Truant rains may affect tractor firms' target

Tractor makers are bracing for a 15-20 per cent decline in sales for the remaining three quarters of the current fiscal if rains continue to play truant in large parts of the country.

"The forecast for the next one week seems good, but if the current trend continues tractor sales will barely cross 200,000 units," said R C Jain, president, Tractor Manufacturers Association (TMA) and group vice-president, Eicher Motors.

In 2003-04, nearly 190,000 tractors were sold in the country, and in the first quarter of the current fiscal, sales jumped almost 50 per cent on the back of good monsoons last year.

But according to industry estimates, deficient rainfall so far in Punjab, Haryana, Uttar Pradesh, Rajasthan and Madhya Pradesh could drag down the growth to just 8 per cent this fiscal. The states account for more than 50 per cent of the country's tractor sales.

Earlier this year, TMA had forecast a sale of 225,000 units this year. Industry sources said the impact of bad monsoons could be most severe in early-2005.

Eicher had sold 16,775 units in 2003-04 but if drought like-situation persists, total tractor sales could come by 5 per cent. Meanwhile, Escorts Tractors added that there could be sharp decline of 10 per cent with monsoon arriving late. "Last year we sold 25,500 tractors and this year we had set higher targets but now that could come down," Rakesh Chopra, business head (agri machinery), Escorts, said.

In 2002, when many parts of the country experienced the worst drought in several years, tractor sales had fallen to 170,000 units from 223,000 units in the preceding year.

"This year does not look as bad because there is still some more time for monsoon to take effect. Also, there are other external factors such as increased farm credit and exemption of excise duty that could save the day for the sector," said K J Davasia, executive director (farm equipment), Mahindra & Mahindra.

In the last one month, the industry has also found it difficult to explain to the farmers a mere Rs 4,000 to Rs 7,000 decrease in tractor prices after the finance minister announced the exemption of 16 per cent excise duty on tractors.

"The farmers were expecting a price cut of more than Rs 30,000. But the excise duty on inputs such as steel is no-modvattable which makes for an actual price reduction of just 4-5 per cent," Chopra said.