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After reporting a decline in sales last fiscal, the tractor industry seems to be back on track with blessings from the rain gods this year; domestic sales are up by around 23 per cent during the first nine months of the financial year riding mainly on demand from the Central and Western Indian states.
Despite the relatively dull months of November and December, tractor makers are upbeat on finishing the fiscal with a 16-17 per cent year-on-year growth.
Overall, the tractor industry in the country has sold around 495,472 units in the domestic market so far, up 23 per cent compared to last year.
Even credit rating agency ICRA said in its latest report on the Indian Tractor Industry that, "A good southwest monsoon and rains thereafter, resulting in good soil moisture content, along with brimming reservoirs, have pushed up acreage of most Rabi crops (total acreage was higher by 5 per cent year-on-year till January 24, 2014); a leading indicator of rural prosperity. This cyclical upswing in tractor industry comes after stagnant/marginally negative growth witnessed during H2FY12 and FY13." ICRA, has hence, revised its FY14 growth outlook (both domestic and exports) to 15 per cent from an earlier 13 per cent.
Sanjeev Goyle, senior vice president,marketing & appliTrac, Farm Equipment Sector, Mahindra & Mahindra Ltd, explained that western Indian states have seen a significant rise in demand this year, especially from Maharashtra, apart from central Indian states like Madhya Pradesh and Chhatisgarh.
"We anticipate the industry would grow by around 17 per cent in FY14 after it had fallen by around 1.5 per cent last fiscal. The main reasons behind the revival in demand are good monsoons, a fairly good minimum support price (MSP), good rabi and khariff sowing. Lets take for example, while the MSP for wheat is good, farmers are also expecting a bumper crop. All this, lifts the general sentiments in the rural areas, which, leads to enhanced demand," he said.
States like Maharashtra and Gujarat had faced draught like conditions in the last two years, when not much groundwater was available for farming, say industry players.
Sameer Tandon, chief sales and marketing officer, Escorts said,"The western states had witnessed draught-like conditions for the last two years, and this year with good monsoons the demand has revived. Especially, in Maharashtra, the demand growth has been in the range of 50 per cent."
Another reason behind good demand as Tandon highlights is that compared to the northern states (Haryana, Punjab), the level of farm mechanisation is less in western states.
"Compared to an average of 40-41 tractors per hectare in states like Haryana, the average in states like Gujarat and Maharashtra is around 10-12 tractors per hectare," he informed.
A region-wise analysis shows, while all regions posted a recovery in tractor sales during the 9mFY14, the central region leads the pack with 36.9 per cent year-on-year growth during 9mFY14 riding on strong growth in Madhya Pradesh and Chhattisgarh.
As the ICRA report highlights, "Western region has also seen robust 29.3 per cent growth during 9mFY14 on back of surge in demand from Maharashtra. With healthy growth in Rajasthan and Haryana, the northern region recorded 18 per cent growth during this period. In South, Andhra Pradesh and Karnataka have seen a revival in demand during the current fiscal, after a sharp decline during FY13; the region’s growth (16.5 per cent) has however been held back by continued demand contraction in Tamil Nadu."
