Tractor sales scaled a record high of 40,765 units in August. What does this signify? In a freewheeling interview,Mallika Srinivasan , c hairman and chief executive officer of Tractors and Farm Equipment Ltd. (TAFE), discusses the prospects and challenges ahead for the industry. For her, exports are a critical component going forward. Excerpts
What does the robust tractor sales in August indicate?
If you look at the tractor industry, August was good. This is because the season has begun early this time. You saw the pick-up in August. Some of us had de-stocked in the previous two months significantly ahead of the implementation of Goods and Services Tax. Therefore, there was a re-stocking in August. Secondly, we are looking forward to a good season given that the monsoon is fine.
The sentiment is also by and large okay. The festival season is coming early. That was what you saw in August. Everybody is getting ready for the season that has just got started. Crisil study has predicted 11-13% growth for the tractor industry this year. I think we will see that. It will get a bit more even in the next few months and balance out by March.
But I don’t think you should go by one month (August) figure, which comes after a dip in June.
Have farm loan waivers benefited tractor sales? What was the impact of GST and demonetisation?
I have personally not seen the benefits of loan waiver. It will, no doubt, be there. But I have not seen the full benefits of loan waiver kick in yet. They will take a little time to come. But it is definitely a positive indication. As far as GST is concerned, we had some initial problems.
The government has sorted out our issues. We still have some refunds to come back on GST. The GST council, the state governments, and the Finance Minister were all responsive to our concerns. We had a very genuine issue and it affected the farmers. The effect of demonetisation is behind us. It is a thing of the past.
More than anything else, crop prices bother us. Crop prices are a concern to us. In my personal view, we should allow our farmers to earn a little bit more since most of them are small farmers. The viability of small farms is always a difficult subject. What we have been able to do in this country is to provide relevant technology to small farms and that has made a difference. We should always keep in mind the fact that our farmers are small farmers. In most States, 60-70% are small farmers. That should be kept in mind when framing any policy.
What are the key challenges facing the industry?
We have seen a little bit of inflation, which has been balanced out by GST benefits that some sectors had. That is one challenge. Regionally, too, there are some challenges especially since some States are growing very fast. Some others are not growing that fast, however. While growing at an aggregate level, we are seeing growing imbalances. We see States such as Jharkhand growing very fast for our tractors. We don’t see the same in western States where the growth has been lower.
In some States, we have seen subsidy roll-outs taking a little more time. So, we have seen some blips.
Has GST really helped?
We are confident that GST will bring some benefits in the long term in terms of efficiency of operations.
For example, we make tractors in the South and supply to the North. If we can save two to three days of transportation, it is a lot of savings for us and lot of efficiency improvement.
I think GST is definitely a move towards making us truly one nation in that sense. I am very pro towards GST and very upbeat.
Some teething problems will be there. These would settle down. Some more infrastructure need to be in place and the process needs to be streamlined in the short term.
The government has been very responsive. If this continues, it would settle down.
What should be the immediate focus area?
The biggest challenge for us is exports. We are the largest exporter of tractors in the country.
We have grown 13% in exports, when compared to the industry growth of 4.5%. We want to double our exports share to 30% in the next three to five years with a focus on developing markets.
So, we are growing well on exports. But that is the area where we see a lot of challenge. And that is where we are keenly looking for government policy and support.
The volatility we are seeing with regard to currency is extraordinary in Turkey, Brazil and many other markets. Lot of these markets have also become a little more focussed on local manufacturing.
So, the kind of investments we are making today internationally to increase our local content in those countries is very significant. With the advent of GST, we are hoping that the support given to exports is continued.
The foreign exchange situation is very volatile. We have worked very hard over the last decade to strengthen our exports in key markets. We need to stabilise that.
