Bhopal/New Delhi: The frown on the face of Shakti Singh Tomar belies his recent successes. A 44-year-old farmer from Vidisha in Madhya Pradesh, Tomar proudly says he purchased a Mahindra Scorpio SUV in 2014 by paying Rs8.1 lakh in cash. “Unlike others, I do not have a loan to repay and purchased two hectares of land recently,” he said.
A large farmer once at the mercy of the vagaries of nature and vulnerable to lower crop prices, Tomar now earns at least Rs6 lakh a year by renting out farm machinery. “The centre that I am running has been a blessing,” he added.
Tomar is not an isolated success story. He is among 1,205 farmers spread across Madhya Pradesh who are running custom hiring centres (CHCs) which rent out machinery to small and marginal farmers and employ rural youth who manage these centres all day.
The cost? Rs25 lakh to set up one centre, which will get a Rs10 lakh government subsidy. However, as Madhya Pradesh has showed, the social benefits of the scheme have far outweighed the costs.
Machinery available for hire has reduced manual labour and lowered the cost of cultivation, which has gone up due to a labour shortage. Farmers renting equipment have reported yields rising by around 20%.
Stories like that of Tomar also show the structural transformation under way in Indian agriculture: farmers harnessing the opportunities of the market economy, using new technology and becoming entrepreneurs. For instance, Tomar is planning a trip to Haryana to purchase a seed grading machine that costs more than Rs6 lakh. With a group of farmers, he wants to start production of certified seeds that can be sold at a premium.
Mechanization has become a necessity due to higher costs and paucity of farm labour, said Rajesh Rajora, principal secretary (agriculture) with the state government. “Every year, nearly 4.5 lakh farm hands move out of rural areas (in Madhya Pradesh) in search of skilled or unskilled work. As purchasing equipment is costly and unviable for small farmers, custom hiring is the way out,” he said.
Fragmented farm holdings mean individual ownership of machinery is unviable for small farmers. For instance, 85% of farm holdings in India belong to small and marginal farmers cultivating less than two hectares. A tractor needs at least 1,000 hours of operation every year to be economically viable, while two hectares means at most 100 hours. In states like Punjab—India’s most mechanized state with double the number of tractors it needs—individual ownership of machinery has not only led to higher cost of production and lower net income to farmers, but also rising debt among farm households.
In comparison, Madhya Pradesh is promoting CHCs as a simple and transparent way of renting farm equipment. Rural youth under 40 years with an undergraduate degree can apply for a grant under the scheme. While agricultural graduates are preferred, final applicants are selected through a lottery. The subsidy is limited to 40% of the cost of a centre or Rs10 lakh. Applicants have to place a margin money of Rs5 lakh and the rest is financed by bank loans.
After the candidates are selected, they are sent for a week-long technical training that is a prerequisite to qualify for the bank loan. The applicant has to purchase a mandatory set of equipment required for farm activities from ploughing to harvesting. Each centre serves 200-300 farmers within a radius of less than 10km.
In January 2015, 38-year-old Gyan Singh Parmar from Sehore district saw an advertisement in the newspaper inviting applications for setting up farm equipment renting centres. “I was lucky to be selected in the lottery and by September, the centre was fully functional,” he said.
The returns for Parmar are handsome. The thresher worked for nearly 500 hours harvesting the winter wheat crop in April at a rental of Rs700 per hour. In less than a year, Parmar earned over Rs3 lakh. He has employed two people at a salary of Rs5,000 per month, and is planning to buy a crop reaper cum binder which costs Rs3.5 lakh.
“We approve applications in such a way that there is no more than one CHC in a village. This helps keep the model financially viable in the long run,” said Anil Porwal, an agriculture engineer who oversees the programme at the state level.
While 286 CHCs were set up in the first year of the scheme (2012-13), the number rose to 444 in 2014-15 and 475 in 2015-16. This year, the state has set a target of 612 centres.
“The progress of CHC scheme in Madhya Pradesh is impressive,” said Ankur Seth, executive officer at the Confederation of Indian Industry’s agriculture division which carried out a multistate study commissioned by the National Bank for Agriculture and Rural Development, India’s apex rural development bank. Seth adds that different states have followed different models—while in Andhra Pradesh, CHCs are run by informal groups of farmers who find it difficult to access bank credit, in Punjab, CHCs are run by cooperative societies as an added service.
In comparison, the Madhya Pradesh model is designed to retain youth who are losing interest in farming by giving them an opportunity to run a business and also promote the centres as technology transfer units at the village level, Porwal said.
While Madhya Pradesh has performed exceptionally in the past few years and states like Tamil Nadu, Odisha and Uttar Pradesh are coming on board, some states like Gujarat, Bihar, Rajasthan and Haryana are not utilizing central funds for mechanization, said a senior official in the Union agriculture ministry who did not want to be named.
The centre in 2016-17 allocated Rs160 crore to states under the Sub-Mission on Agricultural Mechanization, but the unspent balance was as high as Rs103 crore by the end of March this year, shows data from the agriculture ministry.
In Madhya Pradesh, the scheme for promoting CHCs does not work in isolation. The state is also implementing a scheme called Yantradoot where 200 villages are adopted every year and farmers get to see first-hand how farm mechanization can boost productivity, save labour costs and even help fight climate change.
For instance, 30km from the state capital of Bhopal, Acharpura village has 20 tractors but few improved implements to go with them. Until last year when the village was adopted under Yantradoot, farmers used single box seed drills (for planting crops like soya bean and pulses) where seeds and fertilizers are mixed together, resulting in a poor harvest.
The scheme brought in double box seed drills where seeds and fertilizers were applied separately, and many farmers benefitted from the reversible plough, which overturns soil from deep within.
Deep ploughing increased the fertility of the soil and also helped control weeds, said Kaluram Ahirwar, a farmer from the village, adding, “productivity of my wheat crop increased from 17 quintal per acre to 22 quintal per acre”.
Encouraged by the potential of the machines, 24-year-old Haridesh Maran, a commerce graduate from the village applied for a CHC, but did not make it in the lottery. Maran now wants to buy a combined harvester which costs over Rs20 lakh. Isn’t that a risky investment?
“If harvesters from Punjab can come this far and make money, why can’t I? In one season, a combined harvester can do a business of Rs7 lakh and I can recoup the investment in three years,” he says with confidence.
In the neighbouring village of Ratata, Kalyan Singh shows how his soya bean and groundnut crops were not washed away despite heavy rains. Under Yantradoot, his land was sown with a raised bed cultivator that is attached to a tractor. The cultivator made 15-inch raised beds where seeds were sown, alternated with deep furrows which drain the excess water when it rains too much, and conserve soil moisture during dry spells.
In the rush to mechanize farm operations, the private sector too isn’t far behind. According to a report published in July by lobby group Ficci and the German Agribusiness Alliance, leading farm equipment manufacturers such as Mahindra and Mahindra, TAFE, Escorts and John Deere are trying out different models of custom hiring.
Noting that purchasing costly equipment like combined harvesters can be prohibitively expensive, even for large farmers, the report said that “custom hiring is the only practical way to introduce capital intensive, high quality mechanisation to the small farming structures prevalent of India”.
“Farmers who used the combined harvesters took 45 minutes to harvest, thresh and pack wheat in an acre, which otherwise takes a week and 15 labour days,” the report said, citing a 2013 field study from Madhya Pradesh.
No one knows this better than Chandra Mohan Gupta, a former engineer who quit his job to manage 20 acres of his family farm in Narsinghpur district. In 2013, Gupta opened a CHC with government support. “To meet the rising demand from farmers, I also purchased a second tractor, a raised-bed cultivator and a seed grader that cost Rs15 lakh,” said Gupta.