The Hidden Costs: Why Indian Farmers Are Reluctant to Buy Tractors
02 October 2024, New Delhi: India’s tractor market, once hailed as a symbol of the agricultural revolution approaching 10 lakh tractor unit sales, has encountered stagnation in recent years. The total tractor sales in 2022 was at 9,15,474 units which further reduced to 9,12,061 units in 2023. The market is further expect to decline by 5-7% in 2024. Despite being one of the largest tractor markets globally, the purchasing patterns of farmers across the country are influenced by numerous factors. The key issues in agriculture center around high costs, fragmented landholdings, financing constraints, and a growing inclination towards rental services. This article delves into insights drawn from a recent survey of Indian farmers done by Krishak Jagat, highlighting the diverse factors that influence their decisions regarding tractor ownership.
The Predicament of Tractor Ownership
India’s agricultural landscape is dominated by small and marginal farmers. A significant portion of these farmers either rent tractors or abstain from purchasing them due to financial constraints. The survey reveals that over 50% of respondents who do not own tractors cite high costs as the primary deterrent.
For instance, a respondent with 1-3 acres of land mentioned, “The upfront cost of buying a tractor is beyond my reach. I prefer renting one during the sowing and harvesting seasons.” This sentiment was echoed by many other small landholders. Farmers who do not own tractors typically rely on renting, using tractors about 2-3 times per season.
In contrast, those with larger holdings (10 acres or more) are more likely to own tractors or at least consider purchasing them. However, even large landholders, at times, opt for rentals due to access to rental service and the high upfront costs associated with tractor purchases.
Financial Barriers and the Role of Credit
The Indian tractor market faces a unique challenge when it comes to financing. A considerable percentage of farmers close to 50% purchase their agricultural inputs such as seeds and agrochemicals on credit, typically from input dealers or via bank loans like the Kisan Credit Card (KCC). While these credit facilities ease input purchases, financing for tractors remains inadequate.
Farmers often lack access to affordable loan schemes that could help in purchasing tractors. The survey indicates that many farmers are forced to rent tractors as a more economically viable solution, given their limited capacity to repay high-interest loans. As one farmer put it, “The interest rates are too high. If the government or banks could offer low-interest loans, I would definitely consider buying a tractor.”
The second hand tractor purchase market is unreliable and does not have transparency and history of maintenance and mechanical issues.
Government subsidies, although beneficial to some, are perceived as insufficient or inaccessible to the broader farming community. There’s a growing demand for better financing options tailored to smallholder farmers, including longer loan tenures and flexible repayment schedules.
Fragmented Landholdings: A Major Hurdle
Land fragmentation remains a pervasive issue in Indian agriculture, with many farmers owning less than 5 acres. This landholding pattern makes it difficult for them to justify the purchase of high-cost agricultural machinery like tractors. A respondent owning 1-3 acres stated, “With such a small piece of land, a tractor isn’t a feasible investment. I can easily manage by renting.”
Farmers with larger landholdings (10 acres or more) are better positioned to benefit from tractor ownership. However, even among these farmers, the fragmented nature of their holdings poses challenges. One such respondent noted that while they own a tractor, they still occasionally rent another due to land fragmentation and the need for simultaneous operations during peak farming periods.
Renting: The Preferred Solution for Many
Given the economic realities faced by many small and marginal farmers, renting tractors has become a popular alternative. The survey indicates that nearly 70% of farmers without tractors prefer renting, with most using rented tractors 2-3 times per season. The flexibility and lower cost of renting are seen as major advantages, especially for those with limited land.
For these farmers, the availability of better rental services is critical. As one farmer from a small village pointed out, “I don’t need to buy a tractor when I can rent one. But sometimes, the rental services aren’t reliable. If they could improve, I wouldn’t even think about purchasing my own.”
Future Purchase Intentions and Market Needs
Despite the hurdles, there remains an interest in tractor ownership, particularly among farmers looking to expand their operations or landholdings. Around 30% of respondents expressed an interest in purchasing a tractor within the next 2-3 years. The factors influencing these decisions include:
- Reduction in tractor prices, loan availability and low interest: Many respondents emphasized that they would be more likely to purchase tractors if prices became more affordable.
- Better post-sale services: The assurance of reliable maintenance and support post-purchase is crucial for those considering the significant investment.
- Advanced technology: Some farmers expressed interest in tractors equipped with the latest technological features, which would help them maximize efficiency and yields.
However, the purchase decision is heavily contingent on government policies, particularly subsidies and financing options. Farmers often look to the government to provide incentives that could alleviate the financial burden associated with tractor ownership.
Challenges Facing the Indian Tractor Market
The tractor market in India faces several challenges that need to be addressed to unlock its potential fully:
- High upfront costs: For most farmers, the steep initial investment in tractors is unaffordable. Addressing this through affordable financing and subsidy programs is essential.
- Fragmented landholdings: The issue of small and fragmented plots makes large machinery unnecessary or impractical for many farmers, dampening demand.
- Uncertainty in agricultural income: With fluctuating market prices and the unpredictability of yields, farmers often hesitate to make significant investments in machinery. This uncertainty has been a significant barrier for farmers across India.
- Inadequate financing: The lack of affordable and easily accessible credit for purchasing tractors limits farmers’ ability to buy them, despite the availability of schemes like the Kisan Credit Card. A farmer succinctly mentioned, “If we could get tractors on the same credit terms as seeds, it would change everything.”
The Road Ahead
India’s tractor market holds immense potential, but the challenges are equally significant. Addressing the barriers of high costs, fragmented landholdings, and inadequate financing is crucial to reinvigorating the market. Furthermore, improving rental services could provide a bridge for farmers who cannot yet afford to buy tractors but still need them for specific periods.
Innovative government policies, coupled with better financing schemes from banks and financial institutions, could stimulate tractor purchases among small and marginal farmers. Meanwhile, tractor manufacturers can also focus on affordable models tailored to small landholdings and improving the post-sale service experience.
In conclusion, the future of the Indian tractor market depends on a multi-faceted approach that addresses the financial, structural, and service-related needs of the country’s farmers. Only then can we expect significant growth in tractor ownership and, by extension, increased agricultural productivity across India.
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