The Hindu Business Line : Tractor industry grows 45 pc in Jan-Feb period

The industry has grown 45 per cent in January-February 2004. In fact, the turnaround in growth in the second half of this fiscal has been so good that the industry is set to grow by 8-10 per cent this fiscal, after seeing four consecutive years of double digit de-growth.

"The industry has already grown by 7-8 per cent till February this year," Mr R.C. Jain, President of the Tractor Manufacturers Association (TMA) and Chief Executive (Group Affairs) of the Eicher Group, said.

Interestingly, the industry de-grew by about 17-20 per cent in the first six months of the current fiscal, with the first positive growth being recorded only in October.

Tractor sales, it may be recalled, had decreased from 2,66,000 units in 1999-2000 to 1,59,000 units in 2002-03. In fact, the last fiscal alone saw a 26 per cent decline in sales.

But, why the sudden turnaround? "There was suppressed demand in the market due to poor monsoons earlier. There have been good crops this time around, and the farmers' income levels have increased. Also, with the inventory levels of tractors coming down, there is less pressure on dealers. In fact, with a decline in the dealer's receivables, the retail growth in the January-February 2004 period would be more than 45 per cent," Mr Jain said.

Inventory levels in the industry have come down from 1,00,000 units earlier to less than 50,000 units at present.

Further, availability of finance has improved with almost every commercial bank rolling out attractive finance schemes and also a decline in interest rates on tractor loans. "In fact, farmers with lesser acreage of even three to four acres are able to take loans now," Mr Jain said.

Meanwhile, with spiralling costs of steel and other inputs and consequently margins under high pressure, companies are likely to go in for a price hike on tractors by end-March, to pass on to buyers some of the increases in the cost of inputs.

According to Mr Jain, prices are set to increase by about 3-5 per cent by the end of the month, since most manufacturers have reached a point where they cannot hold on to the current price levels. This would translate into an increase of Rs 7,000 to Rs 12,000 per tractor depending on the cost and model. The price hike would be for the first time in three to four years.

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