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Business EconomyPosted at: Feb 22 2018 5:14PM


Tractor sales to reach record high this fiscal: India Ratings

New Delhi, Feb 22 (UNI) Sale of tractors is expected to a reach record high this fiscal at a Year-on-Year (YoY) growth rate of 14-15 per cent, India rating said on Thursday.
The sale will cross the peak achieved in FY-14 when it registered sale of 696,828 tractors. However, the rate would moderate in FY19, the agency said.
During April 2017 to January 2018, the industry has already recorded strong volume growth of 16.6 per cent with total domestic volumes sales of 659,170 tractors.
The growth in sales is attributed to two consecutive years of normal-to-good monsoons, improved crop production, easy availability of credit to farmers and increasing use of tractors in non-agricultural sectors, it said.
The agency said, the growth rate could moderate in FY19, primarily due to the strong base built over the last two years (FY17 and FY18), along with the uncertainty over rainfall as it is a rare possibility to have three consecutive years of a good monsoon.
Tractor sales’ dependency on monsoon is evidenced from the 10per cent and 9per cent Year-on Year (YoY) drop in industry volumes in the years of inadequate monsoon, i.e. FY15 and FY16, respectively, while the cumulative revenue of the top four industry players fell 3per cent and 11per cent YoY.
Central Statistics Office’s (CSO) advance estimates suggest gross value added of ‘agriculture, forestry and fishing’ would fall to 2.1per cent in FY18 against 4.9 per cent in FY 2017, primarily due to the uneven spread of rainfall leading to lower kharif and rabi crop yield and affecting farmers’ cash generation.
Higher delinquencies for tractor loans also show the continued stress in the agricultural sector. As around 45per cent of the total tractor sales are financed through organised channels, loan delinquency rightly represents the average credit profile of a farmer; which might worsen in case of inadequate monsoons in FY19, thus impacting the additional demand for tractors, the agency said.
The Union budget FY19 showcased strong support to the agricultural and allied sectors through a total allocation of Rs 638 billion (12.8 per cent up above the revised estimates for FY18) and various other measures. However, timely implementation of these measures is important to lead to a steady increase in the demand for tractors and other farm equipment in the medium term, the rating agency said.
Some states provide around 25 per cent subsidy on the average value of tractors, which goes up to 70per cent in Assam.
Tractors especially of higher tonnage are increasingly being used in non-agricultural segment particularly construction and infrastructure. About 20per cent of the tractors are used for non-agricultural use. The government’s thrust on roads and highways development as seen in Bharatmala project would also be positive for the higher tonnage tractor segment and the players therein, the agency said.
Both Mahindra and Mahindra Limited and Escorts Limited recorded tractor volume growth of 18per cent and 17.5per cent, respectively, in the 10 months ended January 2018, in domestic markets, in line with the industry growth.
UNI JPG SHK 1713
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