Date:07/06/2007 URL: http://www.thehindubusinessline.com/2007/06/07/stories/2007060701131200.htm

Back An alternative financing model

Harish Damodaran
Phalguna Jandhyala

New Delhi June 6 De-linking tractor finance from landholdings would not just expand the market and extend the benefits of mechanisation to more farmers, but will also help promote a vibrant rural services industry.

"No farmer, even if he owns 8 acres and grows two crops a year, uses a tractor for more than a couple of months for his own field operations (ploughing, threshing, irrigation, etc). For the remaining 10 months, the tractor is either idle or used as a general utility vehicle. Owning a tractor just to meet his cultivation needs is inherently unviable," claims Mr Ravindra Kumar, Managing Director, SAS Motors Ltd.

So why does the farmer then keep a tractor? "He has no option because it is difficult to get labour in the peak season. Mechanisation also provides leverage through timely agricultural operations. But in the current situation, all this comes at a huge cost, even to the eight-acre farmer who can access tractor finance," he points out.

No wonder, the country's total tractor population is barely 30 lakhs — which is what gets sold every year in China!

So, what is the way out? "De-link tractor finance from land ownership and develop a tractor hiring services industry.

The banks can lend to unemployed educated youth, who can buy tractors and custom-hire them to farmers, including to the 95 per cent who cannot afford to own one. If necessary, the banks may even insist on higher margins of, say, 25 per cent, and shorter loan tenure," suggests Mr Kumar.