Models of custom hiring services (CHS) of agricultural machinery in India

Presented at workshop on “ Constraints for Farm Mechanization in Bihar ” Patna, 12 May 2016

Madhusudan Bhattarai, Economist &

P K Joshi, Regional Director,IFPRI South Asia Office, New Delhi

BackgroundMassive transformation is taking place in rural South Asia

Harvester is efficiently used only under Custom Hiring Services

Tractor prototype in early 1900sInnovative use of machine

Rental market systems widely vary across places in South Asia view – CHS AM

1. To illustrate importance of custom hiring services for

promotion of agro-machinery uses in India

2. To discuss major typologies of business models of Custom

Hiring Services of Ag. Machineries (CHS-AM) in India

3. To discuss issues and opportunities on CHS-AM to Bihar.

II Objectives

Land preparation

Planting of PaddyResidue handling

Harvesting of Paddy

Transportation

Puddling

Mechanization component for Rice Background

Jharkhan

dJ &

K Orris

a

Chhatisga

rh

Rajsthan

Himach

al P

Mahara

shtraKeral

aAssa

mBihar

Gujarat

M P

Tamil N

adu

Karnata

ka

West Benga

l

All India A P

Uttaranch

alU P

Haryan

aPunjab

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0

0.5

1

1.5

2

2.5

3

3.5

4

Food grain productivity (Kg/ha)Farm power availability (KW/ha)

KW/ha

r = 0.89

Food grain productivity and farm power used across states of India, 2001

Recently, there is an increased emphases on farm mechanization due to:

a. Increased on agricultural wage rate

b. Changes in rural labour institutions

c. Increased rural infrastructures and connectivity

d. People moving out of rural areas for non-farm jobs.

e. A slow process of Structural Transformation is taking places at many places in India

=> An increasing importance policy makers on farm mechanization

Total number of tractor per 1000 ha of NSA in 2012

Kerala

Assam WB

Odisha

J & K MH AP MP

Karnata

ka

Rajasthan

Bihar TN

All India

Gujarat UP

Punjab

Haryana0

20

40

60

80

100

120

140

160

No of Tractor/1000 ha of NSA

Diffusion of Tractors across the states of India, 1962 -2012

1960 1970 1980 1990 2000 20100

20

40

60

80

100

120

140

160

Haryana J & K Punjab UP Bihar

WB Gujarat MP MH Rajasthan

Karnataka All India

In no of Tractor per 1000 ha of NSA)

Tractor density and Ag. labour density in 2012

Rajasthan

Punjab

Haryana

Kerala

Gujarat

Karnataka

MHMP

India

UP

AP

Odisha

TN

WB

Bihar

High tractor density and high labour densityHigh tractor density and low labour density

Low tractor density and high labour densityLow tractor density and high labour density050

100

150

Trac

tor D

ensi

ty

0 1 2 3Agricultural Labour density

Villages level issuesSatellite View of the 8 Villages (VDSA) in Bihar and Jharkhand

Constraints in Farm Mechanization in BiharSN Farmers

categoryNo of Household

Total crop land (ac)

Avg. Operating holding (in ac/ household

No of tractor in the village

No of tractor per 100 acre of land

No of diesel pumps per 100 acre

1 Marginal 2238 863 0.39 16 0.7 13.62 Small 156 558 3.58 14 2.5 15.23 Semi-

medium 45 3357.45

134.0 15.2

4 Medium 18 235 13.05 6 2.03 9.85 Large 2 76 37.80 1 1.3 9.2

6Sample Total 2,459 2,067

0.84 50 2.45 13.8

Census survey in 4 villages in Bihar, 2010, under VDSA project (NCAP+ICRISAT)

Ploughing by Tractor & Bullock in ARAP, Bihar, 2001-2014Year No. of

tractors in the village

% land ploughed by tractor in the

village (kharif)

Rental rate (Rs/ hr)

No . of Bullock

pairs

% land ploughed by

bullock in Kharif

Wages rate Bullock pair

(Rs/day)

2001 8 30 250 300 70 125

2004 12 55 300 175 45 150

2005 12 60 325 150 40 165

2008 18 90 400 30 10 200

2009 20 95 500 10 5 225

2010 21 100 600 1 NA NA

2011 21 100 700 1 NA NA

2013 24 100 950 0 NA NA

2014 26 100 1000 0 NA NA

Source ; FGD with villager and key informants, ARAP, 2014

Combined harvester uses in farming in ARAP village, BIHAR

Year No. of Combined

harvester in the village

Usage of % in Rice harvested

by Com. Harvester

% of wheat harvested by

Combined harvester

2006 01 15 202007 01 17 202008 01 17 202009 01 20 202010 01 20 202011 01 20 252012 01 20 252013 02 30 302014 02 35 35

Effective use of farm machinery (tractor) depends upon how efficiently we can reduce its fixed cost per unit of uses

5 haAnnual operated land of the machine (in ha)

Cost in Rs/ha

40 ha

Rs 200/ ha

Rs 2,200/ ha

Operating cost

Rs. 500/ ha

Rs 400/ ha

200

Rs 2,000/ ha

Rental rate of machine (tractor) if used widely.

Rental rate if the tractor used only on owner’s field

Different Models of Custom Hiring Services of AM

1. Individual farmer led …(a)……(b)….

2. Farmers group purchased

3. Cooperative managed AM services

4. Traders’ led CHS-AM

5. Individual entrepreneur operated

6. CHS- AM set up under PPP mode

7. Non-profit group (NGO) supported AMS

8. Govt. supported/operated CHS-AM

9. Big Corporation led CHS - AM (EM3, tractor companies)

Alternate Business Models of CHS- AM I. Informal CHS-AM

II. Semi- Formal CHS-AM III. Formal CHS - AM

1 Individual farmer (most widely followed in all villages in SA)

2.1 Implement traders -supported 3.1 ) Govt. Led CHS-AM

a) DOA- Ext- CHS-AM b) Yantra Doot village in MP

1a) Landlord System 2.2 un-registered CHS-AM 3.2) Farmers’ Cooperative managed CHS- AM (in Punjab.)

1b) Service Providers (LSP)

a) Kerala – Food Security Army ( by KAU)

3.3 Intermediate led CHS-AM

- Devt. Proj (CSISA, etc).

b) Labor bank (green bank), formed/facilitated by Coops/SHG

3.4 Private Sector – Corporate led CHS-AM (this list is big..)

- Other NGOs c) Kudumbasree N groups - Govt. support- Individual

entrepreneur

d) NGO supported PT in Nepal

I. Informal - Individual provided services (CHS-AM

1. Individual operated machine

1.1a) Landlord System (??...)1.1b) Local Service Providers (LSP) - Dev. Project (CSISA, etc.) - NGOs supported - Govt. subsidy/supported

1.1 c) Individual entrepreneur (their own initiative)

Nearly 20,000 power tillers and tractors sale in Bangladesh; > 1 .25 billion USD/year market of farm machinery.

II. Semi- Formal CHS-AM

a) Kerala – Food Security Army ( by KAU)

b) Labor bank (Green bank) formed/facilitated by Coops/SHG

c) Kudumbasree N groups

d) NGO supported PT – LSP in Nepal

Dr. U. JAIKUMARAN, KAU, Ashoka Fellow

Dr Jaikumaran, prof. at Keral Ag. Univ., =>

Fixed module practical training to create “Food Security Army”

The FSAs were encouraged to form societies called Agro Machinery Operation Service Centres (AMOSC).

3.3 Intermediate led CHS-AM

a) NGO supported CHS-AMa) Nepal, Bangladesh

b) PPP mode of set up CHS- AM (big push in Karnataka). Govt + 3 Separate agencies

- Gujarat govt. supported –PPP mode of CHS-AMc) Govt. contracted to local community (KVK/ICAR

supported - 100 CHS- AMs across 100 villages)d) SHG supported/managed CHS-AMe) Private Comp. Operated

Karnataka- CHSC-AM- under PPP modelIn mid 2014, Karnataka state govt. gave contract to run 178 CHSC-AM around the state for six years.

Shri Kshethra Dharmasthala Rural Development Project, (SKDRDP) – (A temple trust )= 161

The Indian Society of Agribusiness Professionals, New Delhi = 17 centres.

Each center costs: = 5 million Rs + 2.5 million Rs ( in 1st and 2nd year). (75 % of cost by Govt.).

In March 2016 ( scaling out):

VST Tillers and Tractors has entered into an agreement with the Karnataka govt. to set up 92 custom hire service centres (CHSC) in 9 districts. VST will invest 400 million Rs.

3.4 Private Sector – Corporate led formal CHS-AM (in India )Key Player Location Remarks

1) Tata Farmers Services Aligarh, UP Profit from Input sales

2) Yamaha – CHS-AM for rice transplanter

Tamil Nadu & AP More implement sale, demo of new implements

3) Coromandal Corp. in South India TN and in AP Profit from Input sale4). Escort Supported CHS – AM in A P Tractor &

attachments5) Zamindara Farm Solution- Punjab Fazilka dist.

punjaba) Library systemb) Taxi system

6) Mahindra & Mahindar (Kisan Sambridhi Yojana)

Tractors and attachments

7. UPL Punjab & Haryana

Renting out auto-mated sprayer

B). E M3 Agri Services (unique) In 6 villages in MP

Profit from renting the machines

Interesting Innovation (models) on Harvesters use in India 1. Large farmers, privately owned harvester with

limited renting out to fellow farmers nearby

2. Farmers Groups, PACS, Multipurpose Societies.

3. Custom Hiring Center (govt., cooperatives, etc.)

4. Individual farmer operators (at limited scale)5. Traders , entrepreneurs , drivers, doing rental

business of harvesters (dominant one);

1 machine= ~ 1,500 acre/year (~1,000 km)6. Corporate firm - (Tata chemicals, EM3 Agri services, etc.)

First Harvester brought in India (1968)

Over 50,000 harvesters are operating in India

Fig. Process of custom hiring of combine harvester for wheat in Kanzara village, Maharashtra in 2014 ( machine from Haryana)

Combine harvester Owner (Mostly from Punjab & Haryana

Taluka/ Block Level Commission Agent

Village Level Commission Agent

FarmersRental charge paid by farmers Rs.1200/acre

Amount received by Block level agent Rs.1100/acre

Amount received by CH (Rs.1050/acre)

V. CONCLUSIONS AND IMPLICATIONS

Conclusions and Implications• Through custom hiring services, even smallholding farmers

are being able to use costly machineries (tractor and harvesters) and get their benefits.

• The extent of adoption of a farm machinery depends upon several factors such as labor markets, cropping pattern, agrarian structure (land holding, rural infrastructure), level of farm intensification, access to market, etc.

• The new Custom Hiring Services Institutions are emerging, but its structures and function vary across the regions of India (development pathways) of South Asia – Punjab and Haryana model of mechanization will not be

transformable to other parts of India.

• Institutional credit to entrepreneurs interested in Custom Hiring business is a critical bottleneck!

• In adequate R & D for development (adaptation) of small-scale machine in India and in South Asia, in general than the case of mans SE Asian countries.

• Need to consider also distributional implications on use of certain machines.

Conclusions and Implications …II

In Vietnam

Acknowledgments: Farmers, LSP, drivers, CHS managers, coop. secretaries, several other stakeholders.

Thank you very much for your

attention

1. There is no one-size-fits -for-all type of policy prescriptions for promotion of mechanization among smallholding farmers.

2. No other often than strengthening rental services – private informal (LSP), or group, or intermediate led CHSC-AM).

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-110

500

1000

1500

2000

2500

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

domestic Farm Yield (Kg/ha)

Farm Power (kW/ha)

r=0 .99Kg/ha

kW/ha

Relationship of Farm Power vs. Food grain productivity in India

How can mechanical power boost productivity and income of smallholding farmers?

Source: Mehta et al., 2014

Trend in use of power sources in Indian agriculture

SCAM, 2014