Agri-input marketing
Case study Analysis
VANRAJ MINI
TRACTORS: IS SMALL
BEAUTIFUL?
Submitted by:
Meet Dadhania (p39193)
Isha Jain (p39196)
Praharsh Shah (p39212)
Roshan Khetade (p39219)
Suchetna Adhikari (p39229)
Vaibhav Mogra (p39232)
The case revolves around the selection of appropriate market segment for the Vanraj
mini tractor having 10 horsepower. Four segments have been identified for the tractors based
on the land holdings and occupation type: small and marginal farmers, large farmers,
industries, and horticulture farmers. The target segment chosen is that of small and marginal
farmers which is currently not being catered by any big players and have 82% of total farmers
without tractors. These farmers relied on bullocks for their agricultural needs and hence
bullocks became the biggest competition for Vanraj. Although there were other mini tractors
manufactured by Chinese companies, they failed to withstand the hostile Indian conditions.
Many farmers opted for renting the tractors from large farmers. Vanraj tractors was designed
to remove these problems and be more efficient and convenient to the farmers. It reduced the
amount of time spent by farmers on farm activity promoting farm mechanization to improved
productivity, useful for intercultural operations and also for spraying pesticides. All these
benefits come with a cost which makes Vanraj tractor comparatively costly and unaffordable
for marginal farmers as they do not have easy access to formal credit due to small land
holdings. Also, the small and marginal farmers might not find these benefits attractive
enough to make 0.19 million of investment.
A cost benefit analysis for the small and marginal farmers has been done to
understand the dynamics of the segment.
Parameter Bullock Vanraj Rent
Expected Cost
Initial Investment 27000 190000 0
Life Span 8 8 0
Average Fuel /
Fodder 17500 3467.52 48467.52
Maintenance 421.875 2968.75 0
Interest 0 19000 0
Depritiation 3375 23750 0
Human Capital 15480 0 0
Total 36776.88 49186.27 48467.52
Benefit
Renting 75000
Loan Amount 19000 0 19000
Over All Benefit -17776.9 25813.73 -29467.5
There are following assumptions for the analysis - Diesel Price in 2008 was approx. Rs 32,
renting tractor for 180 hours in year – (60 days – 3 hours a day), human works – 400 hours at
cost of Rs 10 per hour (per acre), for this small tractor rent price – is assumed to be Rs 100
(excluding diesel charges) and on an average renting for 500 hours.
The Vanraj tractors is clearly a very viable deal for the small and marginal farmers as
compared to the bullocks. But The feasibility is still in question as the initial investment upon
the tractor is unaffordable for the farmers and the credit market is not supportive for farmers
with small land holdings but promotes purchase of tractors with HP lower than 30 by
providing a subsidy of 30000 rupees.
Small farmers are the group of farmers which have a land holding of 3.87 acres which makes
them eligible to avail credit facilities from the banks. On one hand the man hours on farming
would also reduce and on the other hand the modernize agriculture promises to increase the
productivity. This dual benefit makes the deal of buying tractors attractive and also reduces
the default of loan due to increased productivity. If the small farmers buy the tractors and rent
it to the marginal farmers it would give extra income to the small farmers and on the other
side it would reduce the cost of renting to the marginal farmers
Vanraj also served the benefits beyond farming too by having a Power Take-off point feature
and transportation use and could also be further used in other industries with certain
modifications. But if the market segment would change the strategy would change with
respect to the industry structure and the environment in which it is operating.
RECOMMENDATIONS
- There is potential market for small farmers and also we can target medium farmers
especially in horticulture segment.
- As initial investment is high and also agri input credit are having high default rates ,
to encourage farmers to pay the loans , NGO/SHGs should tie up with microfinance to
provide discounts and offers for this Vanraj tractors.
- Many other players from China and other small tractors are competing in the market,
the current price should be reduced through innovations to increase the market share,
as this will attract small and marginal farmers over the period.
- Awareness and know about the product usage and especially for the type of soil
should be spread among the farmers to show the maximum efficiency of the products.
