Restricted finances knock tractor sales by 20 per cent

19 December 2008

Tractor sales took a severe beating in the month of November 2008, dipping by 20 per cent despite a good monsoon this year.

"The drop in sales was mainly due to the conservative approach of banks in sanctioning loans to farmers," says L D Mittal, president, Tractor Manufacturers Association.

Urging the government to take immediate remedial measures, the Mittal said that "unless this was done, not only would agricultural production suffer, the effects of any slowdown in the agricultural sector will be felt across all sectors."

Mittal further added, while there exists a healthy latent demand for tractors, the limited availability of retail finance is hitting sales, 96 per cent of which are bank financed. It said that if corrective steps were not taken immediately, the drop in tractor sales in December would be still higher.

"The corrective measures include reserving 8 per cent of all agricultural credit for farm mechanisation tools only. The State Bank of India should take the lead in sanctioning more tractor loans on realistic norms for other PSU banks to follow," he added.

Mittal also said that the lending filter should be brought down to farmers having land holdings of at least four acres, with the tractor being made the collateral for such loans. 
"Similarly, the margin money requirement should be restored to 10 per cent," he said.