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Neha Kaushik

NEW DELHI, July 24

EVEN as tractor companies underplay the impact of the drought, market analysts are expecting the truant monsoon to take a further toll on the domestic tractor industry. The industry has already seen a decline of 10 per cent in the first quarter of this fiscal. And given the near drought-like situation in parts of northern India, the fall in growth is expected to increase further in the coming quarters.

According to an official from a leading tractor company: "Although the numbers are not very alarming till now, profitability in the second and third quarters now depends on how good the monsoon is. Though the Meteorological Department has said that the last few years have seen a normal monsoon, it has been normal in only about 60-65 per cent of the districts; earlier a normal monsoon would cover about 85-90 per cent of the area. This decrease in rainfall has already had an adverse impact on the tractor industry."

The most affected would be the larger tractor markets such as Punjab, Haryana, Gujarat and some parts of Uttar Pradesh.

Another problem affecting sales, say tractor companies, is the surplus stock of food grains, which has not only had an impact on rural income but has also made the farmer more reluctant to increase his investment on production.

Meanwhile, the tractor companies are resorting to discounts, exchange schemes and new product launches to push sales. With an estimated 40-45 per cent of the sales being replacement purchases — this being as high as 90 per cent in Punjab and Haryana — major companies such as Mahindra & Mahindra, Escorts, Eicher and Bajaj Tempo are planning a slew of product launches to increase sales. The purchase trend too, is increasingly towards mid-size (30-40 hp) tractors, with farmers using the margin money to upgrade from their earlier models.

Says Mr Anirban Ghosh, Marketing Manager (Tractors), Mahindra & Mahindra, "We are planning many new key product introductions in the market. Meanwhile, our focus is currently on improving channels. For instance, in order to strengthen our dealer network, we are introducing training exercises to teach dealers how to interact with the consumer."

Also, with retail inventory stock levels for tractors at about three times more than normal, almost all the firms are taking steps to reduce dealer stocks to improve profitability.

Escorts, for instance, undertook steps to correct dealer stock levels during the first quarter of this year. Says Mr Rakesh Chopra, Head of Escorts Agri-Machinery division, "During the first quarter, we managed to correct the inventory levels by around 6,000 tractors. Our programme is expected to continue till July."

Mahindra & Mahindra has also introduced similar initiatives at the dealer level. The company claims to have reduced its inventory levels by 50-60 per cent in the past year, and is continuing its efforts to keep the inventory levels low.

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