President,
Tractors Manufacturers Association,
Senior
Vice President (Marketing & Product Strategy), Tractors and Farm Equipment
(TAFE)
Company Description: The
Tractor Manufacturers Association (TMA) is a non-government, not-for-profit,
tractor industry led and managed organisation, playing a proactive role in
India’s agricultural development.
Founded over 25 years ago, TMA - India’s premier business association in
farm mechanisation, works to create and sustain an environment conducive to the
growth of the tractor industry in India, partnering industry and government
alike through advisory and consultative processes. With its Headquarters in New
Delhi, TMA serves as a reference point for the Indian Tractor Industry. ) TMA
is housed under the leading Chambers of Commerce and Industry in India, the
Confederation of Indian Industry (CII) with headquarters in New Delhi.
What is the size of the Indian
tractor industry? And going forward, what will be its size?
The size of the Indian tractor industry is about 800,000
units which includes all tractors in the sub 100 HP range (including the sub 20
HP range also) The market currently is soft but cyclicality of the market is
something the industry is used to and so overall the tractor industry in India
in the long term may grow at a volume CAGR of 7pc over the next few years
though in the current fiscal we foresee just about 3pc at the most.
What are the current capacities
in the tractor industry and what are the utilisation levels at this moment?
The current capacities according to published reports are
for 1,100,000 units per annum. Capacities have increased during 2008-12 at a
CAGR of 9pc. According to the same report the capacity utilisation was about
81pc.
Like the automotive industry,
is the tractor industry also going through an evolution in terms of better
technology, more powerful and fuel efficient engines, etc?
Definitely! The technology used in tractors is being
improving on a regular basis. Especially in India, we are constantly working on
the reduction in emissions. We are already complying with Term 3A norms
(equivalent to BS-III emission norms applicable to automobiles). We are now planning to upgrade our engines to
meet Term 4 emission norms. This is because the TMA is following European
standards. I think by 2017 or so, we should be able to fulfill our objective.
What kind of investments will
be flowing in the Indian market for the next few years? And will the overseas
players account for a major chunk of them?
The Indian manufacturing companies have always been
talking about investments. Even the overseas firms are pumping in some amount.
Anything between 500 crore +is the amount that I can anticipate in the next few
years in the country. The amount includes the outlay earmarked by both domestic
and international firms. Two of the lead players in the industry are augmenting
capacity by about 30pc plus. India with its proven design, engineering and manufacturing
strengths and a reputation for low cost high quality manufacture is bound to be
a manufacturing hub for world markets. However, the Indian experience and
expertise is in the sub 100HP range. There is a growth opportunity here that
existing manufacturers in India could capitalise on. However, in terms of
investments for augmenting capacity, we do not foresee any major/ significant
activity in the immediate future by overseas players.
How much does this industry
contribute to India’s GDP? And going forward what are its prospects?
The tractor industry is inextricably linked to
agriculture. The agricultural industry’s contribution to the country’s GDP is
pretty small today. And out of that the tractor industry’s contribution is also
minuscule. Agriculture is today driven by farm mechanisation that is powered by
tractors. So we can say that tractor industry is a significant contributor to
agriculture, which accounts for close to 15pc of India’s GDP.
While foreign brands like John
Deere, New Holland, et al are making big ticket investments in India, domestic
players like Mahindra, Tafe, etc have foreign tie-ups and acquisitions? Does it
mean that the Indian firms are at par with their global counterparts?
In India, the manufacturers generally use smaller
horsepower tractors compared to any part of the world. This is because we have
small farms. Almost 80pc of the farms are less than 2 acres. So what we require
is a very appropriate technology (for small hp tractors). We are talking about
the tractors which are used for regular farming. So in the small-powered
segment products, we are on par with global standards. Moreover, the industry
has been exporting its product quite a bit to all over the world. So once we
start making the higher-powered products, we may attain global standards.
Will there be more overseas
acquisitions by Indian players in the next few years?
It’s a very difficult question to answer. As TMA, we
don’t know about each company’s individual plans. But knowing what is happening
in the world, I am sure there will be more mergers and acquisitions in all
spheres.
Can the Indian industry be
bigger than the Chinese one in the foreseeable future?
The Indian industry is primarily known for its four-wheel
tractors. We are the largest manufacturers globally and manufacture close to 6
lakh units. In China, the industry players make 2 lakh such units. Moreover,
the Indian players have played a significant role by exporting on a large scale
to global markets. We definitely have an edge over the Chinese players when it
comes to exports.
Will the tractor industry be
impacted by the rising cost of diesel fuel?
When the cost of diesel goes up, all the industries are
adversely impacted. But what the
industry players have been doing on a regular basis is enhancing the fuel
efficiency of their products.
Does TMA support Free Trade
Agreement (FTA) with Europe and other nations?
India has come to a stage where we have to now work on
our own strengths and not be concerned about trade barriers. And I think we
have learnt to work. So my belief is that today homegrown tractor manufacturers
has done a reasonably good job on exports based on the strengths of their
products, pricing, services offered and also on performance. I think that
should be our aim rather than worrying about the sops offered by the
government. Sops are always welcome, but I think we should always stand on our
own strengths.
Do you witness rampancy of
spurious parts just like the way other vehicle manufacturers witness?
A tractor industry is no different from other
vehiclemaking industries. We are selling the products which have been there in
the market for some time. I always believe that the market for the tractor
industry will be able to garner out of OEMS will always be 20-25pc. And there
are not a lot of ill-fit parts available in the market. And that is something
nobody can avoid because any roadside mechanic can repair a tractor today. So
it’s another way of serving our customers.
As the auto industry has come
out with vehicles run on alternate fuel propulsions, can we expect similar
benchmarks being created in the tractor industry too?
Our industry has products which can work on biofuels. But
tractor being a different product, I don’t think you will suddenly find
companies working on renewable energy that fast. This is because a tractor
requires a minimum horsepower pull or torque of the engine. So we can go to a
certain extent on churning out biofuel-run products or developing highly
fuel-efficient and environment-friendly engines.
Mahindra has created a
benchmark by launching an entry-level low-cost Yuvraj tractor. So is there any scope for such Nano-like
tractors?
Whether it is Tafe or Mahindra or any other company, what
we are really trying to uncover is the unspoken nature of the farmer where they
may have a small acreage. And they will do what we call as ‘very low tillage’
(not very deep). And then there are some appropriate products being developed.
And I genuinely believe that there will be a market for this product. It is
also being used for intercultural weeding. And probably what these small
tractors will do is start replacing, to a certain extent, the tillers. This is
because apart from being a multipurpose product, it is comfortable and farmers
can actually ride on it. There is a space for such products which I am sure
will be covered.
Is rapid urbanisation in the
country and a growing demand for homes and offices affecting in any manner the
growth of the agriculture industry?
‘Land’ has always been a constraint in India. For the
last 20-30 years, I don’t think we added substantially to the agricultural
land. But what the government is trying to do is how to increase the
productivity of the same land. Our
productivity is much lower vis-à-vis the ones in even neighbouring countries
like Pakistan. Like our sugarcane is not comparable with Brazil. So what we can
do is with the existing land, we can enhance the productivity by increased
mechanisation. That is one area where tractor manufacturers will be able to
work. We also need to ensure that the groundwater availability is sufficient to
produce additionally. Secondly, we are not able to utilise everything what we
produce to avoid any wastages, etc. We have poor storage capacity. We have to
take requisite steps to the crops are stored and utilised properly. Apart from
keeping the land neat and clean, we also need to use the right kind of seeds, organic
fertilisers, etc. We should also have to make sure that the land is also not
misused.