Tractor makers blame PSU banks for falling sales

Tractor makers blame PSU banks for falling sales

New Delhi: Tractor manufacturers have blamed public sector banks’ reluctance to provide credit for drastic slowdown in sales and warned that farm productivity could be hit if the issue is not addressed.

“Tractor sales are affected due to conservative approach of PSU banks while offering credit to farmers," Tractor Manufacturers Association President L.D. Mittal said.

“Tractor sales declined by 20% in November though the demand was high due to a good monsoon this year," he added.

During April-November, tractor sales grew by 2%.

Rohtash Mal, the Executive Director and CEO of Agriculture Machinery Group, Escorts Ltd, said that there is still demand for tractor, which has grown by 15-20% but it could not be converted into sales because of decline in flow of credit at the ground levels.

“About 96% of tractors sold in the country is financed," Mal said.

“Since tractor is an important component in mechanisation of Indian agriculture, the non-availability of credit to farmers could impact farm productivity," he added.

Quoting Nabard figures, Mal said farm credit during April-September 2008 stood at Rs90,000 crore whereas the target for the period was Rs1,40,000 crore.

“TMA would ask the government to reserve eight per cent of agricultural credit for tractor and other farm implements so that mechanisation process could grow faster," Mittal said.

Asked if the recent announcement on excise duty cut would have any impact on tractor prices, Mal replied in the negative as tractor does not attract excise duty.

“I do not think so. But cost pressure is there as volume has been affected." On an average a tractor costs Rs4.5 lakh to a farmer.

Auto major Mahindra and Mahindra, which is the leading player in tractor segment, has witnessed a growth of 2.7% in July-September quarter in sales of the agri machinery input.

Some agricultural experts pointed out that banks are reluctant as they do not want to risk their money by lending to farmers.

Tractor manufacturers, however, counter this by saying it is the banks’ fault not to recover loan as farmers’ income have increased in last 3-4 years due to higher production and good remunerative prices.

“The issue is retail liquidity. The offtake (sales) of tractor will increase only through retail liquidity," Mal said.