CUSTOM HIRING OF AGRICULTURAL MACHINERY AND ITS FUTURE SCOPE

Custom Hiring of Agricultural Machinery and its Future Scope

V.K. Sharma1 , Kulvinder Singh2 and B.S. Panesar3 Punjab Agricultural University, Ludhiana ABSTRACT This paper reviews the status and future of custom hiring in the backdrop of changing world agriculture. The custom hiring got a boost with the onset of green revolution in Mid 1960s and establishment of Agro-industrial Corporations and road network in rural areas. The custom hiring gained importance mainly due to rise in the cropping intensity and drop in average land holding. In India, the total percentage of number of marginal and small size land holding increased from 69.6 in 1970-71 to 78.2 in 1990-91 while this figure for medium and large size land holding declined from 15.2 to 11.5 during the same period. This data clearly indicates that the average size of landholding has decreased. In the backdrop of the fact that farm mechanization would continue to be on the forefront, the impact of further fragmentation of landholding due to rising population of India, government policies of diversification and evolution of new farm machines on prospects of custom hiring has been presented. Further, the reasons for the enhanced scope of custom hiring have been discussed. 1. INTRODUCTION The recent structural changes in economic environment, liberalization policy and the signing of general agreement on tariff and trade has laid down new challenges in which, India has to compete in the international trade including agricultural trade. The basic requirement of this competition is to reduce the unit cost of production, and improve quality of agricultural produce so as to meet the international standards. The cost of production can be reduced only if the cost of every single factor contributing towards the total cost is minimized and resource productivity maximized. Also, various decisions regarding long term investments such as land, building and farm machines are taken with utmost care. Therefore, the agricultural strategies need to be based on the time-tested principles of business management and entrepreneurship so that agriculture can be made a profitable venture. There has been a progressive shift from draft animal power (DAP) to mechanical power in Indian Agriculture because DAP and manual labour were not sufficient to cope with the work load of intensive agriculture. The use of mechanical power is becoming indispensable for making an optimal use of other resources and in-time
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completion of various farm operations under intensive agriculture. Hence, mechanization has become a very crucial input to further the development of agriculture. Mechanization saves time in completing different operations, which gives the crop more time to mature; allows the farmer to be more flexible in his farming operations; and facilitates multi and relay cropping. This transition from animal power to mechanical power in some states has made the agriculture capital intensive. But, it has played a key role in modernization of Indian agriculture due to its benefits of improved labour efficiency and productivity, efficient use of expensive farm inputs, reduction of human drudgery and timeliness of operations. The composition of Indian farms varies drastically. India has a large number of small farms with land holding of less than 2 hectares and very poor economic condition. Single farm ownership and use of tractors and machinery on these small farms is not economically viable. But through custom hiring of agricultural machinery even small farmers have been able to get the benefit of agricultural mechanization. Punjab and Haryana have amply demonstrated it. Therefore this paper looks at the historic prospective, present status and future scope of custom hiring of farm machinery

Registrar. Assistant Agricultural Engineer, Department of Farm Power & Machinery. 3 Professor, School of Energy Studies for Agriculture.

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especially in northern India. 2. HISTORICAL PERSPECTIVE A sea change has occurred in Indian agriculture since Independence. Pressure on land has increased. Progressive mechanization and other developments such as establishment of agro-industries and agro-service centers, rural credit facilities, etc. have all contributed to these changes some aspects of which are discussed below. 2.1 Composition of Farms The percentage of marginal and small farms in India was 69.6, 74.9 and 78.2 in 1970-71, 1980-81 and 199091 respectively (Table 1a). Marginal and small farms
Table 1(a). Percentage of Land Holdings in Different Categories in India & Punjab
Category of Land Holding India 197071 198081 56.8 18.1 13.7 9.1 2.4 100.0 199091 59.4 18.8 13.7 7.1 1.6 100.0 197071 37.6 18.9 20.5 18.0 5.0 100.0 Punjab 198081 19.2 19.4 28.0 26.2 7.2 100.0 199091 26.5 18.2 25.9 23.4 6.0 100.0

Marginal (<1ha) 50.6 Small (1-2 ha) 19.0 Semi-Medium 15.2 (2-4 ha) Medium (4-10 ha) 11.3 Large (> 10 ha) 3.9 Total 100.0

dominate in Indian agriculture in spite of the fact that Consolidation of Land Holding and Fragmentation Act, 1948 was enacted long back. The situation in case of Punjab is different. Percentage of marginal and small holdings actually decreased between 1970-71 and 198081 and increased between 1980-81 and 1990-91. But even then, this percentage in 1990-91 was lower compared to 1970-71. The marginal and small farms cannot enjoy the benefits of mechanization through individual ownership. Custom hiring of farm machinery and power is the only means by which they can reap the benefits of farm mechanization. With the population growing at an alarming rate of 1.8% further fragmentation of the land holdings is continuing. This is clear from Table 1b. The number of land holdings in India increased by about 51% between 1970-71 and 1990-91. In case of Punjab where agricultural mechanization has made maximum progress, the total number of holdings decreased between 1970-71 and 1980-81 and then it increased during the next decade. This number, however, remained lower in 1990-91 compared to 1970-71. Mechanization seems to prevent or slow down fragmentation of holdings. This aspect of agricultural mechanization needs to be studied further. 2.2 Transformation of Farming Agriculture in Punjab, which is the most mechanized in India, has undergone a remarkable change since Independence. It has been transformed from subsistence farming which was entirely dependant on animals for draft power, to mechanized farming using mainly inanimate power sources like tractors, diesel engines, electric motors, etc. The adoption of mechanization has taken place on a very large scale as evident from Table 2.The number of all types of farm machinery grew in leaps and bounds bringing in a phenomenal change in Punjab agriculture. Similar transformation is occurring in Haryana and Western UP. Other states are also showing the trend towards progressive to mechanization of farming.

Table 1(b). Number of Land Holding in India and Punjab (000)

Category of Land Holding India 197071 198081 199091 197071 517.6 260.1 281.1 Punjab 198081 197.3 199.4 287.4 199091 296.1 203.9 288.8

Marginal (<1ha) 35685 Small (1-2 ha) 13409 Semi-Medium 10741 (2-4 ha) Medium (4-10 ha) 7938 Large (> 10 ha) 2763 Total 70536

50290 63342 16007 20048 12108 13969

8035 7571 247.7 269.1 261.5 2142 1706 68.9 73.9 67.2 88582 106636 1375.4 1027.1 1117.5

Table 2. Number of Agricultural Machinery in Punjab

Year Tractor Tiller Disc Harrow 1970-71 1980-81 1990-91 1999-2K 22345 110000 265000 395000 18200 95000 195000 285000 6200 70600 215000 295000 Seed cum Ferti Drill 18000 45800 100000 195000 Spray Pumps 60000 125355 435000 555000 200 3100 4100 Reaper Thresher Planter 76024 245000 297000 350000 310 800 1900 2350 Potato Combine* TD 110 3100 5000 SP 80 1900 3050

Note: * TD: Tractor drawn; SP: Self-propelled

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2.3 Custom Hiring of Farm Machinery Custom hiring of farm machinery was first introduced in Indian agriculture in 1912 when a 30-inch (diameter) steam thresher was used for custom hiring in Layallpur district. These machines were taken to about 10 different places working for 2 or 3 days at each place. The users were charged half rate only i.e. 2 anna a maund (Rs. 3.38 per ton). The output of this thresher was about17 kg/h. Organized move to promote multi farm use of agricultural machinery was made in mid 1960s when Agro-Industries Corporations (AIC) were established in the states. The main role of these AICs was to be a facilitator of farm mechanization. The major objectives of the AICs were: (i) Manufacture and distribution of agricultural machinery and implements as well as of the equipment pertaining to processing, dairying, poultry-farming, fishery and other industries connected with agriculture; (ii) Enable persons engaged in agricultural and allied pursuits to own the means of modernizing their operations or alternatively make available the necessary custom service for this purpose; (iii) Undertake and assist in efficient distribution of inputs for agriculture; (iv) Promote and develop industries having a bearing on production, preservation and supply of food; and (v) Provide technical guidance to farmers and persons concerned with agro-industries with a view to enabling them to conduct their enterprise efficiently. The Agro-Industries Corporation in most states setup Agricultural Machinery Service Centers to provide custom hiring and servicing facilities to the farmers as no such facility was available. These centres were run on no profit no loss basis. From 1967 these centers also supplied pump sets, tractors, power threshers and power tiller on hire purchase basis rather than on custom hiring. These centres suffered huge losses on account of difficulties involved in recovery of loans from the farmers. The AICs had to curtail this project and finally these centers were closed. In the meantime, private entrepreneurs entered the field of custom operation of farm equipment. Owners of tractors and threshers started providing custom service to other fellow farmers for tillage, thrashing, transport, etc. This brought additional income to custom operators and gave access to mechanization for all groups of farmers irrespective of the size of their holdings. Custom hiring of farm machinery got further boost when Govt. of India, in 1971, launched a scheme to set up agro-service centers all over the Country. The main aim of this scheme was

to provide employment to the unemployed engineers and graduates in Agriculture. The Government of India even paid subsidy on the interest (exceeding 5%) on the capital. As a result of this scheme Agro Service Centers in the northern states of Punjab, Haryana and Rajasthan were established to provide custom hiring services for use of tractor operated machinery; to sell farm equipment and other agricultural inputs; and to provide servicing facilities for agricultural machinery. Many of these centers are functioning even today. One can see their harvester combines moving to Central India in February & March and work their way up to North, moving with the wheat harvest from March to early May. 2.4 Rural Credit Services and Nationalization of Bank After independence, major thrust of five year plans was on agriculture and rural development. It was strongly felt that both agriculture and rural sector were short of capital and needed credit support. The farmers and villagers were using moneylenders to meet their credit demand and paying exorbitant rates of interest. So, on 19th July 1969 fourteen leading commercial banks were nationalized with the aim of implementing Government Scheme of rural credit. These banks introduced an experimental scheme of commercial finance at 4% interest per annum for weaker sections including agriculturists. A Credit Guarantee Corporation was set in April, 1971 to operate a voluntary scheme of granting loans up to 75% of the capital subject to certain limitations. This Corporation was also drawn into agricultural development work through lead bank schemes. These nationalized banks were a stimulant for adoption of farm mechanization and establishment of Agro Service Centers through their provision of liberal credit which was also made available for the purchase of pumps, tractors, diesel engines, electric motors, combines and agricultural machinery. These banks helped the farmers to take the benefit of agricultural mechanization technology. They also contributed to the establishment of network of custom hiring, servicing and sales through Agro Service Centres. Other state organizations like land and seed development corporations, marketing federations, etc. also provided valuable technical and financial help to promote custom hiring of farm machinery and tractors. 3. STATUS Since independence, Indian agriculture has been transformed from subsistence agriculture to modern agriculture. The sources of energy and power, farming practices and technologies and crops have under gone a sea change. This is evident from the data on number of

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Table 3. Number of Power Units in India

Year Animals (million) Tractors (million) Diesel Engines (million) Electric Motors (million) Power Tillers (thousand) Selfpropelled Combines (thousand) 0.0 0.0 0.0 0.1 0.2 0.3 0.3 1.5 3.2 4.1 4.4 Farm Workers (million) Cultivated Area (million ha) Irrigated Area (million ha)

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1997

65.0 72.0 80.4 81.4 82.6 83.4 73.4 72.6 70.9 65.2 62.6

0.008 0.020 0.037 0.063 0.168 0.292 0.531 0.810 1.192 1.707 2.032

0.07 0.12 0.23 0.50 1.70 2.32 2.88 5.40 4.80 5.20 5.55

0.02 0.05 0.20 0.50 1.60 2.28 3.35 4.33 8.07 11.13 11.99

0.0 0.0 0.0 1.5 9.6 17.9 16.2 19.6 31.2 55.2 65.9

95.6 112.4 116.0 120.0 124.2 136.2 149.3 165.9 183.5 199.0 205.0

118.8 129.2 133.2 136.2 140.3 140.1 140.0 141.3 143.0 142.8 142.0

20.9 22.8 24.7 27.8 31.1 34.6 38.7 43.2 47.8 53.0 55.0

Table 4. Average holding size and tractor ownership in selected villages in Punjab
Farm category No. of farms 1986 Marginal Small Semi-medium Medium Large Total 90 82 132 166 470 1998 90 108 123 126 46 493 1986 55.4 125.2 330.7 1305.7 1817.0 Area in ha 1998 50.0 146.6 334.6 779.9 624.0 1934.6 Average farm size 1986 0.62 1.53 2.51 7.87 3.87 1998 0.56 1.35 2.72 6.19 13.56 3.92 No. of tractors 1986 1 5 22 123 151 1998 2 7 38 116 58 221 Area per tractor in ha 1986 55.4 25.0 15.0 10.2 12.0 1998 25.0 20.9 8.8 6.7 10.76 8.8

mechanical power units used in Indian agriculture (Table 3). Number of tractors, diesel engines, electric motors, power tillers and self-propelled combines has increased by manifolds during the second half of the twentieth century. Table 4 gives the details of changes in average holding size and of tractor ownership in different categories of farms. This information is based on the findings of studies done in six villages of different zones of Punjab under ICARs All India Coordinated Research Project on Energy Requirements of Agriculture Sector. The change in number of farms in different category does not show a uniform trend. This also applies to the average size of holdings in different categories. However, the number of tractors in each category increased over the 12 year period and area per tractor reduced. The marginal and small farmers and not tractor owning farmers in semi-medium and medium categories apparently got tractor service from the tractor owning semi-medium and medium farmers as the area/tractor in these two categories was the smallest and spare tractor capacity was available. In a situation where the use of draught animals has almost disappeared, the vast number of farmers in marginal,

small, semi-medium and medium categories who not own tractors continue to operate their holdings with hired power and machinery. On the other hand semi-medium and medium farmers who do not own sufficient land of their own are able to achieve operational economy in use of tractors and machinery and earn more income. 4. INFRASTRUCTURE The infrastructure needed for the success of custom hiring operations includes all weather roads, servicing network and spatial distribution of machinery ownership. In many parts of northern region adequate infrastructure including repair and maintenance facilities is available and this has lent a great support to the spread and success of custom hiring of farm machines. Agro Service Centers, Co-operative Societies and other public sector undertakings like agro-industries corporations, markfeds, etc. have further augmented the availability of custom hiring services in the region. 5. CUSTOM HIRING RATES The custom hiring rates prevailing in Punjab in 20022003 are given in Table 5.

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Table 5. Custom hiring rates in Punjab

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Operation Rate (Rs)

Cultivator x 2 and bund making 850 /ha Harrow x 2 1200 /ha Planker x 1 288 /ha Seed drilling 672 /ha Puddling (Cult x 2 + Planker x 2) 2,280 /ha Potato planting 1,200 /ha Potato digging 480 /ha Straw combine (@ 450/trailer) 2,160 /ha Reaper 1,920 /ha Threshing 2,400 /ha Fertilizers broadcasting 360 /ha Combine Harvesting of Paddy or wheat 960 /ha Leveling 600 /ha Stubble shaver 300 /ha Spraying 7 /tank Transportation up to 5 km 300/round trip Transportation for 5 km to 20 km 500/round trip

are in the range of 35-40 hp (51.8%) yet more than 9% tractors are of more than 50 hp. These large size tractors are mainly used for custom hiring work relating to combine harvesting. 7. DIVERSIFICATION OF AGRICULTURE AND CUSTOM HIRING Diversification is the new mantra for sustainable agricultural development especially in paddy-wheat belt. Diversification means diverting a large area under wheat and paddy to other crops. Machinery needed for sowing, planting, transplanting, plant protection, harvesting and product recovery is highly crop specific. Thus, diversification would require use of a vast variety of additional equipment for these operations on limited area in the initial stages, making it highly uneconomical on ownership basis. However, custom hiring through private entrepreneurs or co-operatives will help to increase annual use of these equipment thereby making them economical. Thus, custom hiring of specialized farm equipment for replacement crops can greatly facilitate diversification of production agriculture. 8. FUTURE PROJECTION Diversification of agriculture, need for and introduction of new machines and the trend among the farmers to use increasingly larger tractors will vastly expand the scope for custom hiring of farm equipment because in future multi farm use will be the only way to keep the operating cost of farm equipment at a reasonable level. Listed below are examples of farm equipment which have done well in the field in recent years and which are likely to be used on large scale in the future years. - No till drill - Pulverising roller cum puddler - Rotavator

6. SOCIAL AND ECONOMIC IMPACT OF CUSTOM HIRING In northern region, more than 80% of the operational land holdings are either marginal (<1 ha), small (1-2 ha) or semi-medium (2-4 ha) in size. Many studies have indicated that investment capacity of majority of the farmers in these categories of land holdings is poor. These farmers can not own expensive farm power units and machinery. However, they are making use of modern technology like combine harvester, tillage equipment and planting/sowing machinery through custom hiring. This has helped them improve the timeliness of operation, to increase land productivity and increase economic returns. As a result the living standard of majority of villagers in the northern region has improved. The size of tractors owned by the farmers of northern region, especially Punjab, varies over a wide range from 20 to 60 hp (Table 6). Though majority of the tractors

Table 6. Horse power of tractors on the sample farms in Punjab, 1991-92

District 20 Gurdaspur Ropar Amritsar Kapurthala Jalandhar Patiala Sangrur Bathinda Ferozepur Faridkot Overall % of total 1 1 0.46 25-27 4 3 4 4 5 1 3 5 2 10 41 18.81 Tractor Power Range in hp 30-37 7 9 9 14 13 21 10 11 11 8 113 51.83 45-47 4 5 95 3 4 5 2 10 4 42 19.27 50-55 1 2 2 3 1 5 1 15 6.88 59-61 1 3 1 1 6 2.75 4.03 4.07 3.64 3.46 4.15 3.56 3.43 3.19 4.06 4.15 3.75 Available hp/ha

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- Strip till drill - Ridger planter - Multi crop drill - Sugarcane planter - Sugarcane stripper - Sunflower thresher - High clearance sprayer - Straw combine Most of these machines will prove uneconomical for single farm operation. Under Indian conditions, a majority of the farmers can benefit from the technological superiority of the listed equipment and more such developments in future only through custom hiring. Good networks of rural roads to allow easy movement of equipment, within easy reach repair and maintenance facilities and availability of finance will greatly determine the growth of custom hiring of machinery in different parts of the Country. REFERENCES
Balasankari, P.K. and Salokhe, V.M. 1999. A case study of tractor utilization by farmers, Coimbatore district, India. Agricultural Mechanization in Asia, Africa and Latin America 30(3), 14-18. Brar, S.S. 1998. Dynamics of agricultural production pattern under varying input output price in Punjab. Unpublished Ph.D. (Agril. Economics) thesis, PAU, Ludhiana. Dhillon, B.S. and Sidhu, D.S. 1987. Economics of custom hiring of agricultural machinery in Punjab a few case studies. Agricultural Engineering Today, 11(2) 15-19. Grewal, S.S. 1972. Impact of mechanization (Tractorization) on labour employment and labour productivity in Punjab. Unpublished Ph.D. (Agril. Economics) thesis, PAU, Ludhiana. Hossain, M.A. 1988. Estimation of demand for major agricultural inputs in Punjab agriculture. Unpublished Ph.D. (Agricultural Economics) thesis, PAU, Ludhiana. Joshi, H.C. 1998. Pattern of tractor power utilization in a fodder farm: A case study. Agricultural Mechanization in Asia, Africa and Latin America, 29(3). 39-41. Kalra, V. 1996. Capital Investment and credit transaction in various farm size in Punjab. Unpublished M.Sc. (Agril. Economics) Thesis. PAU, Ludhiana. Kashyap, V.P.S. and Lohan, H.S. 1980. Tractorization in Haryana. Agricultural Engineering Today, 4(2), 9-10. Kaur, K. 1988. Economics of custom hiring of agricultural

machinery in Punjab state. Unpublished Ph.D. (Agril. Economics) thesis, PAU, Ludhiana. Kundu, P.S. 1979. Financing of agro machinery for improved agricultural production. Agricultural Engineering Today, 3(3), 13-14. Mathur, R.N. 1977. The Andhra Pradesh State Agro-Industries Corporation Ltd. Agricultural Engineering Today, 1(7-8), 11-14. Morris, J. 1988. Estimation of tractor repair and maintenance costs. J. Agricultural Engineering Research 41, 191-200. Pandey, M.M. 2000. Energy efficient implements package & needs for their custom hiring Agricultural Engineering Today, 24(6), 1-21. Patel, A.R. 1980. Agro Service Center Scheme: Need for Monitoring. Agricultural Engineering Today, 4(4), 5-7. Peter, E.C. 1993. A proposal to accelerate farm mechanization. AET, 17(3-4), 68-72. Randhawa, M.S. 1980. A history of agriculture in India. All Volumes. Indian Council of Agricultural Research, New Delhi Sandhu, P.S. 1985. A study of change in structure, resource use efficiency and factor share in Punjab agriculture. Unpublished Ph.D. (Agricultural Economics) thesis, PAU, Ludhiana. Sethi, K. 1993. Land use pattern and demand for tractors. Unpublished M.Sc. (Agricultural Economics) Thesis. PAU, Ludhiana. Sharma, M. 1998. A quantitative analysis of demand for tractors in India with particular reference to Punjab. Unpublished M.Sc. (Agricultural Economics) Thesis. PAU, Ludhiana. Sharma, S. 1985. Farm size and economic efficiency in Punjab. Unpublished M.Sc. (Agricultural Economics) Thesis. PAU, Ludhiana. Shrivastava, A.K. and Shrivastava, S.P. 1998. Comparative profitability on the use of tractor vs. Animal draft power, Madhya Pradesh, India, AMA, 29(3), 19-22. Singh, J. and Jindal, B.R. 1993. Tractorization of Punjab Agriculture: Socio Economic Considerations. Department of Economics & Sociology, PAU, Ludhiana. Singh, J. and Dhawan, K.C. 1994. An economic analysis of tractorization of Indian Agriculture: A case study in Punjab state. AMA, 25(4), 61-64. Statistical Abstracts of India. Statistical Abstracts of Punjab. Varma, V. and Maheshwari, R.C. 1979. Economics of tractors in Ravine reclamation. Agricultural Engineering Today, 3(6), 17-18. Yadav, K.S. 1976. Our State Agro Industries Corporations. Agricultural Engineering Today, 1(4), 3-13.

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