Tractors rock as farming expands

Manu P Toms, Hindustan Times
Mumbai, April 29, 2011

A rising farm economy is driving tractor sales to new highs. Going by a conservative estimate, it is set to cross half a million unit sales this financial year. The tractor industry foresees a 10 to 15% increase in growth over the record 482,000 units it clocked last fiscal. A host of measures by the government such as loan waiver, increased lending to farm sector and national employment guarantee scheme increased liquidity and tractor sales grew faster in the recent years.
A Standard Chartered report says tractor buyers' dependence on lending has reduced from 90% to 65%.

"Increase in rural income levels, better farm output and good rainfall in the last few years boosted tractor sales. The industry grew by 20% in the last fiscal. That too, on a high base created by the 30% growth in the year before," said Sanjeev Goyle, senior vice president, Mahindra Farm Equipment Sector.

M&M, the industry leader sold 202,000 units, holding 42% market share.

The buoyancy has led to new capacity additions by major industry players, particularly focusing the under-penetrated southern states. M&M's 100,000-capacity Zaheerabad plant will be commissioned in 2012. TAFE increases production. Escorts and Sonalika are opening warehouses and sales centres in south India.

M&M bets big on growing sales of its low-cost small tractor Yuvraj. Escorts launched five new tractors last year while Sonalika commissioned a new factory in Patna.

Another important factor that drove tractor sales is labour shortage caused by the NREGA.

Despite India being the largest tractor market, the penetration levels still remain low at 19 per 1,000 farmers.