India’s domestic tractor sales have doubled in a decade — from 480,431 units in FY2011 to 899,683 in FY2021, pointing to growing mechanisation of agriculture in the country. The Covid years didn’t drag down tractor sales. One reason could be that agricultural income was not hit hard by the pandemic. The sector, in fact, registered a steady growth even as the country’s Gross Domestic Product (GDP) growth rate plummeted in FY2021.
But there are other reasons for the uptick in tractor sales. Policymakers, agricultural economists, industry experts and farmers whom ET has spoken to say the rising cost of maintaining oxen and bullocks and the non-availability of cheap farm labour in rural areas are two reasons why farmers, even those with relatively smaller landholdings, prefer to shift from bullocks to tractors.
“Aaj kal bail palna haathi palne ke barabar hain (Nowadays, keeping a bullock is like keeping an elephant),” says Lala Ram Chandrakar, a farmer in Dhamtari, Chhattisgarh. “A pair of bullocks cost Rs 40,000 to Rs 1 lakh. Their upkeep throughout the year is also expensive. Fodder is neither readily available nor cheap anymore.”
Policymakers in Delhi and industry analysts in Mumbai echo Chandrakar’s view. “A rapid shift from bullock to tractor is a reality. I have empirical data on this trend,” says Professor Ramesh Chand, agricultural economist and member of NITI Aayog. “A bullock is used for farming just 80 days a year. But the owner has to take care of the animal for the rest of the year. Maintaining a tractor is cheaper. Also, what bullocks can do in eight hours, a tractor does in half an hour,” he adds. Chand says that during the peak Covid period, many farmers postponed their decision to buy a costly item like tractor as their non-farm income had eroded substantially.
A tractor with less than 20 horsepower (HP) costs Rs 2.8-3 lakh while the more popular ones with 40-50 HP cost Rs 5.5-6.9 lakh. The latter accounts for 57% of total sales so far this fiscal year. As far as maintenance is concerned, a tractor needs servicing only after 300 hours of running and that costs just Rs 2,500-3,500.
Hemant Sikka, president of Tractor and Mechanization Association (TMA), says tractors are also used for haulage in rural India, a business that fetches additional income to tractor-owning farmers. “Also, farm labour is becoming scarce, making tractors even more valuable to farmers.
A bullock has to be fed twice a day and looked after regularly with bathing and cleaning. One person is required to be at home (all the time),” says Sikka, who also heads Mahindra & Mahindra’s Farm Equipment Sector (FES). He says while a bullock is mainly deployed for tillage, a tractor performs multiple farm and non-farm functions.
MISSING BEASTS
This shift from bullock to tractor is happening at a time when the population of oxen and bullocks has dwindled, contributing to a demand-supply mismatch. According to India’s 2019 livestock census, the population of male cattle was 47.4 million, a 30% drop from the previous census of 2012, even as the population of cows increased by 18%. The population of male buffaloes dropped by 42% to 9.2 million.
Significantly, it was during this period that tractor sales rose rapidly. The domestic tractor sales rose by 125% from FY2010 to FY2021. However, in FY2022, in the midst of Covid, there was a mild dip to 842,196 units mainly due to the higher base effect of FY2021. The sales have bounced back this year although the graph seesawed in the initial months before establishing major gains ahead of the festive season.
According to industry analysts, the delay in the withdrawal of the southwest monsoon by about three weeks is a reason for the sales boom in September-October. Higher moisture content in the soil means higher rabi sowing and likely higher rabi crop, says Sikka. Higher crop prices in the beginning of this fiscal year coupled with an anticipation of good festive sales added sparkle to the tractor sales since September. The 45-day festive period saw huge sales, with several tractor companies clocking their highest monthly numbers.
According to industry estimates, Mahindra with a 41% market share in domestic sales is the industry leader so far this fiscal year (April-November), followed by TAFE (18%), ITL (12%) and Escorts (10%). Bharatendu Kapoor, president, sales and marketing, TAFE, says tractor sale volumes in October and November are usually big because kharif harvest coincides with festival season. “Cash flow on kharif crops comes in the hands of farmers at that time,” he says.
Union finance ministry in its monthly report for October terms the rise in tractor sales (in September and October) as a sign of “improved sentiments”, adding that such figures indicate “an expected increase in crop area sown”, SK Pattanayak, former Union agriculture secretary, seconds it, saying tractors do accelerate the process of sowing. So a rise in sales indicates an increase in total sown area. “More than that, higher tractor sales means farmers are turning prosperous, investing more on mechanisation and transportation,” he says.
This trend could continue — higher wheat procurement by the government and better crop exports could ensure a healthy farm income, resulting in a strong demand for tractors throughout the year, says Hemal Thakkar, director, Crisil Market Intelligence & Analytics. Higher minimum support price for key rabi crops, better moisture content in soil, high reservoir levels and good progress in the sowing of wheat and other winter crops could see the momentum of tractor sales sustaining.
In a high interest rate regime, which the Reserve Bank of India is unlikely to reverse anytime soon, farmers may spend money on tractors instead of two-wheelers as term loans for buying agri-equipment, including tractors and power tillers, are cheaper than vehicle loans. Various state government schemes subsidise and encourage such borrowings. In this fiscal year, from April 1 to October 5, five states — Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharashtra and Karnataka — accounted for 60% of tractor sales. Madhya Pradesh also saw an uptick in demand of tractors on the back of good harvests and higher income from wheat exports earlier this year.
Tractor has many potential markets. Rajasthan, for instance, remains an underpenetrated state. “We expect tractor sales in Rajasthan to grow at a higher pace, since only 58% of land is held by small and marginal farmers (less than 2 hectares) compared with the national average of 85%,” says Thakkar of Crisil. With fewer bullocks and oxen, mechanised beasts could take their place, and more tractors could chug into the fields.
Rapid shift from bullock to tractor is a reality: Prof Ramesh Chand, NITI Aayog
Edited excerpts from an interview with Prof Ramesh Chand, member of NITI Aayog, by Shantanu Nandan Sharma:
How do you explain the spurt in tractor sales in September and October this year?
There have been a couple of favourable factors. First, many people postponed their decision to buy tractors due to Covid. It’s a costly item and hence people weigh several factors before buying it. During the Covid period, growth in agriculture was intact and there was no adverse impact on agricultural income. But farm households remained cautious as half of their incomes come from non-agricultural sources, a segment impacted by the pandemic. Second, prices of agricultural commodities went down (during the Covid). But this year, farm prices are relatively higher. In several commodities such as paddy and wheat, farmers are not even asking for MSP (minimum support price) as they are receiving higher rates in the open market.
Are the government incentives enough to increase mechanisation?
There are a lot of schemes. Many states are providing incentives for mechanisation. Also, in an overall inflationary situation where interest rates have been increasing, it makes sense to invest in assets like tractors as the borrowing rate in agricultural term loans is low mainly due to incentives from states.
How do you see mechanisation in the Indian agricultural sector hereon?
There has already been a strong trend towards mechanisation. A rapid shift from bullock to tractor is a reality. I have empirical data on this trend. It indicates prosperity in agriculture. Farmers have also realised that the operation through bullocks has turned very costly. A bullock is used for farming for a maximum of 80 days a year. But one has to take care of the animal for the rest of the year. Maintaining a tractor is cheaper. Also, what bullocks can do in eight hours, a tractor does in half an hour.
We are moving towards intensive agriculture. Earlier we had one crop, now in most farmlands we do two crops. Another reason for mechanisation is that members of more and more farming families have been withdrawing from agriculture due to various reasons — be it better economic status or migration to urban areas. And tractors have many other utilities. For instance, it’s widely used for transportation in rural areas.
Based on this year’s crop sown area, what’s your forecast on food inflation?
Food inflation rose to an unreasonable level before moderating a bit during the last couple of months. I feel it should cool down during the next two-three months. Prices of some vegetables such as onions have been cooling down. The sown area for mustard crops is higher this year. So we can expect its prices to cool down next year. Also, area under wheat cultivation this season is higher. So we can hope for wheat prices to come down.
