M&M to close tractor plants for 2 days a week

Mahindra & Mahindra, India's largest maker of utility vehicles and tractors, has decided to shut down production at its tractor units for up to two days a week, for the rest of the month, in order to liquidate piled-up inventories.

In a communiqué to the stock exchanges, M&M said that as part of its ongoing rationalisation of finished stocks, it would be observing 'no production days' at its three tractor plants in Jaipur, Nagpur and Rudrapur.

The move follows a general downturn in the tractor market since the third quarter of the fiscal ended December, leading to a piling up of stock.

Pawan Goenka, president of the automotive and farm equipment division at M&M, said, "In the last three or four months, the growth in the tractor industry has been very slow. In fact, during the last two months there has been de-growth."

He attributed this to decreasing rural incomes, and said that he would like finance minister Pranab Mukherjee to announce some measures for the farm sector in the union budget due to be unveiled next week.

"Though tractor sales have been low for a few months, it has become bit of a concern from February. Farm incomes have reduced while costs have gone up, especially in terms of labour," Goenka said at a function earlier this week.

Sales in the current fiscal are estimated at 6.05 lakh units - an 11 per cent growth - according to rating agency ICRA. This is against an over 20 per cent rise seen in both 2010-11 and 2009-10. In fact, tractor sales have more than doubled in the six fiscal years since 2004-05, when the figure was 2.26 lakh units.

Higher raw material costs have led to a 10 per cent rise in tractor prices over the last couple of years.