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Encouraging farm mechanisation through custom hiring

With most of Indian farmers facing difficulty in justifying ownership of any kind of agri-machinery renting out machines is becoming a viable trend believes Mrityunjaya Singh MD - India and SAARC CLAAS Agricultural Machinery

Mrityunjaya Singh
MD -India and SAARC, CLAAS Agricultural Machinery
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Custom hiring is a big trend these days. How are you helping farmers to bring down cultivation cost by providing equipment on rent?

The government’s support to develop custom hiring is a welcome step to seed entrepreneurs in the agricultural applications. By providing special subsidies to purchase a package of machines, the government is trying to encourage small and medium investors to start equipment hiring business. This has an added benefit too – farmers need not invest in expensive machines for limited use in own fields for small time windows of agricultural processes, such as sowing, transplanting and harvesting. Now they can get modern machines in good condition, operated by skilled operators that will reduce need for heavy investment and enhance productivity.

Most of the CLAAS customers are owner-hirers. They buy the equipment for own use and maximise the return by renting it as well. Hence the concept of machine rental is not new to us. But such customers need special support – equal support levels or parts pricing or equipment pricing across all dealer territories they move in search of rental business. Over the years, CLAAS has been recognised by its ability to support such migratory equipment hirers satisfactorily. Our partnership with banks and NBFCs helps in providing retail level equipment financing quickly and over wide geography to potential machine buyers.

How big is the agri-machinery market in India? What’s the growth rate?

As 70 percent of India’s population is directly and indirectly dependent on agriculture for their livelihood, agri-machinery market is bound to be a critical factor in overall mechanisation of Indian agriculture. At present, 120 million farmers are engaged in different types of activities related to agriculture, out of which 20 million are eligible to own principal machinery like a tractor. This is why India is one of the largest agri-machinery markets in the world.

According to our internal sources, total agri-machinery market, which includes tractors, tractor-trailers, combine harvesters, and different types of tractor operated implements, is approximately between $8 and 9 billion. This market is primarily dominated by tractors, which was approx. $ 5.5 to 6 billion in FY 2013-14. The share of combine harvesters in this pie is still low i.e. approx. $ 200 million.

From which regions are you witnessing highest response?

Our overall business can be categorised according to the type of product being sold. As we are mainly dealing in combine harvesters, we have two kinds of technologies on offer for Indian farmer. In South, which is our biggest market in terms of volume as well as revenue, we primarily offer CROP TIGER 30 terra trac and CROP TIGER 40 terra trac combine harvesters. These harvesters run on rubber tracks and are required for harvesting paddy in wet and slushy fields of states like Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. For dry fields of North, East and Western parts of India, we have CROP TIGER 30 Wheel and CROP TIGER 40 Wheel combine harvesters. Even though South India is our key market, other regions are also witnessing a decent growth during last 4-5 years primarily owing to multi-crop harvesting capability of our wheel harvesters. For other products like MARKANT Balers and PADDY PANTHER Rice Transplanters, we have developed niche markets like Punjab, Tamil Nadu, Andhra Pradesh and Kerala. More states like Odisha, West Bengal and Karnataka are catching up fast in terms of volume.
Please share your equipment rental model.

CLAAS or its dealers do not rent out equipment directly at the moment. The prime reason being that a majority of our customers are machine owner-hirer or rental operators. Such customer segments have challenging needs and our expertise in providing them support is the primary reason for our dominating presence in addressable markets. We run operator training courses, service camps and mobile parts vans to meet customers’ expectations. Our trained technicians and fully equipped dealer workshops ensure quick machine turnaround for optimum uptime.

What’s the status and future of custom hiring in the backdrop of changing agriculture scenario?

Due to our archaic Land Ceiling Act, the total land under agriculture for an average Indian farmer is shrinking, which is a paltry 1.5 acre per farmer at present. With this much land, a farmer has difficulty in justifying ownership of any kind of agri-machinery. Hence, renting out machines, whether a tractor or a combine harvester, is more viable now.

Out of 120 million strong farmer population in India, majority of it is incapable of buying machines financially. Moreover, the growing reality of labour shortage is also making farmers more inclined towards mechanising hitherto manual work, which is eventually a winning position for him as it ensures faster work and at a lesser cost too. Hence, as an overview it can be said that custom hiring is being driven by current labour shortage and need to improve productivity and in turn it is driving farm mechanisation as a faster pace.

What’s your selection criterion? Which equipments are in high demand?

Tractors are still the driving force of agricultural machinery demand. The segment is quite crowded with multiple brands putting out various models and variants. Product familiarity, price, application specific models and variants, proximity to dealer location, quality of aftersales support are typical buying criteria of this segment.

The same buying criteria also apply to combine harvesters. This segment is seeing rapid development in technology. CLAAS recently showcased benchmarking features of GPS guided vehicle tracking system, top unloading system for grain, ergonomic air-conditioned cabin with digital instrument cluster and joy stick control and raise chassis for tackling very wet areas in coastal belt. An advance straw walker type machine on rubber tracks was another display of German technology.

For straw balers and rice transplanters, an added key criterion is of availability of government subsidy for the machines in question. This segment is still very small but with problems of labour availability. Hence there is a huge potential for such machinery all across the country.

Please share a case study.

There are hundreds of such stories, where moderate farmers purchased our CROP TIGER Combine Harvesters, and eventually made fortune out of renting out his machine. For instance, one of our esteemed customer, P Satyanarayana from a small town Sindhanur in Northern Karnataka, was a small time farmer with total land holding of 10 acres. After observing the performance of our CROP TIGER 30 Terra Trac in one of the demonstrations in year 1996, he could instantly oversee a profitable business proposition. After purchasing his first CROP TIGER and initial hardwork, where he needed to convince the other farmers to allow his machine to harvest their paddy crop, he has never looked back. With his earnings over the years, he kept on purchasing new CROP TIGERs and at present, he is the proud owner of 8 machines. Moreover, he made huge profits which helped him in buying more agriculture land. Presently, he is a landlord of 40 acres. So, in nutshell, we can proudly mention that we have helped Indian farming community in looking at agriculture as a profitable business option.

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