Farm mechanization has picked up pace and farmers are increasingly adopting modern agricultural equipment to enhance their productivity. As a result, the agricultural implements market in India is expected to grow at a CAGR of more than 10 per cent till 2024. How do you see the evolution of this market?
Farm Mechanisation has been identified as a key tool to increase agri production globally. Several studies suggest a direct correlation between increased yield and farm mechanisation, which also leads to several other economic and social benefits for farmers. While farm mechanisation in India has made strong strides in recent years, there is still a long way to go. India is amongst the largest tractor markets in the world, and is also highly organized. However, India has a low level of mechanisation compared to developed countries.
From a global perspective the tractor industry is worth around $60 billion, and the farm machinery industry is worth an additional $100 billion. In contrast, the Indian tractor industry is at around $6 billion and the farm machinery industry is at just $1 billion. Looking at these numbers it is clear that India is Tractorised, but not Mechanised.
How do you see the current usage of advanced machinery in the agriculture sector in India?
While a tractor is a prime mover, the agri machinery value chain in-volves mechanisation right from land preparation to sowing to harvesting and post-harvest. At every step in the production lifecycle, the use of farm equipment enhances farming efficiencies; not only in reducing labour time and post-harvest losses, but also towards cutting down of production costs over a long term.
Countries like the United States and European nations are completely mechanized, while places like China and Japan have also seen higher penetration of farm machinery. In comparison, the Indian agricultural sector still lags behind and requires an increase in farm equipment.
Looking at India from a broader lens, over 85 percent of Indian farmers are small and marginal ones, having less than two hectares of land, but they own just 47.3 percent of the total crop area. These small farmers are simply unable to afford these mechanization technologies due to cost, low yield and income issues. As a result, there is a low overall rate of mechanisation on Indian farms.
While there is some level of mechanisation (beyond tractors), it is skewed toward land preparation. For many other operations, simple implements are used, or the work is done by manual labour. Also this level of mechanisation varies greatly by region. States in the north of India such as Punjab, Haryana and Uttar Pradesh have high levels of mechanisation due to the highly productive land in the region, as well as declining availability of labour force.
What is the impact of the COVID-19 on farm mechanisation, including tractor sales and what are the factors that have contributed to it?
The pandemic has triggered increased adoption of mechanisation on farms due to factors like labour migration, which has resulted in very good growth in farm machinery sales in F’21.
In terms of tractors, for the first time ever, in F’21 the tractor industry has touched the highest-ever volume of 9-lakhs. This is in spite of industry having lost April and May last year in terms of production due to lockdowns. So, in spite of working only for 10 months the industry has grown by 27 percent.
At Mahindra, we clocked over 3.54 lakhs tractors of domestic and exports sales combined. This growth has been on account of several positive factors in the rural economy leading to growth of the domestic tractor industry and farm mechanization.
Successive bumper Rabi & Kharif crop harvest coupled with timely procurement of crops ensured seamless circulation of money in the rural economy. Government spending on Agriculture &
Rural Development, MNREGA outlay was also increased substantially. While we’ve seen bumper and records crops output, the price realisation for the farmer has also been very good.
Between June & September 2020, the monsoons were higher than the Long Period Average (LPA) by 9 percent. It is worthy to note that in 2020 we have had the 3rd highest cumulative rainfall in 25 years, with good temporal & spatial distribution. It was also the first time since 1960 that we had back-to-back above average monsoons. Good monsoons have also led to high reservoir levels of the full reservoir level. As a result, Rabi output was also very good.
What are the major expectations of Indian farmers from the manufacturers of agricultural implements for mechanisation to grow? How can those expectations be met comprehensively?
The farm machinery industry in India is largely focused on low technology implements mainly manufactured by unorganised workshops in rural areas. Hence, the manufacturing industry for these products needs to grow rapidly like that of the tractor industry driving manufacturing growth, technology development, exports, finance and employment, while enhancing rural incomes.
With growing realisation that farm mechanisation is imperative for increasing yield and quality, manufacturers are working on technologies that are customised, with afford-ability and accessibility as key drivers, especially for small farmers.
Also, central and state governments, along with several private companies, including start-ups are working towards the development of need-based, regionally differentiated farm machinery and mechanisation solutions for the country. Because of this mechanization is expected to pick-up substantially in the years to come.
Specialised farm machinery can also be popularised through CHC’s (Custom Hiring Centers), ensuring affordability and accessibility, driving the penetration of farm equipment among small & marginal farmers, thereby significantly contributing toward making the Indian agricultural sector and its farmers ‘Atmanirbhar’.
Positioned as the frontrunner in this segment, how is Mahindra leading the change? Are you bullish about farm mechanisation as a whole beyond tractors?
With a presence in over 50 countries, Mahindra is the world’s largest farm tractor manufacturer by volume and is India’s leading tractor manufacturer for over three decades. While we have a strong tractor portfolio, we are very bullish about the farm machinery business beyond tractors with sizeable growth in the next five years.
We are hence building technology skillsets beyond tractors and working on introducing a range of farm machinery, with the idea of taking technologies used in large land holding farms around the world and making them affordable and accessible to small land holding farmers, to transform farming and enrich lives.
With growing realisation that farm mechanisation is imperative for increasing yield and quality, manufacturers are working on technologies that are customised
A step in this direction is through alliances and acquisitions in Agri Technology and start-ups in the last few years. Basis these acquisitions and partnerships, Mahindra has established three global technology Centers of Excellence. These centres will allow us to bring back and adopt technologies relevant for the Indian market. Our global Centres of Excellence are in: 1) Japan – Lightweight tractors & Rice Machinery Value Chain, 2) Finland – Harvester & Forest Machinery, and 3) Turkey – Farm Implements.
With this we have a very strong pipeline of farm machinery and have been introducing three to four new products each year. At Mahindra we have also rolled out Krish-e Centres in nearly half a dozen states so far. With the tag line – ‘Expert Takneek. Naye Upay. Parinaam Dikhaye’ – Krish-e is a new business vertical that provides technology driven services which are progressive, affordable and accessible to farmers.
These include agronomy advisory, access to advanced farm equipment rentals and new-age precision farming solutions, all focused on bringing down overall farming costs and improving crop output and consequently the farmer’s income. Krish-e aims to increase farmer incomes through digitally enabled services, across the complete crop cycle.
“We are building technology skillsets beyond tractors and working on introducing a range of farm machinery”
FY21 was the best year in terms of tractor sales. How do you see the industry going forward in FY22?
Growth in FY21 was phenomenal, recording more than 25 percent YoY rise. Considering the benchmark set in the previous year, growth may be in single digits this year due to high base of last year even though Agri fundamentals remain strong (Bumper Rabi output, record Rabi procurement, hike on MSP of Kharif crops, healthy pre-monsoon showers and timely arrival of monsoons).
In Q1 this year we posted good growth despite sentiments being marred in May due to spread of Covid-19 in rural pockets. While April benefitted from low base of last year, June which is an important season month for the industry surpassed all previous records by crossing 1 lakh mark.
Demand remained buoyant in July as crop sowing operations gained traction with monsoon picking up pace across all the regions. Easing of COVID curbs & robust farm incomes on account of record Rabi crop procurement has bode well for the rural economy. We continue to stay bullish on tractor demand in the coming months owing to revival of monsoon, hike in MSP of key Kharif crops and upcoming festival season. In the exports market, we have sold 1460 tractors with a growth of 55 percent. Having said that, we continue to remain optimistic about the progress of the monsoon and tractor demand in the coming months.