Land Revenue Reform

BY E. V. SUNDARA REDDI, M.A.,B.L.

The question of land revenue legislation has, in recent years, assumed considerable importance. It is not proposed here to discuss the historical aspect of our land revenue policy, except in so far as it may be relevant to a consideration of the lines on which reform therein should be secured. The main features of the present land revenue system in this Presidency may be briefly stated and the lines on which the system should be modified considered.

Of the total area in the Madras Presidency, about one-third is held by the Zamindars and Inamdars and the rest is held under the Ryotwari system. At the time the Ryotwari system was introduced in the Presidency, it was obviously within the contemplation of the persons who introduced the said system that, after the rates on the land were satisfactorily and equitably fixed, they should be declared permanent and unchangeable. The recorded opinion of the authors of the Ryotwari Settlement, Co1. Read and Sir Thomas Munro, leaves no doubt whatever as regards the permanent character of the settlement contemplated by them. Read’s proclamation in Salem in 1796 is clear and unambiguous with reference to this matter. Equally clear and unambiguous is the evidence of Sir Thomas Munro given before the Committee of the House of Commons. In view of the importance of the subject, I may be permitted to extract hereunder the relevant portion from his recorded evidence: -

Q: - Have the goodness to explain to the Committee what you understand by the Ryotwari system?

A: - I shall state what I understand to be the principle of the Ryotwari system, the details will perhaps be too extensive. The principle of the Ryotwari system is to fix an assessment upon the whole land of the country. This assessment is permanent; every ryot who is likewise the cultivating proprietor of the land which he holds is permitted to hold that land at a fixed assessment as long as he pleases; he holds it for ever without any additional assessment. If he occupies any waste or additional land he pays the assessment that is fixed upon that land and no more; his rent undergoes no alteration.

Q: - Is the Committee to understand that in respect to permanency there is no difference between the Ryotwari system and Bengal Permanent Settlement?

A: -With reference to permanency there is no difference between these two systems. But the Ryotwari leaves the Government an increasing revenue arising from the waste in proportion to its cultivation.

In the face of what has been set out above, it is somewhat of a surprise that in the report of the Madras Board of Revenue annexed to the Resolution of the Government of India on the Indian Land Revenue Policy issued in 1902 the Board should say that the words ‘fixity’ and ‘permanency’, as applied to the assessment did not, when used regarding the Ryotwari system, connote the idea of perpetual immutability.

During the early half of the nineteenth century the demands on land varied in intensity. The arrangements made for the assessment and collection of land revenue were far from satisfactory. The defects of the system and the hardships they entailed were laid bare by witnesses who appeared before the Parliamentary Committees which sat in 1848 and also during the Parliamentary enquiries of 1852 and 1853. In 1855 a survey and re-assessment of the province was at last ordered. The principle of permanent settlement was not then abandoned. The Madras Government would then state that "one fundamental ofthe Ryotwari system is that the Government demand on the land is fixed for ever."

In 1861 Lord Canning’s Government circulated proposals to extend the permanent settlement to all the provinces in India and the Madras Government then favoured the old Ryotwari principle of a permanent assessment, that is to say, an assessment based on a certain portion of the crop, and converted into a money payment at a fair commutation rate fixed once and for ever.

Sir John Lawrence, Sir Charles Wood, and Sir Stafford Northcote also favoured a permanent settlement, but in 1883 the then Secretary of State rejected the recommendation for the introduction of the permanent settlement.

In sanctioning the survey and re-assessment, the Secretary of State in his Despatch of 1862 accepted "the principle of eventual introduction of permanency in assessment." The survey and re-assessment that followed had doubtless in the main equalised the incidence of the land revenue on the ryots and made it more equitable, but since that period the principle of periodical revisions of assessment has come to stay.

It is a matter which has been the subject of certain controversy as to whether the early proclamation and Government orders and despatches which declared that the assessment was to be fixed for ever were formally given the go-bye, and whether such declarations should not still be regarded as subsisting and binding on the Government. It is clearly unprofitable to discuss this aspect of the matter in view of the circumstance that, since that period, the system of periodical revisions has been in force and it is now regarded as part of the land revenue administration of the Presidency.

The next step in the evolution of the land revenue system in the Madras Presidency was by way of defining the limits to the demands of the Government and to the enhancements at the time of periodical revisions. In 1883 Lord Ripon made a proposal to the Government of Madras to give to the ryots an assurance of permanence and security without depriving the State "of the power of enhancement of the revenue on defined conditions." In the same year the Government of Madras accepted the said proposal and declared that "there should be no future enhancements of the Government demand except on the ground of a rise in prices." In 1885, however, the then Secretary of State set his face against what was described by him as "the dangerous policy of pledging the Government for ever to a particular line of action." In 1900 in a memorial submitted to the Secretary of State by an influential body of Retired Officials (Indian and European) it was suggested that the enhancement should be made only on defined conditions, but Lord Curzon in 1902 in his Resolution on the land revenue policy refused to limit the enhancement to any such "defined conditions".

Since the day of issue of the Resolution of Lord Curzon’s Government on the Indian Land Revenue Policy, and up to the stage of the Joint Parliamentary Committee’s Report in 1919 which recommended that the imposition of new burdens should be gradually brought within the purview of the legislature, there has been a great deal of discussion of the merits of the land revenue system and administration in the Presidency and the whole policy has come under a careful scrutiny and examination by diverse individuals and organizations. The said committee expressed the opinion that the time had come to embody in the law the main principles by which the land revenue is determined, the methods of valuation, the pitch of assessment, the periods of revision, the graduation of enhancements and the other chief processes which touch the well-being of the revenue payers, and they suggested that the whole policy should be embodied in a statute before the next change in the constitution. Yet in this Presidency, there has not so far been any legislation on the subject.

In a thought-provoking lecture on the Land Revenue Problem in India and England delivered by Mr. Montagu on the eve of the War, he said: -

"You will notice that each individual liable for revenue has to pay the proportion demanded in his locality according to the nature of his holding; if this should happen to amount, say; to 1/5th of the net profits of cultivation, the big man pays Rs. 20 out of 100 and the small man pays one rupee out of five. We are getting accustomed to recognise that the hardship in the latter case is a good deal greater than in the former.

"Allowances are made, it is true, for the small man in India; now it is done at the discretion of revenue officers and not, on any uniform principles and one is tempted to wonder whether it would be possible to apply a graduated scale of assessment instead. There is, of course, the theoretical objection that such a measure would promptly label the land revenue as a tax. But I cannot help thinking that the Government of India’s record shows that it is strong enough to look this difficulty boldly in the face and pass it by."

Notwithstanding the recommendations of the Joint Parliamentary Select Committee made nearly a decade before and the volume of influential opinion, official and non-official, in favour of land revenue reform and legislation, the Government have not seen their way to give effect to the same. The Madras Legislative Council declared itself unequivocally in favour of a permanent settlement and a resolution to that effect was adopted by an overwhelming majority of the members of the Council. The Council also adopted a resolution recommending that re-settlements in the Districts should be deferred pending land revenue legislation but tho re-settlement in the Districts has gone on. The whole question came up before the mixed committee of officials and non-officials appointed in 1921 and presided over by the then Hon'ble Mr. Habibullah Sahib. The, committee were called upon to consider the draft of a bill submitted to the Government by the Board of Revenue for the purpose of regulating the assessment of land revenue. It is a matter for some satisfaction that the committee recognised the existence of very strong opinion among a certain section of persons who had given considerable attention and thought to this question that some form of a permanent settlement should be introduced. The members of the committee were generally in agreement with the proposal to introduce the permanent settlement, subject however to a recognition of the right of the State to impose, if and when the exigencies of the State may require, additional taxation from land. The committee itself recognised the justice and equity of the proposals to introduce the principles of exemption of smaller land holders and of the introduction of the element of progression in the further taxation contemplated, after the land is once, "permanently assessed". The majority of the committee, however, were opposed to their adoption consequent on the difficulties which their introduction suggested. But it is significant to note that even the proposal made by the majority of the committee, whereby the right to regulate the enchancements at periodical revisions was to be vested in the Legislative Council, was not acceptable to the Government and hence such attempts as the Government made to place on the statute book the present procedure, subject only to a restriction of rate of enhancement to 183/4% and certain improvements in the details, did not rightly find favour with the Council. The Government have, however, by an administrative order restricted the enhancement at any re-settlement to 183/4 %. This however does not carry matters far. To the extent it goes, no doubt it is a step in the right direction. But what is necessary is a radical change in the land revenue policy, not a tinkering with it here and there.

The Madras Ryotwari Land Holders Association, which came into existence with the main object of securing a reform of the present land revenue policy of the Government, has devoted considerable attention to the question of land revenue, and the recommendations of the Sub-Committee appointed to go into the question are set out hereunder: -

1. That the Sub-Committee were agreed that a distinction should be made between the smaller and larger land holders in the taxation of land.

2. That it was necessary to consider whether, in taxing agricultural incomes, any differentiation should be made between the income derived from the cultivation of food crops and of commercial crops.

3. That the Sub-Committee were of opinion that a fixed rent charge and a tax on agricultural incomes, the same to be so designed as not to alter the existing total amount of the revenue, appeared to be satisfactory methods of deriving the revenue from land. In other words, the committee agreed that the land holder and not land alone should be taken into consideration in any system of taxation of land and that this necessitated a distinction between the smaller and larger landholders. The committee favoured the proposal that, after such equalisation of the incidence in the different districts in such manner as may be just and necessary, the assessment should be declared permanent and any additional revenue, as the exigencies of the State may require and which cannot be secured otherwise than by the further taxation of land, should be derived by a tax on agricultural incomes. The latter part of the proposal was subsequently modified by adoption of the suggestion to levy a cess on a graduated scale payable by pattadars or proprietors paying Rs. 100 and above as assessment.

The First Madras Ryotwari Landholders Conference, held at Madras in August 1921, adopted the under-mentioned resolutions: -

(1) That this Conference is of opinion that the idea of submitting for the sanction of the Legislature the re-settlement proposals for the several districts separately and of continuing the policy of periodical settlements on such legislative authority, cannot be regarded as affording sufficient safeguard and protection for the interests of the ryot.

(2) That this conference records its emphatic opinion that no legislation which does not provide for a permanent fixation of the Land Revenue can be adequate to remove the existing evils in the Land Revenue Policy of the Madras Government or to ameliorate the sad economic condition of the ryots.

(3) That this Conference is further strongly of opinion that the basis for such fixation should be that of existing settlements where they are not less than 10 years old, and in cases of settlements less than 10 years old, it should be by a reduction of at least 15%, provided that the legislature may, when special necessity arises and it could not be met by other sources of revenue or new taxes, impose special cesses (or surtaxes) for meeting such necessity on pattadars paying Rs. 100 and above as land tax.

It may also be of interest to summarise the more important of the proposals made from time to time for the reform of the present system: -

1. After an equitable re-adjustment of the burdens in the different districts, the revenue should be settled and fixed, The idea of periodical revisions should be abandoned. Any necessary increase in revenue which cannot be secured by having recourse to other taxes should be obtained by levying a certain percentage of the existing assessment, with the sanction of the Legislature every year, the same being in the nature of a super-tax leviable by the Provincial Legislature. (See The Hon. Mr. V. K. Ramanujachariar’s "Land Revenue Settlement," p. 86).

2. After an equitable re-adjustment of the burden in different districts, the assessment should be permanently fixed at a certain proportion of the existing level, say two-thirds, being in the nature of a quit-rent or rent charge on the land, and the reduction in the revenue thus entailed made good by the levy of an income-tax on agricultural incomes. (See Mr. A. Rangaswami Aiyengar’s "Land Revenue Problem in Southern India," p. 16).

3. (a) The ratio of the tax on agricultural incomes should be fixed after deducting a food allowance for the producer and his family and a sufficient sum to enable him to retain a small margin to fulfill the customary social requirements of his country. (b) At periodic settlement of revisions, land rent should never be raised on individual holdings by more than 20 per cent on the larger holdings, except for special reasons, while, on the smaller, this should be much reduced. (c) Settlements should be definitely fixed for thirty years and enhancements should be spread over six quinquenniums and not have effect at once. (d) The present standard of 50 percent of the landlord’s assets urgently needs revision to bring it on a level with taxes in civilized countries. (e) The forecast prepared by revenue officials and approved by Government should be discussed in the Imperial Legislative Council and Local Legislative Councils and sanctioned by the Governor-General in Councilor Governor in Council respectively. (See Sir O’ Moore Creagh’s ‘Indian Studies,’ p. 184)

4. Abolition of the land tax and the adoption of universal income-tax embracing every income and varying with the size of the family. (See Jack’s ‘Economic Life of a Bengal District,’ p. 189).

It has been suggested that the adoption of this proposal will have the incidental effect of doing away with the Permanent Settlement.

5. The land to be assessed at a certain percentage of land values. Thus, an acre worth Rs. 1,000 will be assessed Rs. 10, at 1 per cent of its land value. No other charges will be leviable in respect of such land, as water rate or second crop charges. (See also the Hon. Mr. V. K. Ramanujachariar’s ‘Land Revenue Settlement’ ).

6. Taxation of land values to be periodically revised and taxation of agricultural incomes.

The Indian Taxation Enquiry Committee constituted in 1924 to make a general enquiry into Indian Taxation were directed,

(1) to examine the manner in which the burden of taxation is distributed at present between each class of the population,
(2) to consider whether the whole scheme of taxation –Central, Provincial and Local-is equitable and in accordance with, the economic principles, and, if not, in what respects it is defective and,
(3) to report on the suitability of alternative sources of taxation.

From a survey of the systems of land taxation in other countries the Committee at p. 37 of their Report observe the tendencies of modern development to be as follows: -

1. The flat rate of tax on annual or capital is kept comparatively low.
2. The income from, and property in, land are treated, for purpose of income-tax and death duties, on exactly the same footing as other incomes and property.
3. Where an increasing share has been taken of the return from land, it has generally been taken for local purposes.

The proposals of the Committee referred only to temporary settlements, as the question of permanent settlement was outside their terms of reference. The Committee were divided in opinion as to whether or not the land revenue should be regarded as a tax on the individual who pays it, but they were agreed that the land revenue should be taken into consideration in dealing with the question of incidence of taxation on the country as a whole. They pointed out that the land revenue is essentially a tax on things and not on persons, and as such it is not a tax to which the doctrine of progression can be applied, but that the land revenue viewed as a scheme of taxation is not only not progressive but actually tends in the opposite direction. It is not possible, they say, in the case of a tax in rem to relieve the poorest cultivator by an exemption, but they suggest that the obvious ways of introducing an element of progression in the case of the large holder are through an income-tax on agricultural incomes or through something in the nature of succession duty, or both. In their view the present policy is open to serious criticisms and they lay down that the essentials of a new scheme of temporary settlement are: that it should be made definite as regards both the basis and the pitch of assessment; that it should be as simple and cheap as possible; that it should so far as possible ease or steady the burden on the smallest cultivator; and finally, that it should, in common with the rest of the system of taxation, involve the same element of progression in the case of larger owners.

The Committee recommended that the above said essentials should be secured by providing that, for the future, the basis of the settlement should be the annual value, i.e., the gross produce less cost of production, including the value of the labour actually expended by the farmer and his family on the holding and the return for enterprise. The functions of the Settlement Officer, they say, should be limited to the ascertainment of this value on an uniform basis. An uniform rate fixed for a whole Province should then be applied to these valuations as they were made on districts falling in for re-settlement. The rate of assessment, they suggested, should be standardised on a comparatively low figure not exceeding 25% of the annual value. They would also suggest that, for the local rate, the maximum of 25% of the sum taken as land revenue should be fixed. These in the main are the recommendations of the Indian Taxation Enquiry Committee on the subject of land revenue. As regards the cognate question of water rights, they would suggest that they should be kept separate from the charge on the land, wherever possible. This is only consistent with the proposed alterations in the methods of the levy of land revenue, It is unnecessary here to examine the further proposals they make with reference to the charge for water.

From the recommendations of the committee referred to above, it is obvious that the main principles for which the Madras Ryotwari Landholders’ Association stood have met with their general acceptance. It is not pretended that there may not be difficulties and objections raised as regards the scheme outlined. The terms of reference to the committee itself were unduly restricted. The whole question has to be examined carefully by a committee appointed by the Government of India with power to take evidence. The committee may be asked to make recommendations as to the exact lines which the land revenue should in future be assessed and derived by the State with special reference to the financial results of the changes that may be suggested. The principal thing is that, if we cannot get away from the position that the land revenue is still to be treated essentially as a tax in rem, we will have to, at least for the purpose of the introduction of an element of progression, reconcile ourselves to the adoption of a system in which it should be treated both as a tax in rem, keeping the rate of assessment comparatively low, and as a tax in personam, derivable from the landholder; by introducing therein the principles of exemption of the smaller landholder and of progression, thereby approximating the same to the income-tax. After the committee makes its recommendations, these may be examined by Provincial Committees and, with such local variations as may be found necessary, embodied in the form of a statute. It will doubtless be just and necessary that, pending such legislation, resettlement operations should be suspended and there should be no further enhancements at any resettlement. It is the only method of securing early legislation on the subject of land revenue, as, otherwise, notwithstanding its immense importance, the question of legislation may be deferred indefinitely.

It is unfortunate that, notwithstanding a general recognition that the present system is unsatisfactory in many respects, there has not been any attempt on the part of the Government to constitute a committee specially to go into the question of land revenue. The question was excluded specifically from the terms of reference to the Royal Agricultural Commission. The reference to the Indian Taxation Committee on this subject was fenced with many limitations and restrictions. Their recommendations would easily have been more valuable, if this were not so. It is unfortunate again that the Government of India are contemplating a revision of the policy, not by the usual procedure with which everybody is familiar, of examining the whole policy, after the same is reported on by a competent commission or committee, but by the antiquated method of issuing a Resolution, which is a very unsatisfactory one. If a Resolution is issued at all, the Local Governments may be enabled to set up committees to examine the whole policy and report thereon, and in the light of their recommendations legislation may be introduced without any further delay.

The issue in Bardoli was of a limited character. In Bardoli the general principles underlying the land revenue policy were not in question. The only question was as to whether the enquiry carried out by the Settlement Officer was in accordance with the procedure laid down in the statute and instructions issued to the officers, and whether the data, the accuracy of which was questioned, justified the conclusions. The importance of the report was the condemnation it contained of the Settlement Officer’s methods of enquiry and report on which, in the main, the re-settlements were based. It is however significant that in Bombay Presidency, after the Bardoli Committee’s report, the attention of the public and of the Government has been drawn to the land question in a manner in which no other public event in recent times did. As a consequence, we find, in Bombay Presidency today, the movement for the formation of Land Leagues for securing land revenue legislation. Here in the Madras Presidency an association was formed even as early as 1918 for the main purpose of securing changes in the land revenue policy of the Government. A number of Taluk and District Associations have also come into existence. In view of the forthcoming Resolution of the Government of India and the fresh impetus which the consideration of the question has received, it is necessary that the Ryotwari Landholders’ Associations both at the Headquarters and in the District and Taluk centres, and the Land Leagues now in their formative stages, should take vigorous and active interest by coming together again and formulating the lines on which legislation should be urged and securing therefore a general acceptance in the country. The question of the constitution of Chambers of Agriculture on lines analogous to the Chambers of Commerce is well worth serious consideration as a further step in the organisation of the landed interests. The subject may be brought under greater scrutiny and examination by such a body. Until this question of Land Revenue Reform is satisfactorily settled, the realisation of the ideal of "a prosperous countryside" will be as distant as ever.