Top Tractor Manufacturers Exploring Rental Route as Agri Economy Grows

Leading tractor makers, Sonalika, Mahindra and Tractors and Farm Equipment (Tafe) who have been struggling with the customised hiring schemes are now looking to cash in on growing demand as the migrant workers go back to their homes in other states.  Till now, 65-70 percent of the districts remain Coronavirus free, fuelling belief that farm activities will see an uptick. 

President of Mahindra’s tractor division, Hemant Sikka said “As the agri economy grows, ownership of tractors in the rental segment will become stronger. It is making entrepreneurs of small & marginal farmers through this model while increasing their productivity”. He said that the migrants would have less cash in hand to buy a tractor and renting it & other agri equipments will boost productivity immediately. 

Tractors are generally purchased directly from dealers with the farmer paying 25 to 30 percent of the price upfront & the rest financed by NBFCs and specialised rural banks. The average price of a tractor is Rs. 6 to 7 lakh. A cultivator shells out around Rs. 2 lakh as down payment while the final quantum of financing & repayment depends on the relation between the dealer & the farmer. 

Paul Thomas, MD of ESAF, a small finance bank in Kerala that funds tractor hiring said, “What is vital is that the harvest has been good for sugarcane, wheat, pulses and the Centre will buy and warehouse these products. Demand for tractor hiring has since opened up & we are getting nearly 20 financing requests daily”. 

With the country witnessing a good rabi crop and a plentiful harvest in the offing, labourers see a future for themselves in the farm sector. On the other hand, few industry experts believe that labourers will stay back even for planting and not come back till November. 

Raman Mittal, Executive Director of Sonalika Group said, “We should support farmers to boost farm productivity while ensuring reduced operational cost & affordable agri machinery”. Mittal said these centres, besides renting out high-end farm machinery to needy cultivators, would also act as ‘agri machinery clinics’ for repairs of implements. 

In addition, the manufacturers are looking at various models to rent out tractors with TAFE launching a free tractor rental service in Rajasthan, Uttar Pradesh and Tamil Nadu.

TR Kesavan, President of TAFE, who is also the president of TMA said, “The scheme received a good response from cultivators and in sixty days, over a lakh acres have been cultivated & rental service has been offered in this crucial cropping season”.

Last week, Massey Ferguson had announced a scheme of buying a tractor on an initial payment of just Rs 5,000.   TAFE manufactures a range of tractors with brands such as TAFE Eicher, Massey Ferguson and the recently obtained Serbian tractor & agri equipment brand - Industrija Mašina i Traktora. 

It is said that the domestic tractor sector has managed to enter positive territory at a faster pace because of timely relaxation of lockdown for the farming sector. Experts believe the second half to be better for the tractor industry, expecting a surge in demand post rabi season and a normal monsoon. Moreover, a significant growth in the demand for food grains would drive the farm equipment rental market for tractor companies.

Source – Economic Times