Agricultural Land Lease in India

An essential component of India's agricultural economy is the leasing of agricultural land. In India, where land leasing is a common practice, farmers who do not own their property can more easily access it thanks in large part to this practice. The government created the Model Agricultural Land Leasing Act in 2016 to liberalize the agricultural market of the nation and to advance efficiency and equity in the sector. Even while the States have not yet fully embraced the model law, its prompt adoption would eventually open the door for a framework for farmland leasing that is more permissive. The lack of adequate institutional structures that facilitate land leasing has hampered private investment in agriculture. Farmers still hesitate to lease their land and leave it fallow since they don't have a clear mandate to stop land grabbing by cultivators. 

What is an Agricultural Land Lease?

An agricultural land lease is a contract that establishes the conditions of usage for a specific farming plot between the lessor, who is the property's owner, and the lessee. Regardless of length, the tenancy typically lasts between three and five years. In a typical lease, terms such as rent, period length, rental rates per acre, permitted crops (for example, only vegetables), frequency of payments (for example, every year on January 1st), and who will supply equipment and cattle are all included (if applicable).

Benefits of Agricultural Land Lease

Both the landowner and the tenant farmer can gain from agricultural land leases in several ways. Leasing their property can give landowners a reliable stream of income without having to worry about the dangers and uncertainties of farming. Additionally, it guarantees that the land is not kept fallow but is instead used productively. For tenant farmers, renting land gives them access to resources including land, water, and other farming inputs. Also, it enables them to avoid the expensive expense of buying land, which is frequently beyond their price range.

Legal Framework for Agricultural Land Lease in India

Since that land is a state issue as defined by the Indian Constitution, several state laws control the legal framework for agricultural land leases in India. Even though state laws differ, most states share a few specific provisions. A few of the crucial clauses are:

Registration

Agricultural land lease agreements must be registered with the revenue department or the local government in the majority of states.

Tenure

State-by-state variations in maximum lease terms for agricultural land range from three to thirty years.

Rent

Rent is determined by mutual agreement between the tenant farmer and the landlord, but it is not allowed to exceed a predetermined percentage of the land's value.

Subleasing

In general, the proprietor must give his or her permission before subletting leased property.

Eviction

If the tenant farmer violates the terms of the lease, such as by failing to pay rent or by using the property improperly, the landowner may evict the tenant farmer.

Challenges Faced in Agricultural Land Lease in India

Notwithstanding the advantages of leasing agricultural land, there are still several issues that need to be resolved. A major issue is an ambiguity surrounding land ownership and tenancy rights, which frequently results in conflicts between landowners and tenant farmers. This is especially true in regions with missing or old land records.

Landowners' hesitation to lease their property out of a sense of control over it is another obstacle. Some landowners may sublease their land to tenant farmers at excessive prices after leasing it to intermediaries, which can lead to exploitation and debt bondage.

Model Agriculture Land Leasing Act 2016

Background

Even when the landowners themselves are unable to cultivate their plots of land, the fear of losing the right, title, and ownership over one's land by leasing out deters them from doing so. This is the reason that a sizable portion of land is still fallow. The State Revenue regulations allow for ownership by demonstrating adverse possession for a predetermined amount of time as determined by the actual tiller. According to the 2011 census, just about 6% of the country is under the lease. In the absence of a formal framework supporting such leasing, the majority of it is verbal, which prevents the lessee from claiming the status of a farmer and gaining access to numerous government and financial institution incentives.

Furthermore, it is well known that a lot of land is left fallow since many people choose not to offer their property for a verbal lease. So, it is essential that leasing be recognized legally by passing a relevant law. Yet, it must expressly and unequivocally safeguard the landowner's interests in place of any other applicable legal provisions.

For the states and UTs to develop their piece of legislation in accordance with the local requirements and adopt an enabling Act, the Model Land Lease Act, 2016, drafted and endorsed by the NITI Aayog, provides an acceptable template.

Which activities are covered under the Act?

Raising crops—both food and non-food—includes growing grass, flowers, fruits, vegetables, fodder, and other horticulture plants and crops. Agroforestry, agro-processing, stockbreeding, fisheries, dairy and animal husbandry, poultry farming, fisheries, and other associated farming operations by farmers and farmer organizations are also included.

Key Features of the Act

·         To encourage agricultural efficiency and justice, the Act attempts to legalize land leasing. The Act was created to increase rural residents' occupational mobility as well as agrarian output.

·         In accordance with mutually agreed-upon terms and conditions, this Act enables farmers to lease land for use in agriculture and related industries. It states unequivocally that the leaseholder's claim to the property is inadmissible in all cases.

·         The leaseholder will have simple access to financing, insurance, and disaster aid thanks to provisions that have been implemented. He will be inspired to make greater investments in productive agriculture techniques.

·         When the lease period is up, the land may be automatically resumed under this model law. It differs from some State regulations, which demand that a certain amount of land be given to the tenant even after the lease has expired.

·         The Act aims to motivate the leaseholder to invest in land improvement techniques by offering financial incentives. Also, it enables them to receive their investment's unused value back at the end of the lease time.

·         A provision of the "Special Land Tribunal" is incorporated in the Act for the expeditious resolution of disputes between the landowner and leaseholder.

Impact of the Model Agriculture Land Leasing Act 2016

The Model Agricultural Land Leasing Act of 2016 has the potential to drastically change India's agricultural industry by giving small and marginal farmers more access to land. Both landowners and tenant farms are given legal protection, which can assist prevent disputes and guarantee greater tenure security for tenant farmers. The law also supports long-term leasing, which permits larger capital expenditure on the land and the use of contemporary farming methods. Increased agricultural productivity and increased economic growth in rural regions can stem from this.

Challenges

The Model Agriculture Leasing Act of 2016 has several operational difficulties despite its potential advantages. The fact that farmers are not aware of the requirements of the act and their rights as tenant farmers is one of the main problems. Also, landowners who are hesitant to lease their property out of a sense of control over it may oppose the idea. Intermediaries who profit from the current subleasing system at exorbitant fees can also be opposed.

Conclusion

The agricultural economy of India includes the leasing of agricultural land, which gives farmers access to land even if they do not own it. Although there is a legal framework for leasing agricultural land, there are still several issues that must be resolved if it is to be advantageous to both landowners and tenant farmers. To stop intermediaries from taking advantage of tenant farmers, improvements must be made to land records and tenancy rights.

A crucial step towards establishing a legal framework for agricultural land leasing in India is the Model Agricultural Land Leasing Act of 2016. To ensure a fair and legally sound agricultural land lease, it is crucial for farmers and landowners to consult with a property lawyer who has knowledge specifically related to agricultural land and the laws governing such leases. A property lawyer with this expertise can provide valuable guidance, draft comprehensive lease agreements, ensure legal compliance, and offer advice on resolving any disputes that may arise during the lease term.

FAQs

How long is a lease on agricultural land valid?

A lease may be long-term, lasting more than five years, or short-term, lasting less than five years. The land must be leased for a minimum of five years but up to 25 years to be eligible for income tax advantages.

How much GST applies to leased agricultural land?

Any lease, tenancy, or permission to occupy land is recognized as a provider of services under Schedule II of the CGST Act, Paragraph 2(a). Long-term lease - The Bombay High Court ruled that a one-time fee paid for a long-term lease of land (30 years or more) is subject to GST at an 18% rate.

About The Author:

Adv.Dr. Ashok Yende is the Founder & Managing Partner at the Yende Legal Associates. He has been empanelled as the Mediator by the Bombay High Court, Maharashtra State Consumer Commission, Presolv360. He had served as Professor & Head, of the Department of Law, at the University of Mumbai. He is the Founder and Director of the University of Mumbai Law Academy. He is the President of Global Vision India Foundation and has headed leading law institutions in the country. He has significantly contributed to the cause of legal education and profession. Besides, D.Lit., Ph.D., and LL.M. degrees, he has passed programs at Harward Kennedy School, USA, and London Business School, London. With an extensive experience of over 35 years, he has authored seven books, and has been honoured with prestigious awards.