Agricultural Equipment Business
Manufacturing, export and distribution opportunities in post-harvest equipment beckon entrepreneurs even as other farm products also hold great promise In the last decade, Buhler, a global manufacturer of grain milling, sorting and handling products, has been witnessing a geographical shift in demand for its products. While the US and Europe remained the mainstay for long, it is China and India that are now the demand hubs for its products. The company, which launched its India operations in 1992, has since expanded its facility in India and ramped up the workforce. Another equipment firm, Satake, a Japanese major, has been witnessing similar trend. But the presence of big firms such as Satake and Buhler has not had much effect on local manufacturing. Many small and medium enterprises operate at full capacity across the country. Take for instance, S P Khandelwal of S S Milling and Engineering. He sells grain cleaning and sorting equipment to flour mills, energy foods producers and snacks companies. He boasts of clients such as Bikanerwala, Priya Gold and Modi Flour Mill. It is the price factor that helps entrepreneurs such as Khandelwal survive the onslaught of the global majors. “Products sold by organized players are expensive while my products are low-cost,” he says. Farm equipment companies, both big and small, are fighting tooth and nail to grab the larger share of the lucrative India market, despite the fact that the agriculture sector’s share in the GDP has fallen over the years. This notwithstanding, the farm equipment sector, that is a key support for agriculture, has been growing at a brisk pace and is projected to touch $7.9 billion by 2012, according to The Freedonia Group, a US-based market research firm. [pic]
A couple of factors are driving the growth of this sector. These are mechanization of agriculture, increase in contract farming, easy availability of farm loans at low interest rates, and migration of laborers from villages to cities. Mechanization of Indian agricultural has been a major booster. The continuous increase in the consumption of power for farm sector and the corresponding reduction in the use of animal and human power is a clear indication that more and more machines are being deployed. A study by KPMG, done for India Brand Equity Foundation (IBEF) throws up some interesting observations. It says the share of animals as the source of power for the agriculture sector declined sharply from 45% in 1971-72 to less than 10% in 2005-06. Similarly, the share of human beings as the source of power for the farm sector reduced to a little over 5% in 2005-06 from 15% in 1971-72. |Quick Points | |- Global demand for agricultural equipment to rise 3.8% per year through 2012 to $112 billion | |- Demand for agricultural equipment in India is projected to increase 6.3% per year through 2012 to $7.9 billion | |- Fast pace mechanization of agriculture in China and India to drive demand | |- Easy availability of farm loans, low interest rates, and contract farming also helping the sector grow in India | |- High manufacturing costs abroad makes India a low-cost production base | |- Lucrative export markets beckons India manufacturers | |- Distribution of established products also makes good business sense | |- Challenges include poor monsoon, rising steel prices and competition from China and low-cost manufacturers |
Alternatively, the share of tractors as the source of power grew from...
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