Farm Mechanisation Sector Aligns with Sustainability-focused Self Reliance
With the support of new technologies such as electric tractors (e-tractors), precision agriculture and custom hiring the farm mechanisation industry is moving towards transformation from traditional tractor production to sustainable and customer-centric tractors by 2030. Let’s explore further.
Farm productivity has been adversely hit by a ceaseless migration of rural population to cities for ‘better prospects’ in the recent past, more so than ever before. This has triggered a significant growth in the market for farm machinery, especially tractors and harvesting equipment, to boost productivity. In 2023, the agricultural machinery market in India was valued at Rs 1.13 trillion and is expected to reach Rs 1.66 trillion by FY2029, expanding at a compound annual growth rate (CAGR) of 6.69 per cent during the 2024 – 2029 period. Government initiatives, such as the Pradhan Mantri Kisan Samman Nidhi and subsidies for agricultural machinery purchases, are also encouraging farmers to adopt advanced technologies, further fuelling the growth of India’s agricultural machinery market. Business models such as custom hiring and tractor ownership have been started to increase the deployment of farm machinery across the country. Startups are supporting farmers through the Farming-as-a-Service (FAAS) model. With the support of new technologies such as electric tractors (e-tractors), precision agriculture and custom hiring the farm mechanisation industry is moving towards transformation from traditional tractor production to sustainable and customer-centric tractors by 2030. Let’s explore further.
The role of modern agricultural machines is very crucial as they help in increasing agriculture production and productivity, improving the utilisation efficiency of costlier inputs such as seeds, fertilisers and irrigation water, besides the traditional use of humans and animals in farming. However, the adoption of mechanisation by the farmers of various states depends on varying factors such as socio-economic conditions, geographical conditions, crops grown, irrigation facilities etc.
Out of the multiple strategic interventions required to spur sustainable agricultural growth and achieve the vision of Viksit Bharat, improving the level of farm mechanisation seems to hold tremendous potential. The overall farm mechanisation level in India stands at 47 per cent which is still below the level of developing countries like Brazil and China where it is around 70 per cent. Farm mechanisation is even more important in India where 82 per cent of farmers belong to the small and marginal categories and half of the arable land is under the rainfed category. In these conditions, it becomes imperative for farmers to ensure the completion of activities on time. Multiple evidence suggests that the average yield in agriculture has a direct correlation with farm mechanisation.
According to the PwC report ‘Farm Mechanisation: A Catalyst for Sustainable Agricultural Growth’ published in February 2024, “Globally, the Asia-Pacific region holds the highest share (43 per cent) in the global farm machinery market. Among different kinds of farm machinery, tractors are used the most, having a share of almost 55 per cent. In India, of all farming equipment used by farmers, tractors make up 80 per cent of the total share. Due to the inclination towards increased tractor use in the country, the Indian agricultural sector is said to be ‘tractorised’. At present, the farm power availability in India is at 2.49 kW/ha. The Government of India has thus set an ambitious target of raising the farm power availability in the country to 4.0 kW/ha by 2030.
In India itself, the average farm power availability varies greatly across different states – i.e. 5–6 kW/ha in Punjab and Haryana 0.2 kW/ha in the north-eastern regions. This discrepancy is one of the major reasons for the uneven development of agriculture in India. It is also important to note that the farm mechanisation level varies according to the types of crops as well – cereal crops like wheat and rice stand at about 50–60 per cent mechanisation, whereas horticulture crops have a much lower level of mechanisation. However, at the same time, farm power availability has increased tremendously in India during the recent decades, helping India to become one of the major net exporters of tractors in the world.
The government is keen to promote mechanisation with the specific aim of increasing the reach of farm mechanisation to small and marginal farmers and to the regions where the availability of farm power is low and promoting ‘Custom Hiring Centres’ to offset the adverse economies of scale arising due to small land holding and high cost of individual ownership of agricultural machines. A Centrally Sponsored Scheme ‘Sub-Mission on Agricultural Mechanisation’ (SMAM) was implemented in all the States and Union Territories from 2014-15 including the state of Uttar Pradesh. Under this scheme, financial assistance @ 40 – 50 per cent of the cost of machines depending on the categories of farmers is provided for the purchase of agricultural machines. Financial assistance @ 40 per cent of the project cost is also provided to rural entrepreneurs, (rural youth and farmers as an entrepreneur), Cooperative Societies of Farmers (CSFs), Registered Farmers Societies (RFSs), Farmer Producer Organisations (FPOs) and Panchayats for the establishment of Custom Hiring Centres (CHCs) and Hi-tech hubs of high-value agricultural machines. Financial assistance @ 80 per cent of the project cost for projects costing up to Rs 30 lakh are provided to the CSFs, RFSs, FPOs, Self Help Groups (SHGs) and Panchayats for setting up of village level Farm Machinery Banks (FMBs). The scheme promotes almost all agricultural machines and equipment for crop production and post-production activities.
Between 2014-15 and March 2024, Rs 7265 crore were allocated for agricultural mechanisation.18,16,221 machines and various other equipment have been provided to farmers on subsidy. 25,527 CHCs, 594 high-tech hubs and 23,538 FMBs have been established to make available agricultural machines and equipment to the farmers on a rental basis. During 2024-25, Rs 69.99 crore was released to the States.
Custom Hiring Centres (CHCs)
Making various farm machinery/equipment for small and marginal farmers at an affordable rent is one of the main objectives of Custom Hiring Centres (CHCs). It also helps in offsetting adverse economies of scale due to the high cost of individual ownership. CHC improves mechanisation in places with low farm power availability. It mainly provides hiring services for various agricultural machinery/implements applied for different operations. CHC helps to expand mechanised activities during cropping seasons in large areas, especially in small and marginal holdings. It also provides hiring services for various high-value crop-specific machines applied for different operations.
The farm power availability for small/marginal land holdings is the lowest. As the small/marginal holdings constitute 85 per cent of total land holdings, the potential for CHC which will cater to the farm machinery requirement of such a vast area, is quite huge. Keeping in view the emphasis on agricultural farm machinery and the need for taking the farm machinery within the reach of small/marginal farmers, institutional credit needs to be made available for CHCs. Generally, FPOs have a base of more than 500 members, readily potential customers for the CHC. Further, CHC’s services can be made available to non-members to increase its viability.
India’s agriculture sector is vast but fragmented, with a significant portion of the country’s farmers holding small lands. For the small and marginal farmers, investing in modern equipment and advanced agricultural practices has traditionally been very expensive and also limited their productivity. FaaS addresses this challenge head-on by democratising access to these resources. Through affordable and scalable solutions, farmers can use technology to improve their yields, reduce input costs, and ultimately increase their profitability.
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