Although small farmers in Sri Lanka have been granted free land for over 70 years, they are forbidden from selling it. Now the government is considering opening up the land market.
In 1935 the government of Sri Lanka took a bold step in land reforms. Reversing the British colonial policy of bringing land under government control, the Land Development Ordinance of 1935 sought to return land to peasant farmers in order to address the acute problems of landlessness and poverty.
Since then a total of 1.5 million hectares of government-owned land has been granted to farmers. These land grants have created a large number of settlement schemes, alongside older villages with traditional land ownership.
Muthubanda, 48, is a third generation farmer in one of Sri Lanka's oldest settlements in Polonnaruwa, an agricultural town lying 200 km north east of Colombo. His grandfather was granted land by the government in the late 1930s.
'My father inherited two acres of the original four acre plot. I still farm on this plot,' he said.
Although Muthubanda and his family of five have a farm and a home, the land has come to them with certain restrictions – they do not have full ownership and cannot sell it on the open market.
'These lands were issued to people as a livelihood asset – to improve their living standards as well as to meet our goal of food security,' explained Jayatissa Samaranayake, former director of the Mahaweli Authority which handled several large farmer settlement schemes and executive director at the Institute of Participatory Development, a research and training organisation that promotes the concept of community participation in development.
'The land was not considered a capital asset that has market value,' he added.
As a result, many banks and financial institutions today do not recognise these grants as security for loans, forcing many farmers to access credit through informal means that carry high rates of interest.
Recently, reviewing its poverty reduction strategies, the government came to view these conditions upon land holding as an inhibition to rural development and agricultural productivity.
Poverty in Sri Lanka is a largely rural phenomenon. More than 85 per cent of the population of nearly 20 million lives in villages and a quarter of them are living in absolute poverty earning less than a dollar a day. Despite measures to improve rural living standards – including land grants, irrigation water, agriculture extension services, fertilizer subsidies, and guaranteed minimum price for rice – rural poverty persists.
Take Muthubanda for example. His rice crop has failed this year due to bad weather at a time when he was already heavily in debt because of the fertilizer, labour and tractor charges he had incurred this season.
'There will be very little money left for the family,' Muthubanda said. 'I think I will have to look for daily wage jobs in the town to tide through.' In 2003, the government showed an interest in eliminating the restrictions on land granted in the past 70 years. A Land Ownership Bill, aimed at giving freehold titles to these lands, was proposed as part of the government's Poverty Reduction Strategy.
One academic paper that preceded this government move came from the World Bank. Reviewing Sri Lanka's poverty reduction strategies over the past six decades, the report was sceptical about the impact of land grants on rural poverty.
The Bank argued in its position paper for the Sri Lanka Development Forum in 2002 that state interventions to protect rice farming (through fertilizer subsidies, free access to irrigation water and state maintained extension and marketing structures) had only resulted in lowered agricultural production, while restrictions on the sale and use of granted land has resulted in fragmented small holdings which are not economical.
It recommended that the land market should be developed by issuing saleable or free titles to the farmers. This, it argued, would enhance farmers' ability to buy up more land and cultivate larger plots using modern technology and machinery, leading to better productivity and more income. A proper title would also lead to better access to credit.
The suggestion to free up the land market has supporters. The Institute of Policy Studies, an influential economic think tank in the capital Colombo, points out in their study of land tenure: 'State ownership and title restrictions have lowered the value of agricultural lands, when compared to private lands.'
But many others dispute what they see as a simplistic economic argument that links land holding status with low productivity and poverty. They fear that loosening present restrictions upon this land may result in large scale rural landlessness.
Sarath Fernando of the Movement for National Land and Agriculture Reform, an activist organisation fighting for farmers' rights (Monlar) insists 'Due to extreme poverty and indebtedness people will be forced to give up their land even when they do not wish to.'
'Farm size is important for income, but productivity is not related to farm size, at least not in paddy growing lands in Sri Lanka,' said Ranjith Ratnayake, one-time director of the Irrigation Development Board and a senior government official.
He added 'Where full title and large farms exist side by side with small holdings with restricted titles, there is no big difference in levels of productivity.' The main reason, according to Ratnayake, is that irrigation water allocation is decided by farmers' societies, which have a good representation of small holders.
Experts say many other factors conspire to keep the rural farmer poor – water allocation, high costs of agricultural inputs, lack of proper marketing channels, failure of the extension services to introduce technology and crop diversification, and lack of alternative livelihood options.
'I have three sons and there is little promise for them in farming. But there are so few choices. I wish they could get jobs in a factory or in town. But jobs are scarce and many are looking for them,' Muthubanda said.
'People are forced to remain poor in their villages due to the lack of other income-earning avenues,' said Ratnayake. He argued that better employment opportunities must be made available if farmer's lands are to be 'freed' for sale in the market.
Like Ratnayake, many government officials involved in land, agriculture and rural policies believe that these issues need to be addressed before land titles are freed. 'The economic and social environment in rural areas is not ready to absorb this shock. Their living standards have to be improved substantially before the lands are opened to a free market,' said Samaranayake.
Fernando from Monlar is against individual land ownership. 'We have a tradition of integrated, communal land use. We must tackle poverty through other means – maybe a sustainable model for land-use based on traditional, integrated forms of farming – not initiate a process that may well push out the small farmer completely from the rural economy.'