Structural changes in rural market aid farm mechanisation

Every morning, Mallika Srinivasan, Chairman and CEO of tractor maker, Tractors and Farm Equipment Ltd (TAFE), receives a spate of text messages from company dealerships round the country on where it’s rained, or hasn’t.

Apart from keeping track of the monsoon through the media, she says it’s a good system to keep tabs of what’s happening on the ground.

As the country’s second largest tractor maker, it’s important for the TAFE chief to watch the monsoon. After all, the monsoon can make or mar the fortunes of the industry. But, as she points out, “There is an impact surely, but it is not the only factor which impacts the industry today.”

Sentiment factor

It has to do with that nebulous factor called sentiment. Last year, she says, farmers had a good crop, and support prices too were good. “So, the purchasing power is there. If the rains pick up, so will sentiment and then the (adverse) impact on our industry is less,” she explains.

Apart from the cheer good rains will bring, Mallika Srinivasan points to the irreversible structural change that is happening in rural India that will aid mechanisation and boost tractor makers’ fortunes.

“People are used to a better quality of life, rural or urban India, they don’t want the kind of drudgery that was there was in the past. Farmers would like to have the aid of a machine to do a lot of the manual jobs and that favours mechanisation,” she elaborates.

Thirdly, the dynamics of the NREGA scheme has changed labour rates in rural India for good.

“There’s no going back on that,” she adds. These trends are favouring farm mechanisation. And, lastly, a lot of private sector financing has come into the rural market which was dependent on public financing from banks.

New products

The last fiscal and the first quarter of this year has been good for the closely-held, Rs 8,020-crore company. Sales grew 27 per cent and 60 per cent of this growth has been led by new products.

“We were not very strong in the above 50 hp segment but we launched a tractor in this segment in April. That’s doing very well. So, we are now covered in all segments, in all brands (Massey Ferguson, TAFE and Eicher tractors, which it acquired seven years ago). We have a full portfolio of products, right from below 20 hp to about 75 hp,” says the TAFE chief. For specialised applications, and for low tillage areas and inter-cultivation, it tied up with the Gujarat-based Captain Tractors earlier this year for smaller compact tractors.

The tractor industry’s sales for the first quarter this year were 1.52 lakh compared to 1.48 lakh tractors sold in the first quarter last year, around 4,100 tractors more.

TAFE sales were 36,669 as against 33,551 for the comparable quarters.

Approximately 76.4 per cent of the total industry growth for the first quarter has been contributed by TAFE, says its chief of the company’s robust growth.

(This article was published on August 12, 2012)
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