Monday, September 11, 2006

Tractors- vehicles of development???

Tractors- do they really mean development?
Many of us consider tractors as a general symbol of development in rural India regardless of the profile of the family owning it. Probably tractors as symbols of development have been borrowed from the western societies but having spent sometime at the grassroots, I beg to differ.

First of all, the cost of purchasing a tractor is very high even for a well to do big farmer. Although through subsidies the total cost of a tractor may be around Rs.4.5 lacs, but farmers seldom are able to purchase them by offering cash up front. Rather they have to get it financed from the banks, and the yearly installments for the same comes to be around Rs. 80,000/- which, by all means is an astronomical amount for small and medium farmers. Add to this the cost of maintenance and diesel and the actual money required to have a tractor shoots through the ceiling. The farmer eventually has to pay about Rs. 7-7.5 lacs for even the low end 25 HP tractors and when they are unable to do so, the tractor, which is under hypothecation with the bank is snatched away and auctioned off.

For this threat, many a times the farmers are forced to sell off a portion of their land to pay for the installment of the tractor, which actually makes them poorer rather than adding to their riches by creating a vicious cycle of reducing means of production and increasing the liabilities. Probably for similar reasons, even Mahatma Gandhi opposed the mechanization in agriculture in his book 'Hind Swaraj' written in early 30's.

So, what is the solution?
In my opinion, it is much better for a small or medium farmer to hire a tractor during the crop season on rates varying Rs.400-450 per hour rather than purchasing one. It limits their liability, keeps the cost of maintenance off, and best part- provides employment to another villager, usually a young entrepreneur. The basis for this argument is that the tractor is not able to support its cost if it does not works in at least 10-15 hectare land for various crop operations like tilling, sowing and weeding. Thus any farmer having less than these much land either has to hire out the tractor to the other farmers or bear losses.

So simple! Then why the hell do they get one in the first place?
The question is, if they can not afford to have a tractor, how and why small and medium farmers end up getting a white elephant to their home? The answer lies in the greed of tractor companies and the bank managers. The tractor companies are always in the look out for increasing their sales. For this, they employ agents in the nearby villages who act on dealer’s behalf. This dealer is, in turn, connected with the bank managers of Commercial banks as well as the Regional Rural Banks and Land Development/ Cooperative banks which have got targets to finance tractors under various schemes. Financing a tractor is their favorite finance plan as it is a big transaction and they need to conduct fewer such transactions to achieve their targets rather than going for many smaller transactions like those involved in funding a diesel engine.
The Gameplan of Tractor dealer
The agent in the village provokes the fancy of the farmer, whets his ego by promoting tractor as a mean to show that he is a big guy in the village and brings him to the dealer. The dealer, at times pays off some amount of the initial deposit required for the bank by providing a loan to the farmer on exorbitant interest rates and keeping a blank stamp paper with the farmers sign or thumb impression on it with his land record as a security. Then he gets the tractor financed by the bank, but not before the manager extracts his pound of flesh in form of bribe from the farmer. Thus, the deal is struck. The dealer gets his margin, the agent gets his 'cut' and the manager gets the increment as well as the bribe, but the farmer pays through his nose for all of this.

That’s how another farmer is drawn into the debt trap for the so called symbol of development. Adding to the existing number of tractors in the village, it further reduces the rate that a young entrepreneur was getting as tractor hire and thus the farmer not just hurts his financial interest but also that of others in the village.

Later on, as the farmer is unable to pay the installments in time, he sells of some of his lands, and ultimately the tractor is either snatched off by the bank or the farmer has to make a distress selling to some biggy of the village to pay off the remaining amount of the loan.

It is evident with this that selling tractors to small and medium farmers- without any ethical considerations about their paying capacity and how it would effect their finances in the long run- is ruining thousands of farmer of India.

Is anybody listening?