India’s Biggest Tractor Maker to Help Farmers Tide Over Note Ban

  • Mahindra to assist in buying seeds, servicing their tractors
  • Company concerned about cultivators missing sowing season

India’s biggest tractor maker said it will extend assistance to farmers affected by the banknote crisis to tide them over the planting season.

Pawan Goenka

Photographer: Prashanth Vishwanathan/Bloomberg

Mahindra & Mahindra Ltd. will help farmers with servicing for their tractors, buying of seeds and give some leeway on loans and advances, Managing Director Pawan Goenka said in an interview last week.

“While loss of sales is a concern, our bigger concern at this time is farmers missing sowing season that can be a severe blow to the farmers and a cascading impact on economy and sales in future,” Goenka said at his office in Mumbai. “We are also working with finance companies to ensure sufficient fund rotation among farmers. It is an unusual situation and we are talking to dealers to extend credit to farmers.”

The government’s decision to withdraw 500- and 1,000-rupee banknotes and its inability to keep pace with demand for replacements especially in rural areas has left the nation’s farmers with a severe currency shortage during the winter sowing season.

The ban has caught citizens by surprise in an economy where businesses and consumers often transact in hard cash. For Mahindra, also India’s biggest manufacturer of sport-utility vehicles, the cash crunch will affect sales as rural areas account for a bulk of its tractor sales and about half of automotive deliveries, Goenka said.
 

Villagers line up outside a bank.

Photographer: Sanjay Kanojia/AFP via Getty Images

The withdrawal of high-denomination banknotes has resulted in demand for commercial vehicles declining by as much as 30 percent, and is expected to hit sales in the near term as fleet operators likely put purchases on hold, ICRA Ltd., a credit rating company backed by Moody’s, said in a note last week.
 
Goenka said he expects the demonetization to cut auto industry sales by 20 percent across all segments, with the effects to last until mid-January. Sales will still see some marginal loss up to six months from now, though an expected implementation of a goods and services tax from April 1 should offset the impact as levies are likely to reduce, he said. Over the long term, the impact of the overhaul of high-denomination banknotes will ease and will be good for the country’s economy and auto industry, he said.

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