Tractor sales in India are set to rise 15 percent in 2011/12, posting double-digit growth for a third consecutive year, as farmers increasingly seek mechanisation to overcome a severe shortage of rural labour, a senior industry official said.
Demand for heavy tractors, with 40 horsepower or more, is driving the growth because these can be used to haul other farm equipment such as harvesters, Bishwambhar Mishra, an executive at Mahindra and Mahindra Ltd , said.
Sales of small tractors, less than 20 horsepower, are also rising fast, while growth for 30-40 horsepower tractors that form the largest segment is tapering, he said. "Farmers are using new equipment to accelerate operations," Mishra, who heads the farm equipment division of Mahindra, told Reuters in an interview.
Traditionally, he said, tractor industry growth was powered by good monsoon rains, bumper harvests, government support prices for produce and easier bank loans. "In 2010, one new factor came in which was labour shortage," he said. Mishra said a government poverty alleviation programme that guarantees 100 days of paid work annually for rural households has drawn workers away from agriculture, leaving farmers to greater mechanisation.
Mahindra and Mahindra, the world's biggest tractor maker, and rivals New Holland Fiat India, a subsidiary CNH Global, the Indian unit of John Deere and unlisted Indian firm TAFE are all beefing up production. Mahindra, which has a market share of more than 40 percent of the tractor sales in India, expects to start a new 100,000 vehicles a year plant in the next June quarter in the southern state of Andhra Pradesh.
That will takes its total annual capacity to 350,000 tractors. However, the pace of the industry's growth is slowing due in part to sharp increases in borrowing costs, high inflation and lower disposable incomes of farmers. Tractor sales in India had jumped 20.4 percent to 219,932 vehicles in the first half of the fiscal year that began in April, with Mahindra's leading the way with 111,510 tractors, up 23.9 percent.
Last year, sales had risen a fifth while the year before they had climbed 31.7 percent. India had around 4.2 million tractors in the financial year 2010/11 ended March, up from 150,000 in 1970, Care Research said in a note. Tractor penetration during the period grew to 29 per 1,000 hectares from one, it said. Tractor sales in India would grow more than 10 percent annually over the next five years, Mishra said.
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