer against the vulnerability factors that threaten the rural poor.^[78] The beneficiary households receiving small field plots typically (continue to) pursue other income-generating strategies such as working as agricultural labourers. Receiving land through the land reform has not, in most cases, changed the primary "occupation" of most beneficiaries. The land has, however, provided those households with a significant opportunity to supplement their nutrition and income, in addition to increasing their status and credit worthiness.

House-and-garden plots

While West Bengal's experience suggests that very small agricultural field plots can play a role in improving the livelihoods of India's rural poor, house-and-garden plots probably offer much greater potential. Because RDI is providing to FAO a separate, more comprehensive paper on this topic, we will only introduce and summarize the topic here as it relates to India.

RDI, along with Indian partners, have conducted field research in several Indian states (Karnataka, West Bengal, Andhra Pradesh, and Uttar Pradesh) to explore the role that house plots - and particularly, home gardens - play in providing livelihood benefits to land-poor, rural households.^[79] Our research indicates that:

• Functionally landless, agricultural labourer families that own a house plot typically derive substantial non-housing benefits from the plot including increased nutrition, income, status, wealth generation, and access to credit.

• The benefits derived increase substantially with relatively small increases in house plot size, especially as the house plot increases above 1300 square feet to about 3,000 square feet.

• Families with house plots larger than 1300 square feet were more than twice as likely as those with smaller plots to report that their house plot had resulted in increased family income; three times as likely to report that the plot had resulted in improved nutrition; and almost twice as likely to report that receiving the plot had increased their access to credit.

• Not all poor households with house plots exploit their potential. However, studies of land-poor, agricultural labourer families with relatively small (1700-2600 square feet), well-developed house-and-garden plots found that they were producing enough vegetables, fruit, and milk on their homestead plots to meet or significantly exceed their household nutritional needs of these products. Apart from direct household consumption, these households received about Rs 11,000 of annualized income from the sale of products from their house-and-garden plots.

• Building on these benefits, agricultural extension programmes targeting the development of existing house plots of poor rural households could greatly enhance food security, income, and wealth.

• Providing sufficiently sized house plots to the poorest households who lack them is financially feasible, even if the land is purchased at market value. The cost of providing 3,000 square foot plots with minimal infrastructure is about Rs 5,000 per landless family. (All-India prices for non-irrigated agricultural land average about Rs 35,000 per acre, equal to about Rs 2,500 per 3,000 square feet; and the cost of minimal infrastructure is about Rs 2,500 per plot in a typical rural colony of house sites.)

These findings from India are consistent with evidence from a variety of developing countries: in varied settings and circumstances, small homestead or garden plots consistently provide poor households with multiple, diverse benefits, including food, income, status, fuel wood, and economic security. Moreover, many of these human, social, and financial assets accrue to women, which in turn benefits the children and family as a whole.^[80]

Opportunities for donors and NGOs^[81]

The findings related to small plots - both field plots and, particularly, house-and-garden plots - suggest that: (1) state governments can provide meaningful land access to the land poor at relatively low cost per beneficiary household, even if the land must be purchased; (2) it is politically and financially feasible to provide some meaningful land access to virtually all of India's landless households; and (3) efforts to help develop existing small parcels of already owned by marginal farmers may be more cost-effective than providing ownership access to additional land.

Possible opportunities for donors and NGOs in this area include:

• Further study of related NGO and other programmes in India that either allocate or develop home gardens in order to study the impacts and develop a set of best practices for such programmes.

• Collaborate with state governments or NGOs on pilots to obtain and distribute land for the purpose of granting house-and-garden plots of at least 0.07 acre (3,000 square feet) or small field plots of a fraction of an acre to rural landless families.

• Collaborate with state governments or NGOs on agricultural extension programmes that provide advice and assistance for the development of home gardens or very small field plots.