Shrinkage in demand

S Muralidhar

THE SUSTAINED fall in farm incomes has continued to dampen demand. To add to farmers' woes, the increase in the excise duty on lower HP tractors has lead to a sudden fall in demand in the 20-30 HP category.

According to tractor industry observers, some of the decline is of the industry's own making and is the staggered effect of the unhealthy practices adopted by some manufacturers in previous years.

Says Mr T. L. Palani Kumar, Managing Director, New Holland Tractors (India) Pvt Ltd: "The fall is due to a combination of factors such as the slowdown in agricultural incomes over the past few years and the 6-9 months lag effect between farmer's income and the actual purchase of tractors." He also felt that the practice of some manufacturers in the last few years to push sales by providing cheap credit to dealers and customers is now boomeranging on them.

Interestingly, the three States most affected by the drought last year have shown clear signs of recovery this year, at least with regard to tractor sales. However, Mr Palani Kumar says that the overall effect of the drought continues and many farmers are delaying their purchase plans till there are clear signs of a full recovery. He thinks that last year's correction in the market will continue through this year and is likely to lead to a fall of over 17 per cent by the year's end.

Mr Klaus D. Ramsauer, CEO of the Pune-based L&T John Deere Ltd, a joint venture between Larsen & Toubro and the global tractor major John Deere & Co, also feels the low crop prices are affecting tractor sales. ``We expect a further downward trend in tractor sales during the remaining months of the current year. It is surprising that inspite of the good monsoon, tractor sales have not picked up.''