The efficient and timely operations of farming rely on a collaborative effort between man, machine, and materials. The integration of farm mechanisation is crucial for achieving optimal output levels, efficient use of resources, and meeting the increasing demand for agricultural products. The transition from traditional to smart farming creates growth opportunities and attracts young talent to innovative agriculture, resulting in improved income and greater comfort.
Furthermore, the global agricultural sector faces a labor shortage as workers migrate to urban areas. In India, the proportion of farm workers has decreased from 59 per cent in 1991 to 54 per cent in 2011 and further to 39 per cent in 2022. To tackle this challenge, there has been a global increase in the adoption of farming machinery to enhance precision and timeliness in field activities. India has positioned itself as a prominent manufacturing hub and exporter of tractors, fostering numerous partnerships with Japanese and German manufacturers, with the anticipation of more collaboration in the future.
In 2022, the Asia Pacific region emerged as the dominant force in the global market, commanding a significant volume share of 69 per cent. The primary driver behind this growth was the robust performance of India’s tractor industry, closely followed by China and other nations in the Asia Pacific. India, in particular, spearheaded the regional market with a remarkable share exceeding 54 per cent in 2022.
Renowned for its prowess in farm machinery exports, India, especially in the tractor segment, contributed to over 80 per cent of the total market value. The global agricultural tractor market, aggregating to 29.42 lakh units in 2022, is poised for a compound annual growth rate of 7 per cent from 2023 to 2030. This growth is attributed to the escalating demand for farm tractors, notably from countries such as Italy, Greece, and Lithuania. Furthermore, the market is anticipated to be fueled by a high demand for autonomous tractors throughout the forecast period.
The growth of the compact tractor market, driven by the needs of small farms and technological advancements like integrating telematics into agricultural tractors, is poised to continue. India, contributing to 33 per cent of the global market producing approximately 3 million tractors annually, manufactures over one million units each year. Out of this, around 9 lakh units find a market in India, while 1.31 lakh units, equivalent to 4.5 per cent of the global share, were exported in 2022. In a bid to bolster the “Made in India” initiative, Sonalika ITL currently commands a substantial share of the export market at 40 per cent and is orchestrating a global partners summit, named ‘GPS 200,’ scheduled from October 12th to 14th in Delhi.
India holds significant potential in the export of tractors to various countries, including the US, Brazil, Italy, Greece, Lithuania, Argentina, Turkey, SAARC nations, and African countries. Projections indicate an anticipated export volume exceeding 200,000 tractors by the year 2025.
In addition to tractors, there has been a notable surge in the adoption of non-tractor agricultural machinery, including power tillers, combined harvesters, diesel engines, and electric motors, contributing to enhanced crop productivity. Sales figures for these items have seen significant increases, with increments of 0.50 million, 0.05 million, 11.50 million, and 7.50 million, respectively.
Despite this positive trend, a substantial 53 per cent of non-tractor agricultural machinery is still imported from China. This underscores the importance for policymakers to implement strategic measures aimed at nurturing the growth of non-tractor farm machinery in India, with the ultimate goal of establishing the country as a global production and export hub in this sector.
From 2010 onward, the landscape of agricultural mechanisation has been reshaped by precision agriculture and post-harvest processing technologies. Despite these advancements, India lags with a farm mechanisation level of 45 per cent, contrasting starkly with the United States at 95 per cent, Brazil at 75 per cent, and China at 57 per cent. Wheat leads the mechanisation chart in India at 69 per cent, followed by rice at 50 per cent, maize at 45 per cent, pulses at 41 per cent, oilseeds at 38 per cent, cotton at 35 per cent, and millets and sugarcane at 33 per cent.
The challenges of small land holdings and financial constraints hinder efficient mechanisation in Indian agriculture. To address these hurdles, a collective effort from farmers, manufacturers, government, and non-governmental organisations recognises the imperative of embracing smart farming technologies. This includes sensor-based embedded systems for monitoring soil nutrients, temperature, fertility, and moisture gradients, along with guidance systems leveraging GPS and automated tractors.
In terms of agricultural machinery production, Punjab contributes significantly, producing one-third of India’s tractors and a substantial number of non-tractor farm machinery. However, the manufacturers in the state face a challenge as they incur more than twice the logistical costs for exports when compared to their counterparts in Southern and Western coastal states. Consequently, there has been a longstanding anticipation for a dedicated freight policy for railways to be implemented, aimed at enhancing the export prospects of farm machinery from Punjab.
Exporters currently do not receive refunds for electricity duty, taxes, and duties on petroleum products through the GST mechanism. It is recommended that the government takes measures to compensate for the cost disadvantage resulting from these duties and levies.
Original Equipment Manufacturers (OEMs) are grappling with short-term challenges, including elevated raw material prices and shortages of semiconductor components. These difficulties are further amplified by disruptions in the supply chain, causing delays in production. Moreover, the growing preference for autonomous tractors has compelled OEMs to adopt an inorganic growth strategy as a means to enhance their market presence.
Absence of Incentives from Punjab Government: The objective of establishing the state’s industrial sector as an export hub faces hindrance due to the Punjab government’s failure to provide incentives for industries grappling with “Inverted Duty Tax Structures.” The Industrial and Business Development Policy-2022 neglects to extend support to these particular industries. A critical flaw in the policy is its repetition of the previous one, indicating that any refund from the central government will be adjusted against the payment of state incentives.
This implies that industries, paying 18 per cent GST on input raw materials and 12 per cent GST on the final product, falling under Inverted Duty Tax Structures, can claim input tax credit from the central government but are denied even a minimal incentive of 2.5 per cent on Fixed Capital Investment (FCI) by the Punjab government. Such a policy dilutes the purpose of attracting new investments to the state and necessitates a thorough reconsideration. Clause no.12.26 of the new industrial policy requires correction.
Restoration of Central Incentives: The annual export incentive provided by the Central government, known as the Merchandise Exports from India Scheme (MEIS), with a value of Rs 51,012 crore, has been substituted by the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. However, the new scheme offers a reduced incentive of Rs 12,454 crore. Consequently, the earlier 3 per cent export incentive for agricultural implements like tractors has been scaled down to 0.7 per cent, and the disbursement of the production-linked incentive (PLI) is still pending.
Future Prospects: India holds a competitive edge in tractor-mounted machinery, a product highly sought after by large farmers in both domestic and developed markets. The local market for self-propelled and hand-driven mechanised farm machinery caters to small and marginal farmers, not only in India but also in developing nations with comparable socioeconomic patterns, such as Asia and Africa. By capitalising on this dual structure, India can play a pivotal role in serving the needs of small and marginal farmers worldwide, while simultaneously emerging as a key supplier of non-tractor farm machinery.
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