Apex industry body ASSOCHAM, growing at a compounded annual growth rate of over 20%, the domestic tractor industry is likely to grow from the current level of about 0.5 million units to about 0.8 million units by 2015.
According to a study titled Second Green Revolution, Northern India accounts for over 50% of market share with states like Punjab, Haryana and Uttar Pradesh enjoying significantly higher penetration levels, followed by the western region, Agriculture to Agribusiness.
As per a region wise market analysis of tractor industry, north India accounts for 55% followed by western states, south and east India accounts for the least about 6% of tractor sales in India.
Mr DS Rawat national secretary general of ASSOCHAM said that “Rising rural liquidity together with high disposable income of farmers due to government social schemes like Mahatma Gandhi National Rural Employment Guarantee Act are collectively contributing to growth of tractor industry which has provided the necessary push for greater farm mechanization.”
Mr Rawat said that “Besides, increasing application of tractors for non-farm operations like infrastructure and construction projects, transportation, haulage and better crop realization through higher minimum support prices clubbed with continued government support through increase in budget outlays for agri sector and increasing farm labour costs due to scarcity are other key growth drivers of tractor industry.”
He said that an increased domestic demand for replacement market is another significant reason behind strong tractor demand as average life cycle of tractors has reduced from over 10 to 12 years to just about 8 to 9 years. Currently almost 40% of domestic tractor demand in India is driven by replacement market.
According to the ASSOCHAM, besides, easy access to tractor loans by commercial banks together with an innovative credit delivery system like Kisan Credit Card and others has also led to the growth of this industry.
Mr Rawat said that “Growth in institutional farm credit can be gauged from the fact that it increased at a CAGR of 19% thereby clocking over INR 0.4 million crore in the FY11.”
The domestic tractor industry which has traditionally been a medium horsepower market with 31 to 40 HP tractors accounting for about 42% of industry volumes, the ASSOCHAM study points out towards a shift in the trend with a higher growth in the upper and lower HP segments and moderate growth in medium HP segment.
The ASSOCHAM “A growth in penetration in southern India, replacement demand in the north and increased use of tractors in non-agricultural applications and growth in exports are certain factors responsible for such a structural shift in the industry towards higher HP tractors.”
At the same time, an increased presence of small and marginal farmers with about 40% area under cultivation, scarcity of farm labour and rising costs of bullock carts coupled with higher efficiency of low HP tractors are certain factors that are collectively responsible for growth of low HP segment.
The ASSOCHAM said that apart from being used in farming and crop cultivation, tractors find application in activities like harvesting, canal irrigation, land reclamation, drawing water, powering agricultural implements and serves as a multi utility vehicles, this has expanded the domestic tractor market.
According to the ASSOCHAM study, Indian tractor industry has 13 national players and few regional players. The industry is dominated by Mahindra and Mahindra with a share of about 40 per cent, followed by Tractors and Farm Equipment with a share of about 23 per cent, Escorts 13%, L&T to John Deere 10% and International Tractors Limited over 8%.
Source - assocham.org
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