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Authors

Title Farm Mechanization in India : A Status Paper

Date December 2009

Food & Agribusiness Strategic

Advisory and Research (FASAR)

YES BANK Limited

I. Background 1

II. Status of Farm Mechanisation in India 5

10

IV. Tractor Industry in India 14

V. International Trade in Farm Equipment 17

VI. Policy Scenario in the Country 27

Annexure I

Export data pertaining to selected commodities (USD Million) 32

Annexure II

Import data pertaining to selected commodities (USD Million) 34

III. Structural Organisation of the Farm Mechanisation Sector

Figures / Graphs

Exhibit 1: Foodgrains Yield in India 2

Exhibit 2: Productivity and Farm Power Relationship 3

Exhibit 3: Per Unit Cost of Different Sources of Energy 4

Exhibit 4: Share of Different Power Sources in Total Farm Power 6

Exhibit 5: Indian Agriculture Machinery Distribution 7

Exhibit 6: Power Source-wise Development of Farm Equipment 8

Exhibit 7: Region-wise Development of Farm Equipment 9

Exhibit 8: Domestic Tractor Sales over the years 14

Exhibit 9: Class-wise Sales of Tractors 15

Exhibit 10: Share of States in Total Tractor Sales 16

Exhibit 11: Exports Imports of Selected Agricultural Equipment 17

Exhibit 12: Selected Agriculture Equipment Exports 18

Exhibit 13: Export Trends 18

Exhibit 14: Tractors Equipment Exports 19

Exhibit 15: Export Composition 19

Exhibit 16: Selected Cultivation Equipment Exports 20

Exhibit 17: Selected Harvesting & Threshing Equipment Exports 20

Exhibit 18: Selected Post -Harvest Equipment Exports 21

Exhibit 19: Others Equipment Exports 21

Exhibit 20: Selected Poultry Equipment Exports 22

Exhibit 21: Selected Dairy Equipment Exports 22

Exhibit 22: Selected Agriculture Equipment Imports 23

Exhibit 23: Selected Cultivation Equipment Imports 24

Exhibit 24: Selected Harvesting & Threshing Equipment Imports 24

Exhibit 25: Selected Post -Harvest Equipment Imports 25

Exhibit 26: Others Equipment Imports 25

Exhibit 27: Selected Dairy Equipment Imports 26

Exhibit 28: Selected Poultry Equipment Imports 26

Executive Summary

India's food-grains output has increased manifold over the past sixty

years. While the stupendous performance of the agricultural sector is

mostly credited to the farm mechanisation, among

other factors, also had a considerable impact on catalyzing food-grains

production in the country. However, since the beginning of the 90s,

significant changes in trends from the agriculture sector have been

noticed. These include, stagnation in yields, changes in consumer

preferences, scarcity of labor during peak agriculture seasons, rising cost

of production, resource scarcity, and effects of climate change on farming.

In this context, among other things, the need for accelerating

mechanization capacity in the farming system and broadening its

applicability to allied agriculture sectors is immense.

Contrary to the popular belief that the benefits of farm mechanisation can

be availed by large farmers only, it has been found that small and marginal

farmers have been quite open to adopting equipment for tillage, sowing,

irrigation, plant protection and threshing etc, the development of which

has gained prominence. In terms of power source-wise development of

farm equipment, over the years, nearly 45% of all the equipment is animal

drawn equipment. However, the country displays significant region-wise

variations in the level of farm mechanisation. Penetration of power

operated equipment is most in northern states; on the other hand,

maximum numbers of animal drawn implements can be found in M.P. and

U.P.

On the international trade front, India's trade in selected agriculture

equipment has grown by about 10 times, in value terms since 2000-01. Of

this, exports occupy 70% share, largely on account of tractors, that

constitute about four-fifth of the total exports of the selected farm

equipment. The exports have grown at a CAGR of nearly 30% since the

beginning of this decade. On the other hand, imports that have grown at a

CAGR of around 27% in value terms are more broad-based with significant

representation from cultivation, past-harvest and dairy equipment in the

overall import figures.

Farm mechanisation still being in a nascent stage needs significant

support from the government for both, increasing domestic penetration

and adoption as well as stimulating international trade. Unlike other

agricultural sectors, farm mechanization sector has a far more complex

structural composition and is majorly influenced by the interplay of a

diverse set of factors ranging from financial to agricultural and market

issues. It has been observed the sector needs considerable attention from

the players in terms of research, development and testing of India specific

Green Revolution,

Farm Mechanization in India : A Status Paper

farm machinery and equipment, standardization and quality control, and

education, training and popularization. Consequently, several policy

announcements need immediate and a careful attention, these include:

• Provision of special credit support at lower interest rates to rural

individuals, venturing into entrepreneurial use of Farm

Machinery through custom hiring

• Provision of incentives and policy support for the development

and promotion of farm mechanization technologies suitable for

Dry Land Farming, Horticulture & Orchards.

• Provision of incentives to support the development of

mechanization technologies which helps to conserve resources

such as water, soil fertility etc

• VAT and excise duty exemptions for agricultural machinery and

equipment purchased by farmers cooperatives, village level

panchayats and agribusiness / clinic entrepreneurs

• Promotion of Farm Service Centres


I - Background

Ever since independence, Indian agriculture has continuously provided

structural support to the economy. It significantly contributes towards

employment generation in the rural sector by employing more than 50%

of the total Indian workforce, and more importantly, ensuring food

security to the nation. At 233 million tonnes, India's agriculture output

has nearly grown five-fold since the early 1950s. The advancements in

food-grain production, besides other things, were brought in by early

agricultural mechanisation in form of irrigation pumps, tillage equipment,

chaff cutters, etc. Moreover, the paradigm changes brought in by

have further catalyzed acceleration of farm mechanization

across various agricultural activities in the country. Consequently, the

dependence on animate power has successively reduced over a period of

time. The custom hiring of the farm equipment for tillage, sowing, plant

protection, and threshing has further increased the penetration of farm

equipment in the farming system.

However with time farm mechanisation needs have also evolved. The

present trend in agricultural mechanisation shows acceptability of greater

mechanization capacity in the farming system and a scope to broaden its

applicability to horticultural, plantations and other commercial crops.

Despite the potential, bringing about sustainable growth in the farm

mechanization sector still remains a challenge on account of (1) the widely

accepted view that the benefits of have run their course,

and fresh impetus is needed at cultivation stage to augment yield and

further, increase crop production; (2) Changing consumer choices, food

preferences are shifting towards processed products driven by health,

lifestyle and convenience considerations, which require suitable &

efficient post harvest operations; (3) non availability of man power during

peak seasons; (4) rising cost of production; (5) resource scarcity and

efficient utilization of the same; and (6) climate change issues. These have

been dealt with as follows.

Despite significant improvements in crop productivity during green

revolution period, the crop yields have nearly been stagnant since the

advent of 90s and are around 35-50% below international averages. (

1). Besides, within India, there exists significant difference in yields

across different states. Cropping Intensity, which presently stands around

137%, has registered an increase of only 26% since 1950-51. Experts

estimate that by 2025, agricultural productivity should increase by 100%

Green

Revolution

,

Green Revolution

refer

exhibit

1Farm Mechanization in India : A Status Paper

to sustain the projected population of 1.363 billion. This can only be

achieved by intensifying agriculture, which is aided by mechanized inputs.

It is estimated that the energy input to agriculture would have to be

increased from the present level of 1.3 to 2.4kW/ha.

2

1382

1457

1501

1546

1491

1614

1552

1627

1704

1626

1734

1535

1727

1652

1715 1707

1350

1400

1450

1500

1550

1600

1650

1700

1750

Yie

ld(K

g/

ha

)

Year

Exhibit 1 : Foodgrains Yield in India

Comparative Yields in Prominent Nations

27

05

80

92 9

45

8

50

00

10

00

00

21

02

45

14

29

38

20

00

40

00

06

00

0

46

08

64

22

51

51

50

00

10

00

00

22

19

.9

38

26

37

85

.4

20

00

04

00

0

27

04 33

03

24

40

20

00

04

00

0

Yield Major crops (kg/Ha) 2007 Wheat Maize Rice


USA

BRAZIL INDIA

CHINA

RUSSIAN FEDERATION

Strengthening farm power availability will have a major role in

augmenting food production in India. Estimates indicate that yield

increases are directly proportional to the rate of farm-power employed on

field. It has further been estimated that use of proper equipment can

increase productivity by up-to 30% and achieved reduction in costs at

about 20% . This is because farm mechanisation ensures

not only the efficiency of input use and cropping intensity but also ensures

timely farm operations management.

Ensuring timeliness of farm operations becomes even more critical due to

uncertainties being witnessed in monsoons during recent past. Estimates

point that a delay in sowing of wheat in Punjab beyond first fortnight of

November leads to a decrease in yield of about 1.50 quintals per acre.

Also, the time taken to perform a sequence of operations is a factor

determining the cropping intensity.

Farm mechanization is also getting important because of the increasing

human labor wage rates, especially since the implementation of

Mahatma Gandhi Rural Employment Guarantee Scheme (previously

know as NREGA) and increase in cost of up-keep of animal (bullock) labor

. For instance harvesting operations on one acre of paddy

in most parts of South India, requires around 20 man-days for harvesting

and 10 man-days for threshing and packaging, which would cost

anywhere between Rs 2500 to Rs 3000. The entire harvesting and

threshing operations are presently done by hiring combine harvester for 1

hour at a cost of Rs 1200-1500. This amount translates into a saving of

approximately 20% of net profit from cultivation of one acre of paddy

under irrigated conditions.

(refer exhibit 2)

(refer exhibit 3)

3

0.25 0.31 0.36

0.63

0.92

1.35 1.4

0.620.71

0.87

1.02

1.38

1.721.73

0

0.5

1

1.5

2

2.5

3

3.5

1951 1961 1971 1981 1991 2001 2006

Pro

du

ctiv

ity

(t/h

a)

&Fa

rmP

ow

er(

kW

/ha

)

Exhibit 2: Productivity and Farm Power Relationship

Farm Power(kW/ha) Average Yield of Food Grain(t/ha)


In the absence of mechanization, the ever-increasing wage rate of human

labor and cost of upkeep of draught animals significantly increases the

cost of production. Also, mechanization helps in timely marketing by quick

mechanical transportation and handling of the produce. Moreover, it also

reduces the weather risk. Documentary evidences point that temperature

and other inter-related dynamics of climate are occurring at a much faster

rate due to industrialization, deforestation, encroachment of wetlands,

grasslands and higher application of agro-chemicals. Consequently,

adoption measures like management of residues instead of burning, fuel

saving zero tillage, water and fertilizer management in rice, drainage of

waterlogged soils, and preservation of wetlands become an indispensable

aspect while considering farm mechanisation policy. In the context of

India, zero tillage technology in rice-wheat cropping system, especially,

looks promising because of improved productivity, profitability and

sustainability. Empirical evidences point that besides saving labour &

time, zero-tillage technology has reduced the cost of wheat sowing from

Rs. 2000-2500/ha to Rs. 400-500/ha and in the case of rice, a 20.63%

reduction in cost of production.

4

0

20

40

60

80

100

120

140

160

Male Female Draught

Animal

Tractors Power

Tiller

Diesel

Engine

Electric

Motor

125

156

29.32

7.6610.71

7.14 3

Rs/

kW

h

Sources of Energy

Exhibit 3: Per Unit Cost of Different Sources of Energy


II - Status of Farm Mechanisation inIndia

Traditionally, blacksmiths and carpenters have been the fabricators of

agricultural equipment in India. However the roots of scientific

agriculture equipment can be traced to technological developments in

England during the nineteenth century. In 1889, ploughs, corn grinders

and chaff cutters were introduced in Uttar Pradesh. Besides these, horse

drawn and steam tractors operated implements were also imported

during the latter part of the nineteenth century, and were suitably

modified by small scale Indian manufacturers to suit Indian draught

animals. In 1940s indigenous development of equipment gained

foothold with the establishment of Allahabad Agricultural Institute that

introduced , & Yet, it

was only with the that the farmers gradually started

adopting mechanized inputs in response to higher yields and economic

returns stemming from application of and

One of the major achievements of 1960s was the

development of

, and

which were widely adopted by farmers. The demand for other

farm machinery like reaper, combine harvesters & tractors also gradually

increased. In this context it is pertinent to note that the then socio-

economic & policy environment had a decisive role in the demand and

adoption of mechanized equipment The following graphic represents the

successive stages of farm mechanization in India since the end of

nineteenth century :

bullock drawn Meston Shabash Wah Wah Ploughs.

Green Revolution

High Yielding Varieties higher

application of fertilizers.

power thresher with integrated Bhusa (chaff) making

attachment aspirator blower mechanical sieves for grain & straw

separation,

1

5

1989 Onwards

1968 - 1988

1891 - 1946

1946 - 1967

Emphasis on Dry-land

Farming

Entrance of Organised

Players / Multinational

Corporations

Easy Availability of

Financing

Green Revolution

Better seeds

Improved Irrigation

System

Better quality &

Quantity of fertilizers

Land Reforms –

Abolishment of

Zamindari System

Central

Government

support for

agricultural

programmes

Stagnation in

Agriculture

Little

innovations in

seeds, fertilizers

& machinery

Source : Zinnov Consulting, November 20061 Agriculture Equipment Market in India – An Overview;


Mechanisation Scenario with reference to various Power Sources:

Historically, human and animal power i.e. has been

predominantly used for various farm operations. However, over the course

of time, the contribution of animate power in total farm power has been

registering a continuous decline, and is being compensated by mechanical

and electrical power sources . The last two decades have

registered a growth of more than 45% in the availability of mechanized and

electrical power, out of which mechanized sources have a greater share.

Under mechanized sources of power, it is tractors and power tillers that

have a larger share, and are followed by mould board ploughs, puddler, and

different types of harrows etc.

There has been a significant efforts put in by both the private and the public

sector towards promotion and adoption of mechanization in the Indian

agricultural system. Further, access to finance for major farm equipment

has also played an important role in increasing the reach and penetration

of the farm machinery viz. tractors, power tillers, bullock/tractor drawn

implements, reapers, threshers, irrigation equipment, hand tools, etc.

among rural consumers. In the last decade the use of new equipment such

as precision planter, zero-till drill, seed cum fertilizer drill, raised bed

planter, improved weeders, plant protection equipment, harvesting and

threshing machines, drip, micro-sprinkler and sprinkler irrigation

equipment have also increased signifying an increase in the usage of farm

machinery. Consequently, it has further been estimated that by the year

2020 the share of mechanical power in the total farm power availability will

further rise to 70% (of which mobile power sources would account for 50%

& stationary sources at 20%). The second largest source of power would be

electrical sources that would account for 25% and lastly animate power

would be relegated to around 5%.

animate power

(refer exhibit 4)

6

0 20 40 60 80 100

1981-82

2005-06

2011-12 (est)

10.92

5.39

5.09

27.23

8.02

6.37

19.95

46.1

51.08

41.57

40.39

37.46

Agricultural Workers Draught Animals Tractor Stationary Engine

Exhibit :4 Share of Different Power Sources in Total Farm Power


Degree of Mechanisation:

Region-wise variation:

Two popular misconceptions about farm

mechanisation in India include, (1) farm mechanisation is many a time

equated with tractors, and (2) the benefits of farm mechanisation can be

reaped by large farmers only. While it is a fact that tractors occupy a nearly

90% of the Indian agriculture machinery market valued at about USD

1.081 Billion , the remaining being made up by equipment such as

harvesters', tillers, and pump sets etc it has been

documented that farmers, including small & marginal farmers have been

quite open to adopting equipment for tillage, sowing, irrigation, plant

protection and threshing etc, the development of which has gained

prominence. However, farm mechanisation in India

depicts location specific trends.

There is a heavy variation in the level and

sophistication of farm mechanization across different regions in India.

While the sale of implements and machines like combine harvesters,

threshers and other power operated equipment have been increasing

almost throughout the country, the Northern States of Punjab, Haryana,

Uttar Pradesh (particularly Western and Tarai belt) have achieved a faster

growth in mechanization over various Plans, the pace of mechanization in

the other states is far from satisfactory. The sale of power tillers in the last

three years has shown an increasing trend in a few states. The pace of

mechanization in North-Eastern States has not been satisfactory due to

constraints such as hilly topography, socio-economic conditions, and high

cost of transport etc. The mechanization in Western and Southern states

of the country viz., Gujarat, Maharashtra, Rajasthan and certain areas of

Tamil Nadu, Andhra Pradesh etc., has increased with the increase in area

under irrigation and also with the growing awareness among farmers.

2

(Refer exhibit 5),

(Refer exhibit 6)

7

1081.7

101.8

Exhibit 5: Indian Agriculture Machinery Distribution (USD Billion)

2 Source: Indian Agricultural Machinery Market: An Investment perspective


As the mechanisation technology is location specific, it is subject to

change with techno-economic and socio-cultural advancements,

different stages of agricultural development and levels of mechanization

exist. These are, (1) manual, (2) using manual tools, (3) animal traction

and initial motorization using combination of animal & mechanical power,

(4) motorization stage using principally mechanical power, and (5) finally

automation stage. Development of manually operated implements has

been dominant in the eastern region. Maximum numbers of animal

drawn implements have been developed in the central region comprising

of M.P. and U.P. In the northern region, there has been very low emphasis

on the development of power operated (stationary as well as walk

behind) implements, as compared to tractor mounted implements. The

emphasis on tractor mounted implements in northern region may be

attributed to farm holdings being large, higher purchasing power of

farmers and shortage of labor during peak seasons. Increase in cropping

intensity through assured irrigation has also contributed to increased

adoption of tractor mounted equipment with higher capacity (Refer

exhibit 7).

8

27.1

45.2

14.6

7.9

5.2

Manually Operated Animal drawn

Power Operated Stationary Power Operated Walk Behind

Tractor mounted

Exhibit 6: Power Source-wise Development of Farm Equipment (%)


9

0 5 10 15 20 25 30 35 40 45 50

Manually Operated

Animal drawn

Power Operated Stationary

Power Operated Walk Behind

Tractor mounted

Manually Operated

Animal drawn



Tractor mounted

Manually Operated

Animal drawn



Tractor mounted

Manually Operated

Animal drawn



Tractor mounted

Manually Operated

Animal drawn



Tractor mounted

Ea

ste

rnW

est

ern

No

rth

ern

So

uth

ern

Ce

ntr

al

24

21

6

4

6

15

27

3

0

3

17

31

11

4

36

18

30

20

13

13

19

46

10

6

18

Exhibit 7: Region-wise Development of Farm Equipment

Use of Major Farm Equipment over the years in India3

3Source: Agriculture Equipment Market in India, Zinnov Consulting, 2006

Use of Harvesters has increased by nearly 5 % since 1994Use of threshers has increase by nearly 20% since 1994

1200

1300

1400

1500

1600

1700

1994 1998 2002 2006

1351

1465

15511614

in'

00

0

Number of Threshors

390

400

410

420

430

1994 1998 2002 2006

407

416

422427

in'

00

0

Number of Harvestors

Use of Reapers has increased by nearly 315% since 1994

0

5000

10000

15000

1994 1998 2002 2006

2782

6779

960211595

in'

00

0

Number of Reapers

Use of levelers has increased by more than 35% since 1994

0

200

400

600

800

1000

1994 1998 2002 2006

670

786863 913

in'

00

0

Number of Levelers

Use of Maize Shellers has increased by nearly 61% since 1994

0

50

100

150

1994 1998 2002 2006

78

101116

126

in'

00

0

Number of Maize Shellers


III: Structural Organisation of theFarm Mechanisation Sector

Unlike other agricultural sectors, farm mechanization sector has a far

more complex structural composition. It has been observed that the

sector's performance depends on the interplay of a diverse set of factors,

that include, financial aspects, agricultural issues, and market issues.

These drivers have been discussed briefly as follows:

o Any kind of advanced mechanization needs

big capital investment from the farmer. However Indian framers

are unwilling to invest in the machines unless they are confident

of the returns from his investment.

o Fuel is the primary driver for any mechanized

farm equipment but crude prices are at a record high and there is

great shortage of diesel in the country. Usage of oil based farm

machinery is not considered a good strategy to follow at such a

time.

o Proper maintenance and upkeep of the

machinery is necessary for optimal output. If the maintenance of

machinery is costly, farmer may avoid investing in such

machinery.

o Almost 90% of tractors are sold

with the assistance of some financial institution. Sale of farm

machinery is driven by factors like financial support, limit of

funding (in terms of percentage of the cost), funding/financing

institution and the applicant's profile (deciding the credibility of

the loanee)

o Longer the duration of the loan, smaller

will be the installment. The smaller the re-payment installments,

easier it is for the farmers with intermittent source of income to

fund his farm machinery purchase.

o If the re-payment cycles are short,

the farmer faces difficulty in paying back (as their income is

exposed to the vagaries of nature). With a 6 month crop cycle in

India, farmers prefer 6 monthly installment cycles matching their

realization.

Capital Investment:

Operational cost:

Maintenance cost:

Financial Support (% of cost):

Repayment Duration:

Repayment periods/cycles:


o Though rate of interest affects the sale of the

machinery, it is not the deciding factor. The primary deciding

factor is a long duration loan with a favorable repayment cycle,

followed by rate of interest.

o This cost includes all the

expenses (eg. down payment, file preparation charges etc) to be

borne by the farmer in order to avail the financial assistance

including the down payment.

o Cropping pattern decides the extent of

mechanization required for timely operations and achieving

optimum results. The scope of mechanization increases with

intensive cropping pattern.

o Price realized by the crop is also an

important factor, as it indicates the cash in hand for the farmer. It

is directly affected by the support price announced by the central

government (from time to time) and the policies by the state

government.

o Size of land is an important factor for a farmer if he

decides to go for mechanized equipment . For a big farm, there is a

greater need for mechanization, than for a small farm, where it

can be economically unviable to go for mechanization.

o Abundant availability of skilled and unskilled

labor is also a deterrent to farm mechanization. With abundant

cheap labour in supply, farmers prefer to opt for manual labor

instead of investing capital in the machinery, considering all other

factors.

o It is beneficial for the farmer to go for manual labor

if it is abundantly available at cheap rates, though it adversely

affects the mechanization possibility.

o is one of the major energy-intensive operations. One of

the major problems has been the lack of adequate and timely

availability of electricity in rural areas due to which the diesel

engines are kept as standby source of irrigation.

: Contrary to the commonly

held belief of reducing employment, farm mechanization provides

different streams of employment related to machinery along with

reduction in unit cost of production and improvement in

competitiveness of the farmer. The use of different machines in

Rate of Interest:

Cost of availing financial support:

Cropping pattern:

Crop realization/ price:

Land size:

Availability of labor:

Cost of labor:

Irrigation

• Farm Mechanization and Employment


agriculture has different types of impacts on employment of human

and animal labour. Over the last three decades, the use of animal and

human labour have gone down (primarily driven by increase in cost of

upkeep and increase in wages respectively) while mechanization

continues to gain popularity despite the increase in cost of farm

machinery and the multiplier impact of the rise in operational cost.

Unemployment, if any, on account of farm mechanization can be

attributed to the use of tractors, threshers, combine harvesters etc.

However, these machines bring timeliness and remove drudgery from

farm operations.

Mechanization is all about scales

of operation. If scalability is lacking, farm mechanization is not

economically viable. For example in order to have an economically

viable operation, the minimum usage of a tractor should exceed a

minimum of 1000 hours per annum. Experts believe that innovative

Custom Servicing or a rental model for high cost farm machinery such

as combined harvester, rotavator etc can be adopted by private

players or state or central organizations in major production hubs.

Although the rental model already exists in a unorganized manner,

institutionalization of such practice may provide incremental benefit

for the farmers

The farm mechanization sector is

faced by various challenges related to product, technology, markets,

operations, legislation, policy framework and other related areas,

these challenges pose a serious impediment to the growth of the

industry. Few of the key challenges faced by the farm mechanization

industry are discussed below

o

Land tillers and tractors serve the

basic function but there is an urgent need to develop a machinery

especially suitable to Indian farming conditions such as small

farms, dry farming, and for the operations such as paddy

transplanting, sugarcane planting, potato digging, cotton picking,

spraying tall plants such as fruit and forest trees etc.

o As the majority of

customers are cost conscious, quality of the product takes a major

hit. In addition, the inability of local low cost manufacturers to

come up to the levels of standard designs of equipment also

poses a big challenge to farm mechanization.

• Economics of Farm Mechanization:

• Challenges in Farm Mechanization:

Research, development and testing of India specific farm

machinery and equipment :

Standardization and quality control:


o

Knowledge about selection of machinery is insufficient. The

farmers as well as artisans lack adequate training for efficient

usage of the machinery. There are inadequate service centers for

proper upkeep of the machinery and the market lack's

regulations on custom hiring (rental) services. These are the

major challenges which need to be addressed on priority.

The major issues in Farm

Mechanization are discussed below:

o Harder the soil more is the requirement of

mechanization while in the case of loose soil; farmer can operate

even with low level of mechanization.

o In the absence of proper irrigation facility, the

impact of mechanization is not considerable while sufficient

irrigation facility along with mechanization can bring out

excellent results in the farm.

o The use of machinery such as tractor has

resulted in surplus draft cattle population. As upkeep of these

cattle is becoming dearer day by day, underutilized cattle are

becoming a burden on the cultivator.

o Mechanization needs comparatively larger farms for

economical use as the machinery need a larger turning radius.

o Lack of extension services restricts the farmer

from taking a wise decision on purchase of suitable machinery, its

operation and maintenance.

o The farm machinery remains idle for a

considerable time on account of seasonal nature of the

agriculture and dependence on monsoon for irrigation. Idle

machinery means dead investment for the period unless proper

alternate use of such machinery in made during the off-season.

Education, training and popularization of farm equipment:

• Issues in Farm Mechanization:

Soil types:

Irrigation facility:

Cattle Population:

Farm size:

Extension service:

Seasonal Usage:


IV - Tractor Industry in India

Indian Tractor Industry is the largest in the world, and accounting for one-

third of the total global production. During the past four decades, the

tractor industry grew at a compounded annual growth rate of 10%,

despite seasonal variations that have an impact on the industry volumes.

However, in the long term, tractor industry in India is expected to grow at a

CAGR of 5 – 7%, primarily due to thrust given by the government to

increase the agriculture GDP. According to the estimates of the Indian

Tractor Manufacturer's Association, the industry is expected to stabilize at

about 3'50'000 tractors per year and an additional 60'000 tractor for

exports by 2010.

Since the beginning of this decade, tractor industry was

seen shrinking at a negative CAGR of 13.5%, primarily due to stock

correction in 2000-01, and drought in FY 02-03. The recovery started in

mid 2004, which is presently continuing. Since then the industry is

growing at a CAGR of 19.5%, which is primarily driven by strong

monsoons, increase in lending by nationalized banks, entry of private

commercial banks in the agri-lending arena. Besides, the government's

focus on increasing agriculture output and rise in Minimum Support

Prices also had play on the overall demand for tractors. Year-wise

domestic sales pertaining to tractors are given in the following graphic

Tractor Industry is marked by low bargaining power of both the buyers as

well as the suppliers. The fragmented nature of the market further

compounds the issue, as such major companies have carved different

segments and geographies to operate in. While the restrictions on

imports have been removed, the threat of new entrants is only moderate,

Industry Status:

(refer exhibit 8).

14

0

50000

100000

150000

200000

250000

300000

350000

138235

254871

171657

311643342200

Exhibit 8: Domestic Tractor Sales over the years


because of comparative scale of economy in the country. However,

limited new product introductions, technological breakthroughs, and stiff

competition from international players will result in greater

consolidation. Besides, a spurt in the demand for LP tractors by golf

courses, hotel & airlines industry may force companies to concentrate on

aesthetics, noise reduction, and comfort aspects. As the product offerings

by the major players are largely homogenous, the key differentiating

factor for market players would be (1) having a diversified portfolio or (2)

provision of better services like wider distribution network and (3)

financial tie ups with banks .

With increase in sales in the last few years, capacity utilization has

improved and is expected to grow further with the growth in sales

volume. As capacity utilization improves overheads per unit will reduce

and this in turn will lead to increase in margins. It is expected that

operating margins will grow to 10% from current level of 6%. With the

increase in margins and no significant capital expenditure, profitability

will improve along with ROCE (Return on Capital Employed). Moreover,

the expanding exports market for tractors manufactured in India has

helped in reducing the dependence of manufacturer solely on the

domestic market along with reducing the breakeven point (due to higher

margin in export market). This will go a long way in improving capacity

utilization and profitability of the tractor industry.

Indian tractor market is

traditionally a medium horse-power market, constituting mostly of 31-40

HP tractors, under Class C. The growth of the tractor industry is closely

linked to the growth under this class of tractors. During period October to

September 2009, 109246 units under were sold in this class, constituting

about 32% of the overall tractor sales in the country. 41-50 HP tractors is

the next largest category that accounts for about a quarter of the total

tractor sales in the country .

5

Class-wise analysis of the tractor industry:

(refer exhibit 9)

15

8.4713.89

31.92

25.75

14.94

5.03

A B C D E E+

Exhibit 9: Class-wise Sales of Tractors (Oct - Sep, 08-09)


State-wise tractor sales: Uttar Pradesh which contributes nearly 19% of

the total tractor sale is the largest market in India. Uttar Pradesh is

followed by Andhra Pradesh, Maharashtra, Rajasthan, Madhya Pradesh,

Punjab and Haryana in tractor sales. .(refer exhibit 10)

16

PUNJAB, 7.6HARYANA, 7.5

RAJASTHAN, 8.4

CHATTISGARH, 2.7

MP,8.0

UP, 18.5BIHAR, 6.7

JHARKHAND, 1.4

N.E.STATES, 0.6

ORISSA, 1.9

WEST BENGAL, 2.0

GUJARAT,5.8

MAHARASHTRA, 8.3

AP, 10.7

KARNATAKA, 5.3 TAMIL NADU, 4.4

Exhibit 10: Share of States in Total Tractor Sales (Oct - Sep, 08-09)


V - International Trade in FarmEquipment

Since 2000-01, India's trade in selected agriculture equipment has grown

by more than 9.5 times. From about USD 63 Million in 2000-01, India's

agri-equipment trade presently stands at USD 603 Million

. In terms of value, exports occupy close to 70% share in share in

the total trade of selected agricultural equipment. Indian exports have

grown at a CAGR of 29.48% since 2000-01, largely on account of tractors

which account for four-fifth of the total Indian agriculture equipment

exports and more so about one half of the total international trade in

selected agriculture equipment . On the other hand, while import of

agricultural equipment has grown at a CAGR of about 27% in value terms,

its share in trade has declined from 35 percent at the beginning of the

decade to 30% during 2008-09. However, as opposed to exports, which tilt

towards tractors only, Indian imports are broad-based with a significant

representation from cultivation, post harvest and dairy equipment .

Tractors imports are minimal, standing at about 1.5% of the total import of

selected agri-equipment during period April – December 2008-09.

5

6 (refer

exhibit11)

17

5

6

For the purpose of analysis in this section FICCI has considered selected agriculture equipment , notably, Agri / Horticultural

Mechanical Sprayers, Ploughs, Disc Harrows, Agricultural and Horticultural Machinery and parts there-of, Seeders, Planters,

Transplanters, Manure Spreaders & Fertilizer Distributors, and Mowers including Cultivators Bars for Tractor Mounting under

cultivation equipment ; Straw / Fodder Bailers, Combine Harvesters & Threshers, other Harvesting & Threshing Machinery & parts

there-of under Harvest category; Machines for Cleaning, Sorting/Grading Eggs, Fruit/ other Agricultural Produce, Seed, Grain Or

Dried Leguminous Vegetables, other Machinery for Cleaning, Sorting / Grading and parts there-of, and machinery of preparation of

fruits, nuts / vegetables under post harvest category; Tractors under HS Code 8701 covering Road tractors for semi trailers, Track

laying tractors, and other Tractors; Poultry incubators and brooders and parts there-of, other Poultry-Keeping Machinery, and

Machinery for preparation of Meat / Poultry under poultry section, Milking Machines & Dairy Machinery and parts there-of, and

Machinery for preparing Animal Feeding Stuff; and other machinery like Lawn Mowers etc, Machinery and parts there-of for

Manufacture of Wine, Cider, Fruit Juices etc, machinery for Sugar Manufacture, and Brewery machinery. The details of which have

been given in Annexure no. I & II

The latest data pertains to period April to December of the fiscal 2008-09


462.18

417.22

167.02 185.87

0

50

100

150

200

250

300

350

400

450

500

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 *

Year

Export of Selected Agri Equipment Import of Selected Agri Equipment USD Million, Actual Prices

Exhibit 11: Exports Imports of Selected Agricultural Equipment

352.77

288.42

179.88

120.32

97.9558.74

40.79

21.95 57.528.85 36.39

70.2192.99

154.76

FICCI Research

Export Analysis: From a meager exports of about USD 40.79 Million in

2000-01, exports of the selected agriculture equipment have grown by

about 11 times to reach USD 417 Million in the first nine months of 08-09

. However, a significant trend in exports is that the overall

farm equipment export follows that path of tractor exports

USA is the major export destination followed by Brazil, Nepal, Sri

Lanka, Australia, Turkey and Bangladesh

(Refer exhibit 12)

(Refer exhibit

13).

18

0

100

200

300

400

500 462.18

417.22

Exhibit 12: Selected Agriculture Equipment Exports

(Value at Actual Prices, USD Million)

00

-01

01

-02

02

-03

03

-04

04

-05

05

-06

06

-07

07

-08

08

-09

*

352.77

288.42

179.88

120.3297.95

58.7440.79

FICCI Research

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Export growth (%) Tractor Export Growth (%)

Exhibit 13: Export Trends

FICCI Research

44.0

22.8

66.8

123.1

29.3

22.8

54.5

49.5

60.3

69.3

28.1

22.331.0

31.3


Tractor Exports:

Cultivation Equipment :

Export of Tractors witnessed a surge in 2005-06, when an export growth

of nearly 70% was recorded over the previous fiscal. From then on tractor exports have

been growing in the about 30% per year . The export of tractors

occupies about 80% of total exports of selected agriculture equipment .

Some of the major destinations of tractors include USA, Latin American countries like

Brazil, Australia in Asia Pacific, Turkey among the European nations and Sri Lanka and

Bangladesh in South Asia. Besides, independent research points that the share of high

HP segment (>40 HP) tractors in exports has also been rising and this trend is expected to

continue.

Exports of cultivation equipment has registered a CAGR of

about 19% over the last decade. Notable contributors to this growth include agricultural

machinery parts, disc harrows and ploughs among others. . The major

export destinations for these equipment include USA, Thailand, Ghana, Nigeria &

Kenya.

(Refer exhibit 14)

(Refer exhibit15)

(Refer exhibit 16)

19

0

100

200

300

400

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Year

23.97 29.4365.65

84.91

131.16

222.09

284.47

373.6

332.41

Exhibit 14 : Tractors Equipment Exports [USD Million, Actual Prices]

FICCI Research

373.6

332.41

88.5884.81

0

50

100

150

200

250

300

350

400

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Export Composition

Tractors Other Agricultural Equipment

Exhibit 15

FICCI Research


20

0

10

20

30

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Year

6.08

12.4815.5

17.71 17.36

26.47 27.329.3 29.51

Exhibit 16 : Selected Cultivation Equipment Exports [USD Million,

Actual Prices]

Harvesting Machines:

Post Harvest equipment :

Exports of harvesting machines like Combine

harvesters – threshers and parts thereof has been witnessing a continued

surge with a CAGR of around 30% since 04-05 . Some of

major export destinations include Sri Lanka, Germany, USA, UK & Ghana.

Machinery and parts there-of for cleaning,

sorting, or grading seed, grain or dried leguminous vegetables are the

main equipment that are driving the growth of post harvest equipment .

This segment is growing at a CAGR of around 11% since 2000-01; the

major export destinations being Nigeria, Myanmar, Nepal, Ghana, and Sri

Lanka.

(Refer exhibit 17)

0

5

10

15

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

0.431.04 1.27 1.11

2.8

4.395.6

7.8

10.62

Year

Exhibit 17 : Selected Harvesting & Threshing Equipment Exports

[USD Million, Actual Prices]


21

0

5

10

15

20

25

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

5.74

11.2

8.697.3

12.17

15.5916.97

20.9

15.61

Year

Exhibit 18 : Selected Post-Harvest Equipment Exports


Other Agricultural Equipment :

Poultry Equipment :

Machinery and parts there-of for

manufacture of wine, cider and fruit juices etc, machinery for sugar

manufacture and brewery machinery are the prime constituents driving

growth in this segment. Growing at a CAGR of 28%, these equipment have

France, USA, Spain, and Korea as major export destinations.

Poultry keeping machinery and parts thereof are

being exported to Nigeria, Mali, Bangladesh, Kenya, and USA. The exports

under this segment have registered a CAGR of 9% since last decade (Refer

exhibit 20).

Year

Exhibit 19 : Others Equipment Exports [USD Million, Actual Prices]

0

5

10

15

20

20

00

-01

20

01

-02

20

02

-03

20

03

04

-

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

2.183 3.6

4.56

11.11

16.02

9.61

17.53

19.95


FICCI Research

FICCI Research

22

Dairy Equipment : Dairy machinery and parts of milking and dairy

machines are being exported to the countries of Uganda, Australia, Kenya,

Saudi Arab, and Zambia (refer Exhibit 21).

Exhibit 20 : Selected Poultry Equipment Exports [USD Million, Actual Prices]

0

2

4

6

8

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

2.12

1.01

2.12

1.42

2.88

2.03

6.1 5.95

4.59

Year

0

2

4

6

8

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Year

0.270.58

1.12

3.31

2.41.83

2.72

7.1

4.53

Exhibit 21 : Selected Dairy Equipment Exports [USD Million, Actual Prices]

FICCI Research

58.8%70.6%

41.2%

29.4%

79.7%

20.3%

2000-01 2003-04 2008-09*

Tractors Other Equipment

Export Composition over the Years


FICCI Research

0

50

100

150

200

21.95

57.5

28.8536.39

70.21

92.99

154.76

167.02

185.87

Exhibit 22 : Selected Agriculture Equipment Imports(Value at Actual Prices, USD Million)

00

-01

01

-02

02

-03

03

-04

04

-05

05

-06

06

-07

07

-08

08

-09

*

29.5%

2000-01 2005-06 2008-09*

Import Composition over the Years

6.1%

6.1%

7.1%

48.6%

27.9%

19%

4.4%

22%

42.2%

34.3%1.5%

Other EquipmentTractors Cultivation Equipment Post Harvest Equipment

Imports Analysis: Import of agricultural equipment was staggered till

the year 2004-05. Since then it has registered an increase at a CAGR of

around 12% (in value terms) since the beginning of 2004-05

. During the first nine month of the fiscal 08-09, the imports have

registered a surge of 11.67% over the previous period. Imports of

agriculture equipment are broad-based with a significant representation

from cultivation, post harvest and dairy equipment . At present post

harvest equipment , is the largest segment, and accounts for as much as

42% of the total selected agriculture equipment imports. Apart from

this, cultivation equipment especially, machineries for agricultural &

horticultural purposes have been witnessing a continued surge over the

years. The composition of Indian imports of selected equipment has

been depicted in the following graphic

(Refer exhibit

22)


FICCI Research

Cultivation Equipment :

Harvesting Machines:

Import of cultivation equipment , has been

registering an impressive increase, notably in the case of machinery &

parts there-of for agricultural and horticultural purposes. The imports

have been growing at a CAGR of 15% since 2004-05, when the exports

picked up. Major source countries include China, Italy, Germany, USA, and

Australia .

Predominant imports in this category include parts

of harvesting and threshing machines etc., Japan, Italy, China, New

Zealand, and USA are the major countries under this category; harvesting

machines over the years have grown at CAGR of 9%

(refer exhibit 23)

(refer exhibit 24)

0

10

20

30

40

502

00

0-0

1

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Year

1.33

38.81

7.22 6.91

10.98

21.4923.58

28.22

40.96

Exhibit 23 : Selected Cultivation Equipment Imports [USD Million, Actual Prices]

0

2

4

6

8

10

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

4.92

2.382.87

0.79

3.963.54

5.17

8.08

9.68

Year

Exhibit 24 : Selected Harvesting & Threshing Equipment Imports



FICCI Research

FICCI Research

25

Post Harvest Equipment :

Other Agricultural Equipment :

Machines and parts there-of for cleaning,

sorting, or grading seed, grain or dried leguminous vegetables, fruits, nuts

and seeds etc are the main equipment imported in this category. Growing

at a CAGR of around 32%, these machineries are being sourced from the

countries of Japan, UK, Thailand, China, and Austria .

Brewery machinery is the predominant

equipment imported in this category. These equipment are being

imported from Italy, Korea, France, Japan, and USA. A CAGR of 12% has

been registered under this section .

(refer exhibit 25)

(refer exhibit 26)

0

20

40

60

802

00

0-0

1

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

6.479.49

12.6817.68

35.1 35.95

77.53 75.9 78.46

Year

Exhibit 25 : Selected Post-Harvest Equipment Imports


0

10

20

30

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Year

1.69 2.030.87

2.05

9.036.63

20.71

17.83

25.04

Exhibit 26 : Others Equipment Imports



FICCI Research

FICCI Research

0

5

10

15

20

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

4.81

1.58 1.92

4.38 5.03

12.18

15.79

20.5621.61

26

Year

25

Dairy Equipment :

Poultry Equipment :

Dairy machinery from Japan, UK, Germany, Denmark,

and Sweden. A CAGR of 17% has been registered under this section since

2004-05 .

Poultry incubators, brooders & machinery for

preparation of meat etc are predominant imports in this section. These

are imported from Belgium, Netherlands, Germany, USA, and China.

(refer exhibit 27)

Exhibit 27 : Selected Dairy Equipment Imports [USD Million, Actual Prices]

0

2

4

6

8

10

12

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

*

Year

1.02 1.4 1.12

2.93

4.42

7.68

5.73

11.56

7.36

Exhibit 28 : Selected Poultry Equipment Imports



FICCI Research

FICCI Research

VI - Policy Scenario in the Country

There is no separate National Policy on Agricultural Mechanization.

However, Agricultural mechanization strategy for the nation is covered

under the National Agriculture Policy and has the following objectives:

• To achieve sustainable increase in yields and cropping intensity so as

to meet planned growth rate in Agriculture

• To ensure a satisfactory rise in the incomes of agricultural workers;

and thereby reduce urban & rural income disparity

• To target flow of farm mechanization benefits to all types of farmers

including small and marginal ones in different regions of the country,

particularly rain fed areas

• To create a worker friendly environment especially for women by

reducing hard labour, health hazards and improve safety in

production operations

To reduce cost of production Governmental programmes related to

agricultural mechanization lay emphasis on selective mechanization with

the aim of optimal utilization of the available sources of farm power.

Various promotional schemes have been undertaken for (1) replacement

of traditional and inefficient implements and hand tools by improved

ones; (2) enable the farmers to own tractors, power tillers, power driven

equipment, improved bullock drawn equipment/hand tools etc through

subsidy and their popularization through demonstrations. Two main

agriculture mechanisation programmes are:

• The Ministry of Agriculture, Government of India is implementing a

Central Sector Scheme

with a

Tentative Budget Outlay of Rs. 36.00 crore during XI Plan. The main

components of this scheme are Training, Testing, Demonstration and

Outsourcing of Training;

• Central Sector Scheme

being implemented from March, 2008 with the main objectives of (1)

Establishment of units for transfer of primary processing technology,

value addition, low cost scientific storage, packaging units and

technologies for bi-product management in the production

“Promotion & Strengthening of Agricultural

Mechanization through Training, Testing & Demonstration”

“Post Harvest Technology & Management”


catchments under tripartite agreement; (2) Establishment of low cost

Post Harvest Technology (PHT) units/supply of PHT equipment with

Government assistance; (3) Demonstration of technologies; and (4)

Training of farmers, entrepreneurs and scientists. The scheme will

continue during XI Plan with an allocation of Rs.40.00 crore;

Besides the above, promotion of agriculture mechanisation is also a focus

of the following schemes:

• was formulated in 2000-

01 by bringing together under one umbrella 27 centrally sponsored

schemes relating to cooperatives, crop production programmes,

watershed development programme, horticulture, fertilizer,

mechanization and seeds. For the fiscal 2009-10 an allocation of Rs.

950.00 crore has been provided for the scheme; and

• launched in 2007-08 RKVY is a

new State Plan Scheme of Additional Central Assistance (ACA) for

agriculture and allied sectors. The scheme has envisaged outlay of Rs

25000 crores for the XI plan. The scheme has evoked a good response

from the states, which have earmarked about 4% of the total outlay

for farm mechanisation. Funds to the tune of Rs.1263.00 crore and Rs.

3165.67 crore were made available in RKVY during 2007-08 and 2008-

09.

While there is immense scope for improvement in mechanization of

agriculture, a concerted push is needed to facilitate penetration of

improved technology in this segment. Some key interventions needed by

the public sector include

• Government support for joint projects with Agricultural Universities

for development of customized technologies suitable to Indian

conditions and promotion of advanced farm machinery.

• Policy support to tractor manufacturers to enter into joint ventures

with regional implement and attachment manufacturers for design,

development, up gradation and their validation.

• Provision of special Credit support at lower interest rates to rural

individuals, venturing into entrepreneurial use of Farm Machinery

through custom hiring.

Macro Management of Agriculture Scheme

Rashtriya Krishi Vikas Yojana (RKVY): ,

Recommendations to Strengthen the Sector:

:


• Provision of incentives and policy support for the development and

promotion of farm mechanization technologies suitable for Dry Land

Farming, Horticulture & Orchards.

• Provision of incentives to support the development of mechanization

technologies which helps to conserve resources such as water, soil

fertility etc.

• Excise and VAT Exemption: In view of the labor shortage evident in the

agriculture season due to MGREGA, and other social welfare and

employment schemes, there is a need to move towards increased

mechanization. Provision of excise duty and VAT exemption for

agricultural machinery and equipment purchased by farmers'

cooperatives, village level panchayats and agribusiness / clinic

entrepreneurs would reduce the cost of such implements auguring their

acceptance among the farming community. It is recommended that VAT

and excise duty be exempted for the following agriculture machinery

and equipment:

Rotavator Root Crop Harvester

Zero Till Drill Pneumatic Planter

Rota Till Drill Multi Grain Harvester

Multi Crop Planter Transplanters and Planting equipment

Aero blast Sprayer Sugarcane Harvesters

Power Weeder Sugarcane Planters

Reaper Cotton Pickers

Multi Crop Thresher Hay and Forage Management

equipment

It is widely believed that custom hiring (also

known as the taxi model) is best suited model for accelerating farm

mechanization in India. While custom hiring is prevalent in India for

some of the agriculture machinery, it is highly unorganized and sporadic.

Severe labour shortages in crops such as sugarcane necessitates for the

use of machines such as sugarcane harvesters and planters. How ever,

the cost of these equipment makes them unviable even for large

farmers in India. Most of these equipment would cost between 25 lakhs

to 50 lakhs per unit. Further, they need a minimum number of 1200 to

1800 operating hours anually to be financially viable. One of the

possible solutions to this issue is to promote the concept of organized

� �

� �

� �

� �

� �

� �

� �

� �

� Farm Service Centers:


custom hiring through farm service centers. Farm services centers

could be owned by entrepreneurs who undergo Agri-Business Clinic

programme in MANAGE and could cater to 20-25 villages in the

vicinity of the center. To make these centers viable, the following fiscal

and tax incentives need to be considered:

o 50% capital subsidy on specific machinery and equipment

depending upon the crops grown in the agro-climate zone, where

the farm service center is located

o Excise duty and VAT exemption for the machinery purchased for

farm service center

o Extending the tax benefits given under “Investment linked tax

incentives” proposed in the last union budget

As most of these agriculture graduates who undergo training in the “Agri-

Clinics Programme” of MANAGE would not have enough collateral to take

loan that might be as high as 1.0 crore, the companies that are selling the

equipment need to consider provision of collateral to ensure that these

graduates can avail loan to buy high cost equipment . A new framework of

this kind to make custom hiring more organized in the country would

provide a major impetus to the acceleration of farm mechanization in the

country, especially, to the segment of high-end and large agriculture

machines.

• Special Schemes: Special schemes suggested to promote farm

mechanization are discussed herewith.

o Manufacturing units that are set-up in areas with lower

mechanization need to be supported by extending tax and duty

sops. This would result in easier reach of the equipment to

farmers in those areas. Simultaneously the government needs to

also design easier financing schemes to such farmers.

o A higher rate of refinance needs to be extended to loans lent by

banks in regions with low mechanization so as to increase the

interest of banks to lend to this sector.

o Banks need to develop hassle free loan procedures. To facilitate

this process the government could offer to develop a loan

origination and disbursement process.


References

1. Department of Agriculture & Co-operation, Ministry of Agriculture,

Government of India,

November 2009

2. Export – Import Data bank, Ministry of Commerce, Government of

India, last accessed on November 23, 2009

3. Jain, Ramesh C., “ ,

Roundtable Forum for Regional Agricultural Machinery

Manufacturers / Distributors Associations; 2006

4. Kulkarni, Dr S. D., Mechanization Of Agriculture - Indian Scenario”,

5th APCAEM TC Meeting & Expert Group Meeting on Application of

Agricultural Machinery for Sustainable Agriculture; October 2009

5. Palathitta, TAFE in the Tractor Industry: Strategic

Insights”, tejas@iimb, ; last

accessed on November 23, 2009

6. Pandey, M.M.,

Status of Farm Mechanisation in

India, Indian Agriculture Statistics Research Institute; March 2006

7. Pandey, M.M., “Indian Agriculture – An Introduction”, IV Session of

the Technical Committee of APCAEM; February 2009

8. Singh, Gyanendra,

Status of

Farm Mechanisation in India, Indian Agriculture Statistics Research

Institute; March 2006

9. Singh, Joginder,

Status of Farm Mechanisation in India, Indian

Agriculture Statistics Research Institute; March 2006

10. Srivastava, N.S.L., “Farm Power Sources, their Availability and Future

Requirements to Sustain Agricultural Production”, Status of Farm

Mechanisation in India, Indian Agriculture Statistics Research

Institute; March 2006

11. Zinnov Consulting,

”; November 2006

“Background Note for Economic Editors

Conference”;

The Tractor Industry in India “Present and Future”

“

“Present Status and Future Requirement of Farm

Equipment for Crop Production”

“Agricultural Machinery Industry in India

(Manufacturing, marketing and mechanization promotion)”,

“Scope, Progress and Constraints of Farm

Mechanization in India”

“Agriculture Equipment Market in India An

Overview

Rejie George et al, “

http://tejas-iimb.org/articles/02.php


32

Sl No HS Code Particulars 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 2008-09 (Apr-Dec)

1 842481 AGRI / HORTICULTURAL 0.35 0.43 0.6 0.91 2.43 4.41 3.2 6

MECHANICAL SPRAYERS

2 843280 OTHER AGRICULTURAL 0.83 1.01 0.56 3.71 0.85 1.1 1.27 1.31 0.85

AND HORTICULTURAL

MACHINERY

3 843290 AGRICULTURAL & 0 6.74 9.64 8.38 7.69 11.38 4.65 9.54 10.15

HORTICULTURAL

MACHINERY PARTS

4 843699 PARTS OF OTHR 0.59 0.38 0.2 0.49 0.8 0.89 3.04 1.56 1.28

AGRICULTUTAL,

HORTICULTURAL

& FORESTRY MACHINE

INCL GERMINATION

OF PLANT

5 843210 PLOUGH 0 0.81 1.45 0.82 1.67 2.58 1.89 2.91 3.34

6 843221 DISC HARROWS 4.28 2.95 2.89 2.61 4.81 7.29 11.36 9.49 7.12

7 843229 OTHER [Harrows, 0.38 0.2 0.21 0.94 0.6 0.54 0.4 1.08 0.64

Cultivators, Weeders, etc]

8 843230 SEEDERS, PLANTERS & 0.04 0.03 0.04 0.02 0.08 0.26 0.11 0.09

TRANSPLANTERS

9 843240 MANURE SPREADERS & 0.02 0.01 0.04 0.02 0.02 0.03

FERTILISER DISTRIBUTORS

10 843311 LAWN MOWERS ETC 0.14 0.03 0.01 0.05 0.03 0.07

11 843319 OTHER MOWERS 0.02 0 0.03 0.03 0.04 0.2 0.06 0.41

12 843320 OTHER MOWERS 0.07 0.12 0.14 0.08 0.01

INCLUDING CULTIVATOR

BARS FOR TRACTOR

MOUNTING

13 843340 STRAW/FODDER BALERS 0.02 0.03 0.17 0.02 0.01 0.04

14 843351 COMBINE HARVESTER- 0.34 0.64 0.52 0.2 1.22 1.43 2.21 3.17 4.2

THRESHERS

15 843352 OTHER THRESHING 0.02 0.03 0.04 0.05 0.13 0.2 0.34 0.55

MACHINERY

16 843359 OTHER HARVESTING & 0.07 0.18 0.37 0.54 0.81 0.55 0.53 0.42 1.43

THRESHING MACHINERY

17 843390 PARTS OF HARVESTING, 0.17 0.38 0.3 0.72 2.11 2.64 3.86 4.4

THRESHING MACHINES

ETC

18 843360 MCHNS FOR CLEANING, 0.15 0.15 0.22 0.34 0.79 0.46 0.61 0.77 0.77

SORTING/GRADING EGGS,

FRUIT/OTHR

AGRICULTURAL PRODUCE

19 843410 MILKING MACHINES 0.01 0.13 0.83 0.1 0.12 0.09 0.78 0.15

20 843420 DAIRY MACHINERY 0.27 0.23 0.26 0.82 0.54 0.57 0.79 2.81 2.23

Annexure IExport data pertaining to selected commodities (USD Million)


33

Sl No HS Code Particulars 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 2008-09 (Apr-Dec)

21 843490 PARTS OF MILKING & 0.34 0.53 0.65 1.19 0.66 1.38 2.43 1.27

DAIRY MACHINES

22 843510 MACHINERY USED IN 0.57 0.82 0.81 1.06 2.39 1.48 1.79 2.58 1.24

MANUFACTURE OF

WINE, CIDER, FRUIT

JUICES ETC

23 843590 PARTS OF MACHINERY 1.49 0.88 0.62 1.71 3.44 4.01 5.48 9.47

USED IN MANUFACTURE

OF WINE, CIDER, FRUIT

JUICES ETC

24 843610 MCHNRY FR PRPRNG 0.2 1.01 0.57 0.48 0.46 1.08 0.88

ANML FEEDNG STUFFS

25 843621 POULTRY INCUBATORS 0.17 0.09 0.34 1.04 0.48 0.52 0.85 0.28

AND BROODERS

26 843629 OTHR POULTRY- 0.2 0.45 0.56 0.32 0.36 0.34 4 2.65 2.12

KEEPING MACHINERY

27 843680 OTHER MACHINERY 1.68 0.14 1.17 0.28 0.15 0.22 0.39 0.42 0.29

OF HD 8436

28 843691 PARTS OF POULTRY- 0.17 0.25 0.28 0.48 1.33 0.87 0.83 1.8 1.87

KEEPING MACHINERY/

POULTRYINCUBATORS &

BROODERS

29 843710 MACHINES FOR CLEANING, 0.74 1.06 0.38 0.76 1.56 2.38 3.11 6.07 2.96

SORTING OR GRADING

SEED, GRAIN OR DRIED

LEGUMINOUS VEGETABLES

30 843780 OTHER MACHNRY FOR 2.74 2.48 1.26 3.08 4.23 5.72 6.57 4.79

CLNG, SRTNG/GRADNG

SEEDS

31 843790 PARTS OF MACHNS FR 4.45 6.73 5.37 4.41 6.06 8.06 6.88 6.87 6.39

CLNG, SRTNG GRADNG

ETC

32 843810 MCHNRY FOR SUGAR 1.2 0.53 1.76 2.48 6.42 8.51 2.76 5.49 8.13

MANUFACTURE

33 843840 BREWERY MACHINERY 0.25 0.13 0.12 0.36 0.5 2.36 0.92 3.57 1.11

34 843850 MCHNRY FOR PRPRTN OF 0.07 0.02 0.12 0.36 0.23 0.03

MEAT/POULTRY

35 843860 MCHNRY FR PRPRTN OF 0.4 0.52 0.24 0.53 0.68 0.46 0.65 0.62 0.7

FRUITS,NUTS/VGTBLS

36 870120 ROAD TRACTORS FOR 1.07 0.75 0.74 6.03 8.86 11.35 9.5 16.71 23.26

SEMI-TRAILERS

37 870130 TRACK-LAYING TRACTORS 6.96 7.72 26.02 41.4 68.34 70.58 65.65 30.8 5.85

38 870190 OTHER TRACTORS 15.94 20.96 38.89 37.48 53.96 140.16 209.32 326.09 303.3


34

Annexure IIImport data pertaining to selected commodities (USD Million)

Sl No HS Code Particulars 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09(Apr-Dec)

1 842481 AGRI / HORTICULTURAL 0.9 0.89 0.89 2.38 2.75 5.93 6.54 8.67 11.84

MECHANICAL SPRAYERS

2 843020 SNOW-PLOUGHS AND 0.01 1.31 0.04 0.08 0.02 0.72 0.58 0.01

SNOW-BLOWERS

3 843280 OTHER AGRICULTURAL AND 2.09 3.61 2.88 4.25 7.37 10.39 11.54 12.3

HORTICULTURAL

MACHINERY

4 843290 AGRICULTURAL & 0.49 0.99 0.35 1.48 5.16 3.28 4.14 7.28

HORTICULTURAL

MACHINERY PARTS

5 843210 PLOUGH 0.03 0.26 0.25 1.4 1.49 0.88 1.15 3.81

6 843229 OTHER [Harrows, 0.12 0.11 0.33 0.21 0.09 0.24 0.48 0.85

Cultivators, Weeders, etc]

7 843230 SEEDERS,PLANTERS & 0.11 0.22 0.08 0.07 0.16 0.39 0.4 2.22

TRANSPLANTERS

8 843240 MANURE SPREADERS & 0.02 0.04 0.03 0.02 0.21 0.07 0.04

FERTILISER DISTRIBUTORS

9 843311 LAWN MOWERS ETC 0.38 0.24 0.12 0.4 1.07 1.17 2.37 2.81 4.15

10 843319 OTHER MOWERS 0.43 0.31 0.17 0.09 0.09 0.23 0.22 0.26 0.08

11 843320 OTHER MOWERS 0.12 0.06 0.42 0.15 0.29 0.28 0.73 0.32 0.96

INCLUDING CULTIVATOR

BARS FOR TRACTOR

MOUNTING

12 843330 OTHER HAYMAKING 0.01 0.08 0.01 0.14 0.03 0.01 0.01

MACHINERY

13 843340 STRAW/FODDER 0.01 0.07 0.17 0.02 0.15 0.53 0.06 0.94 0.63

BALERS

14 843351 COMBINE HARVESTER- 0.53 0.11 0.43 0.12 0.01 0.13 0.11 0.65 1.18

THRESHERS

15 843352 OTHER THRESHING 0.01 0.14 0.02 0.26 0.07

MACHINERY

16 843359 ROOT OR TUBER 0.12

HARVESTING MACHINES

17 843359 OTHER HARVESTING & 1.59 0.49 0.41 0.06 2.09 0.37 1.18 0.95 2.33

THRESHING MACHINERY

18 843390 PARTS OF HARVESTING, 2.79 1.71 1.86 0.58 1.59 2.37 3.8 5.28 5.47

THRESHING MACHINES ETC

19 843360 MCHNS FOR CLEANING, 0.09 0.43 0.71 1.08 1.64 3.3 6.39 6.93 5.83

SORTING/GRADING EGGS,

FRUIT/OTHR AGRICULTURAL

PRODUCE

20 843410 MILKING MACHINES 0.13 0.09 0.05 0.16 1.21 0.3 1.33 0.41 6.29

21 843420 DAIRY MACHINERY 1.26 0.84 1.09 2.81 2.42 8.02 11.87 13.31 12.37


35

Sl No HS Code Particulars 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09(Apr-Dec)

22 843490 PARTS OF MILKING & 3.4 0.2 0.37 0.99 1.32 3.51 2.03 5.21 1.41

DAIRY MACHINES

23 843510 MACHINERY USED IN 0.06 0.3 0.22 0.5 2.76 2.12 1.19 3.2 3

MANUFACTURE OF WINE,

CIDER,FRUIT JUICES ETC

24 843590 PARTS OF MACHINERY 0.07 0.1 0.25 0.05 1.24 0.82 8.71 0.69 0.5

USED IN MANUFACTURE

OF WINE, CIDER, FRUIT

JUICES ETC

25 843610 MCHNRY FR PRPRNG 0.02 0.45 0.41 0.42 0.08 0.35 0.56 1.63 1.54

ANML FEEDNG STUFFS

26 843621 POULTRY INCUBATORS 0.17 0.1 0.03 0.04 0.87 2.93 1.02 6.49 2.28

AND BROODERS

27 843629 OTHR POULTRY-KEEPING 0.07 0.18 0.57 0.2 0.81 0.73 0.41 0.19 0.33

MACHINERY

28 843680 OTHER MACHINERY 0.06 0.54 0.11 0.22 0.38 0.2 0.72 1.45 1.3

OF HD 8436

29 843691 PARTS OF POULTRY- 0.14 0.35 0.17 0.32 0.89 0.76 0.54 0.82 0.61

KEEPING MACHINERY/

POULTRYINCUBATORS &

BROODERS

30 843699 PARTS OF OTHR 0.31 35 0.72 0.45 0.5 0.99 0.92 1.45 1.66

AGRICULTUTAL,

HORTICULTURAL &

FORESTRY MACHINE INCL

GERMINATION OF PLANT

31 843710 MACHINES FOR CLEANING, 2.25 3.25 7.48 9.37 15.96 15.53 22.05 34.01 36.46

SORTING OR GRADING

SEED,GRAIN OR DRIED

LEGUMINOUS VEGETABLES

32 843780 OTHER MACHNRY FOR 2.1 2.44 2.16 3.3 9.4 9.83 14.9 20.01 21.81

CLNG,SRTNG/GRADNG

SEEDS

33 843790 PARTS OF MACHNS FR 1.64 2.31 2.1 2.41 3.85 5.62 26.75 8.65 7.41

CLNG,SRTNG GRADNG ETC

34 843830 MCHNRY FOR SUGAR 0.67 0.01 0.93 3.7 2.04 5.54 5.09 2.82

MANUFACTURE

35 843840 BREWERY MACHINERY 0.07 0.99 0.1 0.08 0.03 0.25 2.65 5.77 14.48

36 843850 MCHNRY FOR PRPRTN OF 0.58 0.23 0.24 2.15 1.47 3.06 3.04 2.61 2.84

MEAT/POULTRY

37 843860 MCHNRY FR PRPRTN OF 0.39 1.06 0.23 1.52 4.25 1.67 7.44 6.3 6.95

FRUITS, NUTS/VGTBLS

38 870110 PEDESTRIAN CONTROLLED 0.13 0.05 0.01 0.04 0 0.11 0.08 0.13

TRACTORS

39 870120 ROAD TRACTORS FOR 0.34 0.21 0.12 0.83 1.23

SEMI-TRAILERS

40 870130 TRACK-LAYING TRACTORS 0.44 0.23 0.03 0.01 0.27 0.18 0.94 0.29 0.28

41 870190 OTHER TRACTORS 1.27 1.44 0.78 1.25 1.09 5.2 3.65 2.69 2.34

Source: Export – Import Data Bank, Ministry of Commerce, Government of India, last accessed on November 23, 2009


About Agriculture Desk, FICCI

Agriculture desk at FICCI has been strenuously working on agriculture

policies. Over the years, considerable efforts have been put into devising

policies & suggestions that would increase farm income, productivity and

global competitiveness of Indian Agriculture. Under the leadership of

Mr P M Sinha, Former President, Pepsi Cola International for South Asia,

FICCI has played a pivotal role in defining the agri-policy framework of the

nation. Through its long standing collaboration with the Ministry of

Agriculture, Government of India, the Agriculture desk has assiduously

worked to promote public-private partnership in agriculture, agriculture

R&D, agriculture extension, horticulture, risk management, energy

security specifically in reference to first and second generation bio-fuels,

and agri-marketing reforms. In partnership with the Ministry of

Agriculture, Government of India, FICCI organizes the Agriculture

Summit, a flagship policy forum to debate and evolve a policy roadmap for

agriculture and allied sector development in India.

The key objectives of the FICCI Agriculture desk are to:

Identify major bottlenecks that hinder the growth of Indian

agriculture;

Sensitize all stakeholders including the Central and the State

Governments to catalyze the necessary policy changes that are

needed to make this sector more vibrant and competitive;

Address the conflicting domestic policies relating to production,

procurement, pricing and distribution, rising Minimum Support

Prices, ineffective subsidy system, regulated domestic markets, lack

of infrastructure facilities, low productivity, low value addition, ad

hoc export policies;

Define measures to attain a higher trajectory growth in agriculture (of

more than 4 per cent) in order to compete in the global market; and

The Agriculture desk in FICCI has also been instrumental in forging

international co-operation for showcasing / broad basing new

technologies / possible collaborative opportunities for the benefit of all

the stakeholders in agri value chain. It has anchored some initiatives

•

•

•

•

successfully in the fields of

and

with FICCI is

also collaborating with Italy on the Farm Mechanisation front. Our future

endeavors include development of an effective framework for

implementation of Negotiable Warehouse Receipts system and

development of an effective risk management mechanism for agriculture

along with United States Department of Agriculture [USDA]

marketing of fresh & value added agri-

products, Integrated Pest Management, Drip Irrigation with Israel

Development of Terminal Markets United States of America.

Policy Papers Occasional Papers

� Indian Agriculture – The Winds of Change [2006]

� Indo-Israel Agribusiness Opportunities [2006]

� Emerging Platforms for Agriculture Marketing [2007]

� A Roadmap for Agricul ture Marketing Reforms [2008]

� A New Framework for Agriculture Extension in India

[2009]

� Status of Farm Mechanisation in India [2008]

� Ensuring Energy Security through Bio-fuels [2009]

� Investment & Reforms in Agriculture Research

& Development [2009]

Queries to FICCI may be directed to:

Dr S Baskar Reddy

Head

Agriculture, Water & Rural Development

Federation of Indian Chambers of Commerce

and Industry [ FICCI]

Federation House

Tansen Marg

New Delhi – 110001

Ph: +91-11-23753124, 23765323

+91-11-23738760-70 (Extn 488 & 407)

Fax: +91-11-23765333

Email: [email protected]

Publications:

About YES BANK

YES BANK

A key strength and differentiating feature of YES BANK is its

knowledge driven approach, which goes beyond the traditional realm of

banking, and helps adoption of a diagnostic and prescriptive approach

towards superior product structuring.

“Food & Agribusiness Strategic Advisory and Research”

(FASAR)

, India’s new age private sector Bank, is an outcome of the

professional entrepreneurship of its Founder, Rana Kapoor and his highly

competent top management team, to establish a high quality, customer

centric, service driven, private Indian Bank catering to the “Emerging

India”. The Bank has adopted international best practices, the highest

standards of service quality and operational excellence and offers

comprehensive banking and financial solutions to all its valued

customers.

YES BANK lays significant focus to supporting the sustainable growth and

development of the emerging sectors of the Indian economy to facilitate

overall development. To actualize YES BANK’s focus and commitment for

the holistic development of the Food and Agribusiness sector, a

specialized

division has been domiciled within the Development and

Knowledge Banking group at YES BANK. In its endeavour to catalyse the

transformation of this highly important sector, which is the backbone of

the Indian economy, YES BANK has committed to the cause of bridging the

infrastructure and Knowledge gaps, that still exist in the agribusiness

sector.

YES BANK is steadily building corporate and institutional banking,

financial markets, investment banking, corporate finance, business (SME)

and transaction banking, retail banking and wealth management business

lines across the country. The Bank’s constant endeavour is to provide a

delightful banking experience expressed with simplicity, empathy and

totality.

Ajay Kakra

Head North India

Food & Agribusiness Strategic Advisory and Research (FASAR)

YES BANK Limited

7th floor, Tower B, Building no. 8,

DLF Cyber City, Phase-II, Gurgaon-122002

Ph: +91-124-4619177, Fax: 0124-4147193

Email: [email protected]

Queries to YES BANK may be directed to:

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Farm Mechanization in India - YES Global Institute Mechanization in India_low... · Farm Mechanization in India:AStatus Paper. II - Status of Farm Mechanisation in India Traditionally,