Abstract
Traditionally the tenancy-inefficiency debate is centred on the incentive problem of sharecroppers that induce them to under-supply inputs and effort in cultivation. The fixed-rent tenants are supposed to be free from this problem as the rents they pay are in the nature of fixed costs and hence do not enter marginal calculations. The present paper argues that even the fixed-rent tenants can have an incentive problem, albeit of the opposite type, if an inter-temporal optimisation framework is adopted. They may be inclined to use production-enhancing inputs like chemical fertilisers excessively so as to maximise returns from the land during their tenure, disregarding the implication of their action for long-term soil health. For empirical verification of the argument, the authors analyse survey data from Assam Plains, where land holders of all size class actively participate in the land lease market. While the sharecroppers have been expectedly found to use land less intensively than the owner operators, the fixed-rent tenants are seen using land much more intensively which can impair soil health in the longer run. Suitable reforms of the prevailing agrarian institutions have been called for to address the incentive problems of both sharecroppers and fixed-rent tenants.
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Notes
As per the 70th round of National Sample Survey Organization report, the overall incidence of tenancy in India has increased as compared to the estimates of incidence of tenancy in earlier surveys. Report number 571 (2012–2013) on ‘Household Ownership and Operational Holdings in India’ further shows that fixed-rent is now the dominant form of tenancy contract. While 58.10% of the leased-in area was under fixed-rent (fixed money + fixed produce), only 28.70% of area leased-in was under sharecropping in 2012–2013. The increased incidence of tenancy and emergence of fixed-rent as the dominant contract makes the issue under consideration extremely important.
Land may in practice be available for more than one period under lease. In the context of the present study, though more than 60% of the tenancy contracts are for short duration, most of them are however for more than 1 year. This however does not make our assumption of leasing being limited to only one period invalid since the incentive problem that the tenant farmer suffers from will arise in the last period of the contract. In fact, if the duration of the tenancy contract is short, the incentive problem may be present from the first period of the contract. Besides, as has been discussed in “Landholding and tenure profile of sample farm households” section, since at the end of the second year of lease the existing tenant is replaced by a new one instead of the resumption of land for self-cultivation by the owner, the problem persists.
More than 50% of the state’s workforce was employed in agriculture and the sector contributed a quarter of the Gross State Domestic Product in 2009–2010 (Government of Assam 2012).
Over three quarter of the state’s gross cultivated area was under paddy (Goswami 2012).
Farmers with operational holding less than one hectare are marginal farmers, and those who cultivate 1–2 ha are considered as small farmers.
A tenant holding a particular plot of land continuously for over 3 years is an occupancy tenant who by dint of this incumbency can acquire heritable and transferable right over the plot.
Operational holdings of farm households are divided into three parts not necessarily all parts occurring in each observation. These are the part under sharecropping, the part under fixed-rent tenancy and the part owner operated. In the regression analysis, it is neither possible nor necessary to include these three parts as separate independent variables. If all the three parts are included, they add up to 100% in each observation resulting in perfect multi-collinearity situation. In view of the focus of the paper, the two independent variables included are areas under sharecropping and fixed-rent as percentages of operational holding respectively. Indeed, given other control variables the effect on the dependent variable of owner operated part of the operational holding is captured by the constant term in the respective regression equations. .
The predicted values of the dependent variable from the linear regression model fall within the range of − ∞ to ∞. In the present context, since the dependent variable takes only positive value, a linear regression is therefore not the appropriate tool.
Though higher than that of the owner operators, the apparent observation from the figure for cropping intensity of the fixed-rent tenants is that there is still scope for improvement. However, while interpreting the cropping intensity of the fixed-rent tenants, one should keep the fact in mind that the crops that the fixed-rent tenants grow are basically rabi crops and hence can be cultivated only in one half of the year. Those of the tenants who grow either of the following combinations of crops, viz. winter vegetable and rape and mustard or summer paddy and rape and mustard, can only cultivate at least some part of the land more than once even during one half of the year since rape and mustard in particular is a short-duration crop. Thus, a cropping intensity of 148.9 may still be sufficiently higher as far as the fixed-rent tenants are concerned. The explanation of as to why the fixed-rent tenants grow only these crops is provided in Goswami and Bezbaruah (2013). Since, the fixed-rent tenants grow the crops basically for commercial purpose, they choose those crops which can be grown during that half of the year when the weather risk is minimum. Encouraged by very little risk of weather, this group of farmers applies costly inputs like HYV seeds (It is therefore not surpassing that these tenants devote a very high proportion of rice acreages to HYVs), irrigation, chemical fertilizers and pesticides which results in higher production and yield, and fetches higher return.
In the present context, the recommended level of NPK refers to the minimum dose of NPK that maximizes the return/yield in a round of cultivation. However, it is not necessary that the recommended level of NPK is also the optimal level for soil health. Nevertheless, it is instructive to compare the recommended level with the actual level of NPK for inferring the fertiliser utilisation pattern of the farmers and understanding its implications for soil health. A very high level of NPK as compared to the recommended level is very likely to have adverse implication for soil health.
It can also be observed from Table 7 that neither owner operators nor the fixed-rent tenants apply NPK in the recommended proportion. The application of NPK in an imbalanced proportion may be a fall out of the price distortions that stems from subsidy given to the farmers especially for urea.
Given the characteristics of the lessors of the times during which the prevailing tenancy legislation was formulated, the provisions of the law might have been justified. But the characteristics of the lessors of the present time have changed, and they are also small and marginal or at best medium land holders. In the sample of farmers considered for the paper, there is not a single lessor who owns more than 6 hectares of farm land. Hence, protecting the interests of the lessors is as important as safeguarding the interests of the lessees. Taking away land from the lessors to transfer it to the lessees will merely create another class of landless people (Goswami and Bezbaruah 2013).
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Goswami, B., Bezbaruah, M.P. Revisiting the tenancy-inefficiency question with an inter-temporal optimisation framework: insights from the agrarian set-up of Assam Plains in Eastern India. J. Soc. Econ. Dev. 20, 256–273 (2018). https://doi.org/10.1007/s40847-018-0067-1
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DOI: https://doi.org/10.1007/s40847-018-0067-1