CONFIDENTIAL

Agriculture Equipment market in India

An Overview

Zinnov
November, 2006 To obtain a copy of the full
report, please send your
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This report is solely for the use of Zinnov client and Zinnov personnel. No
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 1 2 3 4 5

Indian
Indian Agricultural
Agricultural
Overview
Overview Agriculture
Agriculture Equipment
Equipment Opportunities
Opportunities Appendix
Appendix
market
market market
market in
in India
India

Macro History and Agriculture Understanding the Profiles of

economic Evolution equipment Indian farmer equipment
factors Industry at a Control groups manufacturers
Current Scenario
Agriculture glance Mahindra and
Evolving farming Initiatives to attract Mahindra
contribution Practices Current Market farmers
to GDP size TAFE
Traditional Tie up Indian
Global Installed base of Universities Escorts
Current Punjab Tractors
comparison products Society level co-
Adoption of operatives Eicher
Purchase drivers
Technology Generating
Growth drivers awareness and
Automation in
farming Forecast education
Extension Services
Government
initiatives for
development and
progress

1
 1 2 3 4 5

Indian
Indian Agricultural
Agricultural
Overview
Overview Agriculture
Agriculture Equipment
Equipment Opportunities
Opportunities Appendix
Appendix
market
market market
market in
in India
India

Macro History and Agriculture Understanding the Profiles of

economic Evolution equipment Industry Indian farmer equipment
factors at a glance Control groups manufacturers
Current Scenario
Agriculture Current Market size Initiatives to attract Mahindra and
Evolving farming Mahindra
contribution Practices Installed base of farmers
to GDP TAFE
Traditional products Tie up Indian
Global Universities Escorts
Current Purchase drivers Punjab Tractors
comparison Society level co-
Adoption of Growth drivers operatives Eicher
Technology Forecast Generating
Automation in awareness and
farming education
Extension Services
Government
initiatives for
development and
progress

2
Indian GDP is growing at very high rate and in 2050 its expected be a
significant contributor to world GDP

GDP Trends (in USD Trillions) Percentage Contribution of countries to

World GDP growth (2004 2050)
Key Countries in Asia Pacific CAGR
3.0 40%

China 34%
13.4% 35%
2.5

30% 28% 28%

2.0 26%

25%
20%
1.5 20%
17%
15%
India
15%
1.0 9.8% 12%
S. Korea 10%
11.3% 10%
0.5
4% 4%
Thailand 5%
2%
11.6%
0.0 0%
'02 '03 '04 '05 '06 '07 '08
India US EU Japan China Other
2004 2050

Source: Goldman Sachs BRICs report, WMRC, EIU, 2005, Zinnov Analysis 3
India has highest contribution of Agriculture to GDP amongst most of the
developed/developing nations

Agriculture contribution to Indias total Agriculture contribution as % of GDP for

exports and imports 2004
80

69.0 India 18.6%

70
China 12.5%
61.4
Brazil 8.4%
60 55.7
51.4 52.7 Spain 4.0%

50 Australia 3.8%
43.8
USD Billion

Mexico 3.8%
40 South Korea 3.3%
Canada 2.2%
30 France 2.2%
Italy 2.1%
20
Japan 1.7%
USA 1.0%
10
Germany 0.9%
13.5% 4.5% 12.8% 4.6% 11.7% 4.8%
0 UK 0.5%
2001-02 2002-03 2003-04 Hongkong 0.1%

Exports Imports

Source: Agro India, CIA,Zinnov Analysis

4
India has significant contribution in production of major crops globally

Global production of Paddy Global production of Maize Global production of Wheat

Others China
Others 24% 18%
22% China
USA Others
Thailand 32% Argentina
40% 44% India
4% 3%
France 12%
3% USA
Vietnam Mexico 10%
5% 3% China India
Indonesia India
Bangalade 19% 2% Canada Russia
9% 22%
sh Brazil 4%France6%
6% 6% 6%

Global production of Ground nut Global production of Sugarcane Global production of Tobacco leaves

Others Brazil
21% Others Others
Indonesia 27% 31% China
China 32%
3% 36%
Senegal 41%
3%
USA Nigeria Pakistan Zimbabw e
India
5% 9% India 4% China Brazil India
23% 3%
18% Mexico 6% 9% 10%
USA
4% Thailand Turkey
4% 3% 8%

Source: Department of Agriculture and Cooperation 5

Yield of principal crops in developed nations is much higher than other
developing nations, one of the reason being less adoption of automation 2941

2240

6350
1568
8672
4933
Russia 7205

3832

2706

8672

7205
China

2964
2742
2706

3352
3243
1806
USA

India

4427
Brazil
3912

2705

World

Paddy Wheat Maize

* Figures in chart represents Yield of major crops during 2001

** Yield is defined as Production in Kg per hectare of land
Source: Directorate of Economics and Statistics 6
 1 2 3 4 5

Indian
Indian Agricultural
Agricultural
Overview
Overview Agriculture
Agriculture Equipment
Equipment Opportunities
Opportunities Appendix
Appendix
market
market market
market in
in India
India

Macro History and Agriculture Understanding the Profiles of

economic Evolution equipment Industry Indian farmer equipment
factors at a glance Control groups manufacturers
Current Scenario
Agriculture Current Market size Initiatives to attract Mahindra and
Evolving farming Mahindra
contribution Practices Installed base of farmers
to GDP TAFE
Traditional products Tie up Indian
Global Universities Escorts
Current Purchase drivers Punjab Tractors
comparison Society level co-
Adoption of Growth drivers operatives Eicher
Technology Forecast Generating
Automation in awareness and
farming education
Extension Services
Government
initiatives for
development and
progress

7
Agricultural market in India has evolved over the years with introduction of
better Government policies and new technology

1989 - 2006
Expanding cereal production
Generating surplus of
agricultural commodity for
exports
1969-1988 Emphasis on dry land farming
Green revolution Entry of MNC players in Indian
Self sufficiency in food market bringing better
grain production technology
Adequate buffer stocks Easy availability of financing
1947-1968 Better seeds, improved schemes
irrigation system , better
Land reforms - quality/quantity of
abolishment of fertilizers
Zamindar system
Agriculture sector had
1891-1946 70% of country
employment
Stagnation in Indian agriculture
Contributed 50% to
Few improvements in seeds,
GNP
fertilizers, machinery
Crop growth rate 0.4% / year Central Government
providing financing for
Food grains growth rate
agricultural programs
0.1% / year

Source: Zinnov research, Literature search 8

Traditional farming practices have evolved over the years for various
processes
PROCESSES Traditional Practices Current Practices

Land Development, Tillage and Plough and Blade harrow were Tractors, Mould board plough and
Seedbed Preparation used to break soil without inverting disc plough are advanced implements
or disturbing crop residue for breaking soil.

Dibblers were used to make hole in Modern seed drill and planters are
Sowing and Planting soil and seeds were dropped in used to distribute seeds uniformly at
funnel attached to country plough the desired application rates.

Hand hoes and animal driven Tractor operated implements are used
weeding tool were are generally presently for inter cultivation and
Weeding and Inter-cultivation
used for removing weeds between weeding purpose of wider rows.
plants in a row.
Dusters are hand sprayers have
Blower and Power sprayer can
been used traditionally for plant
Plant Protection regulate volume of pesticides and size
protection. It was suitable for low
of drops to be sprayed.
volume spraying.

Harvesting of major crops was done Tractor mounted as well as self

manually using sickle. After propelled harvester and thresher are
Harvesting and Threshing
harvesting, crops were trampled used nowadays for doing these
and beaten for threshing. processes efficiently.

Source: Zinnov research, Literature search 9

These processes involve the use of multiple equipments at each stage
Focus of Discussion

Land Weeding ,
Post harvest
development, Sowing and Intercultivation, Harvesting and
and agro
Tillage, Seedbed Planting Plant Threshing
processing
Preparation protection

Objective
Jungle clearance, Sowing seeds Weed control, To take out grain, Cleaning, grading,
Soil opening, at desired Improving soil straw, tubers etc. separation, drying,
Making farm depth, spacing, condition, reduce run without much loss storage, milling, food
roads, Field seed rate etc. off, improve and to separate processing,
bundling , infiltration of rain, grains from packaging, transport
Leveling usage of harvested crop and marketing.
insecticide/pesticide
Equipments Involved
Tractors Drill Shovel/Plough Harvester Seed Extractor

Levelers Seeder Harrow Thresher Dehusker

Ploughs Planter Tiller Digger Huller/Dehuller

Dozers Dibbler Sprayer Reaper Cleaner

Scrapers Transplanter Duster Sheller Grader

Ditchers Weeder Sickle/Dao Mill

Terracers Hoe Dryer

Source: Zinnov research, Literature search 10
The technology and type of equipment used in India have changed
considerably over the past decades (1/2)
Animal drawn Mouldboard plough
Plough was moved with the help
of a pair of bullock.
The gauge wheel was used to
control the depth of operation.
Material used in plough is mild
steel
Blade harrow
Harrow is pulled by bullocks.
Blade is attached to wooden
frame with help of rings.
It cuts thin slice of soil and
remove the weed.
Dibbling Stick
Manually operated device for
creating a conical cavity in the
soil for sowing of seeds
It has wooden round stick
with conical steel cone
Source: Department of Agriculture and Cooperation
Tractor mounted Mouldboard plough
It is a tractor operated implement
Working of the plough is
controlled by hydraulic system
lever and three-point linkage.
Material used is high carbon steel
hardened and tempered to suitable
hardness
Tractor mounted disc harrow
It has front and rear set of discs
for better tilling and cutting soil
Material used is high carbon steel
hardened and tempered to suitable
hardness.
Tractor mounted seed drill
Drill is calibrated for the seed
and fertilizer rate and is
mounted on the tractor
Seeds are expelled by the
fluted rollers connected to the
furrow openers.
11
The technology and type of equipment used in India have changed
considerably over the past decades (2/2)
Animal drawn planter Commercial pneumatic planter

Animal drawn planter suitable for It is a tractor operated pneumatic

sowing seeds planter.
It contains one seed hopper. It has a centrifugal blower to
Seed metering mechanism is maintain air pressure to sow the
through the ground wheel and seeds.
chain and sprocket.

Animal drawn hoe Power Tiller

It is animal drawn implement It has an 8.3 HP diesel engine.

suitable for weeding. It consists rotary weeder having
V-shaped attachment is multiple discs mounted with
provided to level the soil and curved blades.
move the trash sideways. A tail wheel is provided at the rear
Frame is made up of mild steel to maintain the operating depth.

Paddy harvester Self propelled combine harvester

Crop is manually harvested It consists of cutting unit,

Crops get sheared with threshing unit and cleaning and
forward motion and gets grain handling units.
collected sideways. It is Crop is cut by reel and cutter
collected manually for bar and is collected in feeder
threshing separately. conveyer where it is threshed.
Source: Department of Agriculture and Cooperation 12
Manual labor has been an integral part of rural agricultural systems in India
for hundreds of years and is still continuing

Source: Zinnov Field trip 13

This changing face of technology is thereby leading to increase in
automation and this trend is expected to continue in near future

Percentage share of Power usage Total Power consumption (KW/Ha)

in Indian Agriculture Sector
1.6
14
18 21 21 21
1.4

18 1.2
24 20 18
0 23
7 1
1
0 1
0
Percentage

kW/Ha
20 0.8

30
45 42 47 0.6

27 0.4
17
0.2
10 8
15 11 9 6 6 0
1981 - 82 1971 - 1972 1991 - 92 2001 - 02 2005 - 06 1971-72 1981-82 1991-92 2001-02 2005-06
Years Years
Agricultural Worker Draught Animal Tractor
Power Tiller Diesel Engine Electric Motor

Source: Indiastat, Zinnov Analysis 14

The automation trend in India is being driven mainly by Southern States

Indian States having a significant growth 6

in level of Automation, 1992-2003

Himachal
Pradesh

MP
During the period
1992-2003, 6 Indian
states had more than 5 Orissa
different automation 6
equipment having an
installed base CAGR 5
of more than 10%
Number of Automation
AP
Equipments out of 14, having a
5 CAGR of more than 10% during
Karnataka 1992-2003

Note: Equipments considered included Tractor, Thresher, Power Tiller, Reaper,

Trailer, Harvester, Disc Harrow, Mould Board Plough, Seed Fertilizer drill,
Leveler, Sugarcane Crusher, Potato Diggers, Maize Sheller and Planter
TN

Source: Livestock Census 1992, Livestock Census 2003, Zinnov Analysis 15

However, the ratio of Manual to Automated equipment is still significantly
high across many Indian states, implying lower penetration levels

Average Ratio of Number of Manual

Equipment to Number of Automated
Equipment in 2003 30

Himachal
Pradesh 245

80

West
West Bengal has the Bengal
highest average Orissa
ratio of Manual to
Automated
equipment across all
52
Indian states
Average of the Total Manual to
Total Automated ratio, for 5
Karnataka
different equipments
44

Note: Equipments considered are Thresher, Disc Harrow, Seed

Fertilizer drill, Leveler, Sugarcane Crusher Kerala

Source: Livestock Census 1992, Livestock Census 2003, Zinnov Analysis 16

Government has taken several Initiatives in budget which will support the
growth of agricultural machinery
The Government of India in its 2004-05 budget, has announced initiatives for doubling
credit to the agricultural sector in the next three years.
Credit
Farmers availing loan from the scheduled commercial banks, RRBs and PACS for Kharif
and Rabi 2005-06 will get a credit for an amount equal to 2% of the borrowers interest
liability on the principal amount up to Rs.100,000.

The current multi-tier rural co-operative lending structure increases the cost of farm
credit. In order to avail (short term) seasonal agricultural credit to farmers at a
competitive rate of 7% upto principal amount of Rs.3,00,000

Rural infrastructure would get boost under the aegis of Bharat Nirman which has been
given additional provision of Rs.18,696 crs (last year Rs. 12160 crs, 54% growth).
Infrastructure
Rural Infrastructure Development Fund (RIDF) XII is proposed to have a corpus of
Rs.10,000 crs

Also, specified projects under the Public Private Partnership (PPP model) are allowed to
access the RIDF funds.

In 2005 06 Accelerated Irrigation Benefit Programme (AIBP) has an outlay of Rs.4500

Irrigation Crs and the grant component was Rs. 1680 Crs.

The programme for repair, renovation and restoration of water bodies is being
implemented through pilot projects in 23 districts in 13 States.

Source: Zinnov research, Ministry of agriculture 17

 Continued

The National Agricultural Innovation Project for research at the frontiers of agricultural
R&D science is expected to receive multilateral assistance shortly, and will be launched in
July, 2006.

Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and
Rural Development Banks (PCARDB) would continue to remain exempted from tax under
Tax Proposals section 80P of the Income Tax Act although other co-operative banks would henceforth
be taxable entities.

Source: Zinnov research, Ministry of agriculture 18

The GOI runs the largest contract farming model

Contract farming is defined as a system for the production and supply of agricultural/horticultural produce under
forward contracts between producers/suppliers and buyers. The essence of such an arrangement is the
commitment of the producer/ seller to provide an agricultural commodity of a certain type, at a time and a price,
and in the quantity required by a known and committed buyer.

The Advantages Of Contract Farming Success stories in Contract Farming

Farmers
Exposure to World Class
Mechanized Agro
Technology.
Obtains an assured up front
price & Market outlet for his
produce.
Bulk supplies versus small
lots as again required by
the fresh market.
Crop monitoring on a
regular basis. Technical
advice, Free of cost at his
doorstep.
Supplies of healthy disease
free nursery
Agricultural implements
technical bulletins Etc
Remunerative returns
To corporates
Entered India in 1989 by
Pepsi installing a Rs 22 crore state-of-
Uninterrupted & regular the-art tomato processing plant
flow of raw material. in Punjab
Protection from fluctuation
in market pricing.
Long term planning made
possible.
Started in May 2002 to
Appachi encourage farmers in the
Concept can be extended
(ACC)
Coimbatore to sow cotton seeds
to other crops.
Builds long term in their fields.
commitment
Dedicated supplier base
Generates goodwill for the Established a successful
organization. Ugar backward linkage with farmers
Sugars of Northern Karnataka for supply
of barley for its malt unit in 1997

Source: Zinnov research, Literature search 19

 1 2 3 4 5

Indian
Indian Agricultural
Agricultural
Overview
Overview Agriculture
Agriculture Equipment
Equipment Opportunities
Opportunities Appendix
Appendix
market
market market
market in
in India
India

Macro History and Agriculture Understanding the Profiles of

economic Evolution equipment Industry Indian farmer equipment
factors at a glance Control groups manufacturers
Current Scenario
Agriculture Current Market size Initiatives to attract Mahindra and
Evolving farming Mahindra
contribution Practices Installed base of farmers
to GDP TAFE
Traditional products Tie up Indian
Global Universities Escorts
Current Purchase drivers Punjab Tractors
comparison Society level co-
Adoption of Growth drivers operatives Eicher
Technology Forecast Generating
Automation in awareness and
farming education
Extension Services
Government
initiatives for
development and
progress

20
Overall World agriculture equipment market is likely to grow at a rate of
4.8% and is expected to reach about $80 billion in 2010

World Agriculture Equipment Market Worldwide Agriculture Equipments Market

2006 (2006-2010), USD billion

$100

~ 4.8% $80
CAGR $76
North Western $72
America, Europe, 24%
$75 $69
30% $66

Africa\Middle
$50
east, 3.20%
Others,
8.80%

Asia Pacific, $25

34%

$0
Total
Total =$66
=$66 Billion
Billion
2006 2007 2008 2009 2010

Source: Literature search, Zinnov Analysis 21

Driven by the buoyant growth, the Indian market is estimated to contribute
10% to the worldwide market in 2006

World Agriculture Equipment Market

Discussion
Discussion
2006
Indian
Indian agriculture
agriculture equipment
equipment market
market contributes
contributes
about
about 10%
10% of
of global
global equipment
equipment market
market and
and is
is sized
sized
at $6.6 Bn
at $6.6 Bn

Over
Over thethe last
last few
few years
years Indian
Indian agricultural
agricultural
equipment
equipment market
market hashas been
been widely
widely exposed
exposed to to
international
international trade.
trade.
Rest of the World
90% Global
Global majors
majors like
like John
John Deere,
Deere, New
New Holland
Holland and
and
Same Deutz have already made an entry in
Same Deutz have already made an entry in Indian Indian
market,
market, whereas
whereas Indian
Indian players
players are
are looking
looking for
for
alliances
alliances with
with foreign
foreign partners
partners overseas.
overseas.

India Many
Many factors
factors affecting
affecting agricultural
agricultural equipment
equipment sales
sales
10%
in India include the monsoon, government
in India include the monsoon, government declareddeclared
support
support prices
prices for
for crops,
crops, commodity
commodity prices,
prices, crop
crop
production
production expenses
expenses (including
(including fuel,
fuel, fertilizer,
fertilizer,
pesticides
pesticides and other costs) and the credit policy
and other costs) and the credit policy
announced
announced by by banks.
banks.
Total
Total =$66
=$66 Billion
Billion

Note: Other mainly include Harvester, Disc Harrow, Mould Board Plough, Seed Fertilizer drill, Leveler, Sugarcane Crusher, Potato
Diggers, Maize Sheller and Planter
Source: Livestock Census 1992, Livestock Census 2003, Interviews, Zinnov Analysis 22
The total numbers of different equipment in India has shown significant
growth, leading to a increase in the installed base

Total Number of Advanced Agriculture Total Number of major

Equipments in India (1992-2010), millions equipments in India, 2006

30

24.3
Tractors 2,748,686

25 22.4

20.4 Thresher 1,614,153

20
Trailer 1,224,187

15
Seed
1,088,013
Fertiliser drill
10
6.6
Disc Harrow 961,367

5
Leveler 913,256

0
1992 2003 2006 2010 0 1,000,000 2,000,000 3,000,000

Source: Livestock Census 1992, Livestock Census 2003, Zinnov Analysis 23

Growth in Total numbers of the Automation equipments being used in
India (1/2)
Power Tiller Tractor Harvester

350 317 3200 500

296 2749 416 422 427
282 272 407

Total in 000

Total in 000
2450
Total in 000

280 400
2400 2057
210 1540 300
1600
140 200
800
70 100

0 0 0
1994 1998 2002 2006 1994 1998 2002 2006 1994 1998 2002 2006

Thresher Disc Harrow Seed Fertilizer Drill

2000 1200 1500

1551 1614 961
Total in 000

Total in 000
1465 921 1088
Total in 000

1600 1351 851

733 979
800 1000 814
1200
562
800
400 500
400

0 0 0
1994 1998 2002 2006 1994 1998 2002 2006 1994 1998 2002 2006

Source: Livestock Census 1992, Livestock Census 2003, Zinnov Analysis 24

Growth in Total numbers of the Automation equipments being used in
India (2/2)
Planter Leveler Potato Digger

150 1000 913 400

863
786 315

Total in 000
116

Total in 000
109 113
Total in 000

102 287
750 670 300
100 239

500 200 158

50
250 100

0 0 0
1994 1998 2002 2006 1994 1998 2002 2006 1994 1998 2002 2006

Maize Sheller Sugarcane Crusher Reaper

11595
150 250 12000
126 210 9602
196
Total in 000

116

Total in 000
190 188
Total in 000

101 200
100 8000 6779
78 150

100
50 4000 2782
50

0 0 0
1994 1998 2002 2006 1994 1998 2002 2006 1994 1998 2002 2006

Source: Livestock Census 1992, Livestock Census 2003, Zinnov Analysis 25

Tractors have been the mainstay of Indian agriculture market, and are
driving the overall sales in the Indian market
Number of Tractors per Million Hectares of Estimated breakup of $ sales by type of
Gross Cropped Area, 1970-2010 equipment sold in India, 2006

18000
15,833
16000
Others* Trailer
14000 13,480 2%
57%

12000

10000 Reaper
3%
8000 6,704

6000 Tractor Thresher

33% 4%
4000 2,790

2000
610
0 Total
Total =$6.6
=$6.6 Billion
Billion
1970 1980 1992 2003 2010

Note: Other mainly include Harvester, Disc Harrow, Mould Board Plough, Seed Fertilizer drill, Leveler, Sugarcane Crusher, Potato
Diggers, Maize Sheller and Planter
Source: Livestock Census 1992, Livestock Census 2003, Interviews, Zinnov Analysis 26
The tractor market in India is ruled by Mahindra & Mahindra

Market share of tractor manufacturers

Discussion
Discussion
in India (2004-05)
Mahindra
Mahindra && Mahindra
Mahindra was
was the
the market
market leader
leader in
in tractor
tractor
segment
segment with 26% market share during 2004-05. ItIt
with 26% market share during 2004-05.
registered
registered aa growth
growth of
of 32%
32% over
over last
last fiscal
fiscal year.
year.

TAFE
TAFE emerged
emerged asas second
second largest
largest player
player with
with 14%
14%
Mahindra & market
market share, dislodging PTL from second position.
share, dislodging PTL from second position.
Mahindra TAFE
TAFE registered
registered aa growth
growth of
of 36%
36% over
over last
last fiscal.
fiscal.
Others
26%
35% Escorts
Escorts and
and Punjab
Punjab Tractors
Tractors Ltd
Ltd were
were other
other two
two major
major
players
players having a significant market share of 13% and
having a significant market share of 13% and
12%
12% respectively.
respectively.

Other
Other players
players in
in this
this market
market includes
includes Sonalika,
Sonalika, New
New
Holland
Holland India, L&T John Deere, Bajaj Tempo,
India, L&T John Deere, Bajaj Tempo, Same
Same
TAFE
Deutz-Fahr,
Deutz-Fahr, etc.
etc.
14%

PTL Escorts
12% 13%

Total
Total units
units sold
sold == 2,47,531
2,47,531 With an average annual sale of
2,47,531 units, Indian tractor market
Is largest in the world

Source: Tractors Manufactures Association, Zinnov research 27

The overall market in India is again on a growth phase post the decline
period and is poised to grow further
Sale of Tractors in India Sale of Power Tillers in India
1995-2005 1995-2005
300000 20000

18000
250000
16000

14000
200000
12000

150000 10000

8000
100000
6000

4000
50000
2000

0 0
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
96 97 98 99 00 01 02 03 04 05 96 97 98 99 00 01 02 03 04 05

Units sold for Tractors Units Sold for Power Tillers


 Main
Main reason
reason for
for revival
revival of
of agricultural
agricultural equipment
equipment market
market post
post 2001-02
2001-02 has
has been
been easy
easy availability
availability of
of finance
finance schemes
schemes with
with
reduction in interest rates. It has solved the perennial problem of cash flow considerably amongst farmers.
reduction in interest rates. It has solved the perennial problem of cash flow considerably amongst farmers.

Source: Indiastat, Zinnov analysis

28
Increased Financing and Private sector participation will necessitate the
replacement of human capital with fixed capital such as farm machinery
Drivers & Restraints for Agricultural
Equipment adoption
1-2 Years 3-4 Years 5-7 Years
Drivers
Financing Very High High Med/ High
Private sector participation High High Medium
Government incentives and investments Very High Very High High
Rising Wages of agriculture labour Low Low/Med Medium
Strive to Increase productivity Medium Med/High High
Increased education & Awareness Med/High Medium Medium
Large scale migration to urban areas Low Low/Med Medium

1-2 Years 3-4 Years 5-7 Years

Restraints
Existing debts Low/Med Med Med/High
Low replacement market High Med/ High Med
Changing laws on Land holdings Low/Med Low/Med Medium
Inflation in fuel and power rates Med/High Medium Medium
High dependence on rains for irrigation Medium Med/low Med/low

Source: Zinnov research 29

Indian agricultural equipment market is expected to reach $ 8 Billion by
2010

Indian Agriculture Equipments Market

(2006-2010), USD billions
$10
% $8.08
CAGR ~ 5
$7.68

$7.30
$8 $6.94
$6.60

$5

$3

$0
2006 2007 2008 2009 2010

Source: Zinnov research 30

Power Capacity, Price and Fuel Consumption are considered as most
important parameters for purchase of tractors in India
Farmer Purchase Drivers
Desired power requirement of a farm
Power equipment is based on size of arable
Capacity land for which it has to be used.
Due to lack of sufficient funds, Price is
considered as a most important criteria.
Price
Though that doesnt mean
compromising on Power capacity need.
Fuel Fuel Consumption factor is more
important for farmers with higher power
Consumption capacity equipments
After Sales support is considered as a
After Sales moderately important criteria
Support
Brand preferences varies across the
Brand Value different regions and geographies
across the country.
Not Applicable Not Important
Source: Zinnov Analysis, Literature Search
Corporate Purchase Drivers
Purchase decision criteria starts with
choosing optimum power capacity
equipment.
Price is important, but Corporate sector
are willing to pay premium, if additional
benefits could be derived.
Fuel consumption is an important factor
of operating cost, which is considered
in evaluating price to be paid.
After Sales support is considered as a
an important criteria
Corporate sector has good comfort
level purchasing any of the top
renowned brands.
Moderate Important Very Important
31
There are various initiatives being offered to take care of financing needs
of farmers which will increase sales growth of farm equipment

Governments Farm Credit package Government has

Government has sanctioned a farm credit package of announced doubling credit
Rs.1,75,000 Crores for agriculture and allied activities to the agricultural sector in
in 2006 - 07 the next three years.
However, 51% of farmers in India still dont have
access to avail formal sources of credit

Availability of loans by SCBs and RRBs

Scheduled commercial banks grant loan to farmers
for amount equal to 2% of the borrowers interest
liability on the principal amount up to Rs.100,000. Government would provide aid to
However, present multi-tier rural co-operative lending NABARD to refinance
structure increases the cost of farm credit for the Cooperative/Rural banks at a low
farmers. interest rates.

Self help groups

NABARD have initiated program of linking self help
groups (SHGs) of the rural poor with banks to provide
them bank credit.
Around 2.11 lakhs new SHGs were added till NABARD has plans to open a
December 05, and additional 3.85 lakhs are expected separate line of credit for
to be added in 2006-07. financing farm production and
investment activities

Source: Literature Search, Zinnov Analysis 32

 4 5

Opportunities
Opportunities Appendix
Appendix

Additional information on the these Profiles of

Understanding the
topics are available in our full report. Indian farmer equipment
Control groups manufacturers
Mahindra and
To obtain a copy of the full report, Initiatives to attract Mahindra
farmers
please send a mail to Tie up Indian
TAFE
Universities Escorts
info@zinnov.com Punjab Tractors
Society level co-
operatives Eicher
Generating
awareness and
education
Extension Services

33
Zinnovs research based market expansion consulting helps customers
create sustainable competitive advantage through the creation of new
markets
Market Engineering
and Analysis

Human Capital New Market Entry

Benchmarking and Strategy
Analysis Market
Expansion
Consulting

Location Best Practices

Analysis Research

M&A Target
Identification

34
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