Subject: Economy

The shrinking farm size in India from 1.23 hectares in 2005-06 to 1.08 hectares in 2015-16 has raised serious concerns about agricultural viability, necessitating innovative solutions like contract farming and land leasing to ensure sustainable agricultural growth.

Advantages of Contract Farming and Land Leasing

Economic Benefits:

• Provides assured market access and predetermined prices to farmers through formal agreements with agribusiness firms.
• Enables access to modern technology, quality inputs, and technical knowledge through corporate partnerships.
• Helps achieve economies of scale by consolidating fragmented holdings through leasing arrangements.

Social Benefits:

• Creates employment opportunities for landless laborers and marginal farmers.
• Reduces migration by making agriculture viable through institutional support.
• Promotes women's participation in agriculture through schemes like Kerala's Kudumbashree model.

Institutional Support:

• Model Agricultural Land Leasing Act, 2016 provides legal framework for transparent land leasing.
• States like Madhya Pradesh have enacted separate laws while Uttar Pradesh and Uttarakhand modified existing ones.
• Union Budget 2024-25 proposed land reforms focusing on administration and management.

Challenges and Concerns

Implementation Issues:

• Restrictive tenancy laws in many states hinder widespread adoption.
• Small farmers often lack bargaining power in contract negotiations.
• Risk of exploitation by corporate entities through unfair contract terms.

Structural Limitations:

• Limited access to institutional credit for tenant farmers.
• Absence of comprehensive insurance coverage for leased lands.
• Inadequate dispute resolution mechanisms.

Way Forward

Policy Measures:

• Strengthening legal framework for contract farming and land leasing.
• Promoting farmer producer organizations (FPOs) to enhance bargaining power.
• Developing robust grievance redressal mechanisms.

Reform Initiatives:

• Encouraging states to adopt model land leasing laws.
• Creating digital land records for transparent transactions.
• Providing institutional support for contract enforcement.

The success of half a million agricultural households engaged in contract farming demonstrates its potential. With proper safeguards and policy support, contract farming and land leasing can be effective tools for agricultural transformation, particularly through initiatives like the 2025 land leasing policy supporting long-term lessees with government assistance.