Karnataka’s Big Bang Farm Reform: How Revoking Agri Land Sale Restriction To Non-Farmers Will Be A Game-Changer

Yesterday ( 11 June), Karnataka government announced that the state will amend the 1961 law that restricted non-farmers from buying agricultural land.

After the amendment, regardless of buyer’s annual income from non-agricultural sources, any Indian or a trust, society, company or an educational institution can buy farmland in Karnataka.

This amendment comes a few weeks after the state government had given permission for industries to directly buy land from farmers without interference from government agencies.

“We will amend the Sections 79 (A) & (B) of the Karnataka Land Reforms Act, 1961, through an Ordinance as we are in the middle of a Covid-19 crisis and the assembly is not meeting anytime soon,” revenue minister R Ashoka told Economic Times.

The two sections were inserted in the Act in 1974 and require agriculturists to sell their farmland only to other agriculturists.

According to the current law, any person with annual income above Rs 25 lakh from non-agriculture sources would not be considered as a “farmer” regardless of the family background. Before 2015, the income cap was just Rs 2 lakh.

In case of a violation, the government could take away the ownership of such plots, and vest it with itself.

How will the amendment help?

Various restrictions on sale of farmland to non-agriculturalists were put in place in different states after independence, primarily out of the fear that diversion of farmland would adversely affect the food security.

At that time, the food production was insufficient to meet the needs of a large and fast-growing population, and the command economy and central planning approaches were in vogue.

For the 1970s Green Revolution, the governments were cautious to keep the farmlands in the hands of the agriculturalists. The ‘land to the tiller’ sensibilities also played their part in restricting the sale of farmland to non-farmers.

However, such laws adversely affected the land market.

Combined with other restrictions like those against land leasing, it resulted in inefficient allocation and use of land resource.

On one hand, owners were forced to leave their lands fallow instead of using it for other purposes, and on the other, an artificial scarcity meant steep prices for land.

Reportedly, around 23 per cent of cultivable land in Karnataka is lying fallow as most of it is owned by families who have moved away from agriculture.

The law was also deemed draconian by the farmers who could not get a good price for their land; were forced to make false declarations before revenue authorities and hide the true value of transactions. This facilitated bureaucratic corruption.

The children of farmers who went on to become, say, white-collar professionals, were not able to buy land and become part-time farmers.

The provision to vest the land with the government only increased the locked-in land resource which became unavailable for productive economic activities. Currently, millions of acres of land under government ownership is lying vacant across the country.

Karnataka’s Revenue Minister R Ahsok says that the 46-year-old law didn’t help anyone except government officials who used it to harass people.

“In the past 45 years, the government could resume lands at the rate of one acre per year. So, it’s clear who the law is helping,” he added.

The restrictions in Karnataka also meant diversion of private investment in agriculture to other states. Those willing to take up farming had to buy lands in the neighbouring states of Tamil Nadu, Maharashtra and Andhra Pradesh.

This deprived the agricultural sector of much needed push towards higher productivity — an increase in production even as more land is diverted to urbanisation and industrial activity — by the use of better quality seeds and new technologies.

Also, the goal of doubling farmers’ income cannot be achieved if the agriculture sector continues to employ over 50 per cent of Indians with less than 20 per cent share in total GDP.

In the long term, India needs to take up land and agricultural reforms side by side, building competitive markets in both, to ensure fast yet inclusive growth as well as food security.