The original intention of PD 27 was that the annual amortization should be approximately the same as the legal maximum leasehold rental. If the land valuation is 2.5 times the base production level ‘Q’ and there are to be 15 equal annual amortizations, (A), capitalized at 6 per cent annual interest, then

from which follows

.

¹ Available from compound interest tables.

Thus the annual amortization, like the legal rental, would be one-fourth of the base production level. The only difference would be that the legal rental’s base production level is stipulated as production net of deductions for seeds, harvesting and threshing costs¹, as well as the cost of hauling ‘if applicable’. PD 27 does not specify such deductions in the calculation of base production; base production is just the average of production in three ‘normal’ crop years immediately preceding the decree in 1972.

¹ Typically paid in kind to the harvesters and threshers.

The amortizations were not meant to be burdensome to the tenant. The simple reasoning was, if the tenant could afford to pay rent, then he could afford to pay an amortization designed to be equal to the rent. The difference is that under OLT he would be paying not for perpetuity but for only 15 years.

PD 27 also intended that amortizing owners would make their payments directly to landowners. But while this option was always maintained, it was exercised only in a small minority of instances. By the end of 1981, such payments were being made by 14,953 FBs to 917 landowners (a ratio of 16 tenants per land owner), for an area of 23,538 ha. (average of 1.6 ha. per tenant).²

² See MAR, op. cit.