Farm Stay 2026: A Welcome Policy with an Inconvenient Twin….by KBS Sidhu

Punjab’s new farm tourism framework is farmer-friendly and fiscally generous — but sits uncomfortably alongside the LIGH farmhouse policy it simultaneously promotes and contradicts

A Landmark Recognition

Punjab has just done something genuinely significant for its farming community. The Farm Stay Policy 2026, approved by the Cabinet under Chief Minister Bhagwant Singh Mann and now awaiting gazette notification, formally recognises farm-based hospitality as a legitimate economic activity deserving of the full suite of industrial and tourism incentives available to any other enterprise in the State. For years, farmers who dipped a toe into rural tourism operated in a grey zone — unlicensed, unprotected, and unsubsidised. That era is now over.

Let us appreciate what has been done before we examine what needs re-examination.

Industry-Grade Incentives for the Farmer

The Farm Stay Policy 2026 is, in its conception, farmer-centric and administratively progressive. A farm stay unit — defined as a property on agricultural land of not less than one acre, offering boarding, lodging, and at least two experiential activities — is now formally treated on par with a boutique hotel or a heritage property for purposes of fiscal support.

The policy links farm stays directly to the Punjab Tourism and Hospitality Policy 2026, and through it, to a substantial menu of incentives. Capital subsidy of up to ten percent of eligible Fixed Capital Investment, capped at Rs 5 crore — which means up to Rs 50 lakhs in outright subsidy for qualifying investments.

Reimbursement of 75 percent of net State GST for the eligibility period. Full reimbursement — 100 percent — of quality and environmental certification costs, up to Rs 20 lakhs per unit. Seventy-five percent reimbursement of energy, water, and environment audit expenses.

Fifty percent digital marketing support. Assistance for participation in national and international trade fairs. These are not token gestures. They are serious incentives of the kind the State offers to mid-sized industrial ventures.

The regulatory architecture is equally welcome. Electricity at domestic tariff rates. Exemption from Change of Land Use fees. Online registration through FastTrack Punjab, with a certificate of registration within 21 working days.

No random inspections — only complaint-driven oversight approved at the Head of Department level. Self-certification for environmental compliance. A five-year registration with three-year renewal on the basis of self-certification alone. For a State not historically known for ease of doing business with farmers, this is a commendable shift.

The policy also correctly excludes farmhouses as defined under the LIGH Policy 2025 and the PUDA Building Rules 2021. This exclusion is deliberate and important. It signals that the Farm Stay Policy is not a backdoor for luxury farmhouse construction dressed up as agritourism. Or so it is intended.

The Inconvenient Twin: LIGH and a Tale of Two Policies

Which brings us to the inconvenient twin.

Running parallel to the Farm Stay Policy is the Policy for Approval and Regularisation of Low Impact Green Habitats (LIGH) 2025, notified on 20 November 2025 and since tweaked by a Gazette Extraordinary of 7 April 2026 — a policy this writer has analysed elsewhere in detail.

That policy applies to lands delisted from the Punjab Land Preservation Act, 1900, in the ecologically sensitive Shivalik-Kandi belt — lands in districts such as Mohali, Ropar, Nawanshahr, Hoshiarpur, and Gurdaspur. It has been stayed by the National Green Tribunal pending further hearing. And it generates an uncomfortable juxtaposition when read alongside the Farm Stay Policy.

The Arithmetic of Contradiction

Consider the numbers. Under the LIGH Policy, the conversion and regularisation charges for farmhouses in areas adjoining Chandigarh — notably SAS Nagar (Mohali) — are reported to touch approximately Rs 1 crore per acre, inclusive of CLU charges and related levies. Under the Farm Stay Policy, by contrast, CLU fees are entirely waived. Capital subsidy of up to Rs 50 lakhs is on offer.

State GST is reimbursed at 75 percent. In other words, in the same State, at roughly the same time, the Government is simultaneously charging one category of rural property owner nearly Rs 1 crore per acre to regularise their construction, while offering another category a subsidy of up to Rs 50 lakhs plus GST reimbursement to build. One is a fiscal disincentive of the most severe kind; the other is a fiscal invitation of the most generous kind.

The land quantum compounds the anomaly. The LIGH Policy applied to properties of a minimum of two and a half acres.

The Farm Stay Policy requires just one acre. If the concern in the LIGH context was that larger landholdings could absorb commercial use while preserving a meaningful agricultural footprint, it is legitimate to ask whether one acre — after setting aside the permissible 10 percent ground coverage and the access areas — leaves enough land for the farm to remain, in any meaningful sense, a farm. Or does it become, in practice, a small hotel with a decorative field attached?

The construction parameters under the Farm Stay Policy — ground coverage of 10 percent, FAR of 1:0.20, two storeys (Ground plus First), maximum height nine metres — are not negligible.

On a one-acre plot (roughly 4,047 square metres), 10 percent ground coverage permits approximately 404 square metres of construction footprint, with an FAR allowing up to 809 square metres of built-up area across two floors. With up to nine lettable rooms and eighteen beds, this is, architecturally and commercially, a small hotel. There is nothing wrong with that — but it should be called what it is.

Doubts and Confusion for Investors, Entrepreneurs, and Promoters

The danger, and it is a real one, is that the Farm Stay Policy could function as a subsidised pathway to exactly the kind of construction that the LIGH Policy — even in its stayed and contested form — was attempting to regulate and charge for.

A landowner with a one-acre plot anywhere in Punjab, including in areas adjacent to the Shivalik belt where land values are high and pressures intense, can now register a farm stay, access capital subsidy of up to Rs 50 lakhs, get SGST reimbursed, and construct a nine-room property — all while paying zero CLU charges and facing no random inspection.

If the NGT eventually permits the LIGH Policy to operate, the State will be in the curious position of charging Rs 1 crore per acre in one zone while paying Rs 50 lakhs in subsidy in another, for what is, in physical reality, the same category of built environment.

The confusion and doubt this creates — in the minds of potential investors, entrepreneurs, landowners, and promoters genuinely seeking to enter the farm tourism space — is considerable, and public policy must be sensitive to the uncertainty it generates, not merely to its stated intentions.

Those with existing land banks and the capital to navigate the registration process may well find their way through; but the genuine small farmer, the aspiring rural entrepreneur, and the outside investor weighing Punjab against competing destinations will find themselves confronting two contradictory signals from the same government.

A small, genuinely subsistence-level farmer is unlikely to have the means to build even a two-room compliant structure, hire trained hospitality personnel (the policy mandates training for three personnel per unit), obtain FSSAI certification, and then wait for GST reimbursements and capital subsidies to flow through bureaucratic channels.

The policy, in the absence of clarification, may disproportionately benefit medium and larger landowners who can treat the farm stay as a capital project with a government subsidy embedded in it — and who may or may not deliver the authentic rural experience that the policy’s vision so eloquently describes.

The Vision is Sound — The Architecture is Not

None of this is an argument against farm tourism. Punjab’s agrarian landscape — its fertile plains, its living traditions, its Sikh cultural heritage, its distinctive cuisine and seasonal rhythms — is a genuine tourism asset. Properly developed, farm stays can provide supplementary income, absorb youth employment in villages, revitalise rural craft, and create a tourism product that neither Goa nor Rajasthan can replicate. The vision in this policy is sound. The execution framework, taken in isolation, is commendable.

But policy cannot be evaluated in isolation. It must be evaluated in relation to the other policies it coexists with, and the State cannot simultaneously pursue contradictory philosophies — heavy fiscal disincentive in one instrument, heavy fiscal incentive in another — for essentially the same physical activity on essentially the same category of land, without inviting legitimate scrutiny of its underlying intentions.

Three Steps to Coherence

The remedy is not to withdraw the Farm Stay Policy. It is to do three things. First, place both policies — Farm Stay 2026 and LIGH 2025 — before the public simultaneously, as a coherent rural land-use and tourism framework, inviting claims and objections, so that citizens, farmers, environmental advocates, and civil society can assess them in totality.

Second, introduce a credible verification mechanism — not random inspection, but periodic audit — to ensure that registered farm stay units are genuinely operational as agricultural hospitality enterprises and not merely subsidy-harvesting construction projects.

Third, establish differentiated eligibility criteria that distinguish between farmers for whom this is a supplementary income intervention and investors for whom this is a capital project dressed as farm tourism. The fiscal incentives should flow primarily to the former.

Punjab deserves a Farm Stay Policy that works. It also deserves a policy architecture that is internally coherent, publicly explained, and immune to the accusation that it gives with one hand to the small farmer while giving rather more generously, through an adjacent window, to those who need no subsidy at all.

May 8, 2026