Even as sales declined in the passenger vehicle segment for the first time in nearly 30 months this July, tractor sales continue to post sturdy growth numbers on the back of favourable monsoons and increased use of farm equipment for construction work.
Sanjeev Goyle, senior vice-president (marketing, farm equipment sector), Mahindra & Mahindra, said: “Tractor sales are directly proportional to rainfall. Till August, rainfall was 95 per cent of what was initially projected by the government, which led to a spurt in sales. The minimum support price for staple crops have gone up by over 40 per cent in the past two years and there is credit availability in the agricultural economy. We are expecting double-digit growth in sales this financial year.”
With increased usage of farm equipment for construction work, tractor manufacturers are recording increased demand for their products from non-agri sectors. “The company is witnessing 70 per cent of its growth from infrastructure-related demand in states like Maharashtra and Gujarat. While no clear segregation of sector-wise purchase is available, we can get an idea of how tractor sales are being driven by infrastructure from an instance of Bihar. In Bihar, tractor sales have tripled in recent years on account of the infrastructure boom,” said a senior executive at Escorts.
According to estimates with the Planning Commission, total spending on construction work grew by r seven per cent to Rs 5,22,200 crore in 2010-11. While industrial development accounted for around 40 per cent of this investment, the remaining resources filtered in for infrastructure projects.
“Due to the construction boom, a typically agricultural product is now finding added usage in non-agri sectors for development of roads, railways and urban infrastructure for haulage of materials. We are seeing demand for tractors for infrastructure development work in states like Bihar, Jharkhand and Madhya Pradesh,” said Goyle.
Industry sources said earlier the proportion of tractor usage in non-agri work was 30 per cent. This had increased to about 45 per cent over the past two to three years. A senior executive at the Tractor Manufacturers Association added, “Around 10-12 per cent of the tractors sold in the domestic market are used in the construction sector. But the actual usage is much higher. In the off-season, farmers lease their tractors for construction work.”
As many as 482,256 tractors were sold in the domestic market in 2010-11. Only 12 per cent of farmers in India own tractors. With an increased flow of labour from the rural economy to the services sector, farm mechanisation is set to increase over the next few years. This will fuel the demand for tractors, said industry observers. Sales are expected to increase by 15 per cent to 554,594 in 2011-12.
Market leader M&M, which accounts for 40 per cent of tractors sold in the domestic industry, saw a growth of 22 per cent in overall sales at 213,653 units last year, as compared to 174,634 units in 2009. The company’s growth target for this year is 15 per cent, on the back of a strong monsoon. Escorts made 65,000 tractors last year and is looking to produce around 72,000 this year.