Farmers deserve better tools

08 Mar 2023
Farmers deserve better tools

Opinion: Bornali Bhandari and Laxmi Joshi. 

Small farmers lack access to tools, as the tractor-dominated farm machinery sector suffers from demand, supply constraints

India is simply not producing the sort of farm machinery that our small and marginal farmers want or can readily use at a price which appeals to them. Farm machinery comprises equipment used at various stages of farm operations like seed bed preparation and soil working, seeding and planting, plant protection, and harvesting and threshing. Increased farm mechanisation can help improve agricultural productivity and yields.

We used available literature and secondary data to analyse the sector in the recently released NCAER White Paper on ‘Making India A Global Power House in the Farm Machinery Industry’. Both the production and consumption of farm machinery for the agriculture sector specifically (leaving out allied activities) are dominated by tractors.

On the production side, India’s farm equipment market, according to a study referred to in the report, is 7 per cent of the global market, with more than 80 per cent of the contribution in terms of value coming from tractors. Since there is no dedicated National Industrial Classification code for the farm machinery industry, we had to use 7-digit product classification codes and club the relevant codes together to define the industry. It formed 0.6 per cent of overall manufacturing, dominated by tractors. The tractor sector is a pyramid-shaped industry with large-scale manufacturers at the top, followed by small-scale manufacturers and village-level craftsmen at the bottom.

Ownership of tractors is largely limited to a few States like Punjab, Haryana and Uttarakhand. As on June 2018, only 4.4 per cent of cultivator households in India owned tractors, and 5.3 per cent owned either power tillers, crop harvesters (power driven)/combine harvesters or threshers, or laser land-levellers. About 63.5 per cent of farmers rented machinery (‘Situation Analysis of Agricultural Households’), but the data does not distinguish between power and non-power farm machinery.

There are challenges both on the demand and supply sides. On the demand side, the challenges to the adoption of farm machinery are small and fragmented land-holdings, a large number of small and marginal farmers, the practice of subsistence agriculture, diverse soil conditions and cropping patterns, lack of timely access to farm power, tedious acquiring process of subsidised farm machinery, high cost of equipment, poor quality of equipment, inadequate after-sale services, credit constraints and lack of awareness.

On the demand-side, we need to improve the credit access of farmers, sensitise the banking industry, improve extension programmes and awareness and address skill shortages on usage.

India has a trade deficit in the non-tractors farm machinery market. It exhibited lopsided trade patterns where 53 per cent of the imports in this industry are coming from China whereas exports are more diversified. India is, of course, a leader in tractors. On the supply side, the non-tractors farm industry is rendered uncompetitive in terms of scale, innovation and prices.

On the supply side, it is imperative that R&D in the non-tractor farm machinery is promoted so that we produce what Indian farmers need. There’s a need to boost FDI and exports, improve ease of doing business, create a level-playing field for Indian manufacturers, improve and maintain the quality of farm machinery, and address skilled worker shortages. Also, data quality on both the consumption and production sides needs to be enhanced. India has no sustainable/working system for the exchange/transfer of new designs or technology developed by research institutes with manufacturers/ fabricators or feedback on market requirements from manufacturers to research institutes.

Second, Indian manufacturers are handicapped as Chinese products enjoy both consumption and production subsidies in China and are sold through various DBT portals in India. In contrast, Indian producers receive no production subsidy.

Business hurdles
Third, doing business isn’t easy — not getting repayments on time, poor logistics, inconsistent policy implementation, etc., are problem areas. While these problems are not unique to this industry, given the nature of the products — heavy machinery, that is — it affects the inventories and working capital of firms, which, in turn, affects small firms that are dependent on larger firms for business.

Firms incur large costs for the testing of equipment; the testing centres are located far away and transportation costs are high. In addition, there are problems with the test results of farm machinery. Often, the same machine is repeatedly tested for several dimensions, and the validity of the test is for a relatively short duration.

Fourth, there is a shortage of skilled workers on the production side. Fabrication of agricultural tools and machinery is often done by semi-skilled workers without proper tools. In the case of small-scale fabricators, there is no qualified supervisor to look after quality parameters.

The level of farm mechanisation in India, at 40-45 per cent, remains low compared to the rest of the world. In the US, it stands at 95 per cent, Brazil 75 per cent, and China 57 per cent. A variety of factors affect the probability of ownership of farm machinery in India — age and education of the head of the household, possession of a bank account by any one of the family members, possession of Kisan Credit Card (KCC), geographical terrain, farmers’ training, size of land area, social capital of the household, the distance from the household to the market and extension service, agricultural wages and presence of irrigation.

Other factors also may affect farm mechanisation like feminisation of the agricultural workforce (as per PLFS 2020-21, 40 per cent of the agricultural workforce are women), aspirations of rural youth, increasing cropping intensity and contract farming.

In sum, the market for farm machinery and equipment remains distorted.

Bhandari is Professor, and Joshi a Fellow, at NCAER. Views are personal

Published in: The Hindu Business Line, 08 Mar 2023