Bad loans put brakes on Punjab146;s tractor run

However, it wasn’t an anti-farmer step that the SBI envisaged when it imposed the moratorium on loans to buy farm equipment. It was simply that tractor loans were its most worrying non-performing asset. Farm loans accounted for a fifth of SBI’s bad loans; tractor loans saw 17 per cent non-recovery of loans. he state of affairs in Punjab, the state with perhaps the most mechanised farming community, easily exemplifies the indiscipline in paying back loans taken to buy tractors.

As far back as four years, the SBI in Malwa realised that bad loans were showing up significantly on the bank balance sheet. And since 2004, farmers there have had to contend with stricter guidelines in availing of loans from the SBI. “There were countless cases of loan default, following which the eligibility criteria for tractor loans were toughened. Consequently, none of our branches in Bathinda has given out a tractor loan in the past four years,” says SBI Regional Manager S K Bhatia.

The things are no different for the Punjab National Bank, where the list of loan defaulters was growing longer by the day. “There is gross misuse of the funds taken ostensibly for agricultural proposes,” rues PNB Senior Regional Manger Ajit Jaitley. “There have been instances where the borrower connived with the dealers to sell the tractor after taking a loan against it and then using the money for non-agricultural purposes.” Jaitley says there are a large number of cases of loan defaults in PNB branches in Bathinda.

“The banks can do little in such cases. Even though the land of the farmers/borrowers is mortaged to us, auctioning property in case of defaults to recover the loan amount is a Herculean task,” adds Jaitley.

In fact, some bankers point out that Punjab has enough tractors, so when there is a demand for a loan, eyebrows are raised. As per an estimate, for 10 lakh farming families in the state, there are about 4.6 lakh registered tractors. The data suggests that almost every second farming family owns a tractor. With more than 60 percent farmers owning landholdings less than 10 acres, agricultural experts believe there is under-utilisation of tractors in Punjab. “The tractor is viable only if it is used for at least 1,000 hours in a year. But, in Punjab, on average, the vehicle is used for only 300-400 hours,” says Dr G.S. Buttar, director of PAU Regional Station at Bathinda.

The extra scrutiny of the borrowers’ credentials and the density of tractors seem to have affected tractor sales in Punjab. India’s premier tractor manufacturer Mahindra and Mahindra says the market for it in Punjab has become stagnant and the company is focusing on sale potential in states like Andhra Pradesh and Karnatka.

Similarly, another company, the Barnala-based Standard Tractors, too says sales have slackened. “After starting the tractor division in 2001, we witnessed a peak season in 2004 when we sold around 50 tractors per month. The sales now have come down to 20 per month,” admits company General Manager Marketing Ashok Kumar.

“The banks are dragging their feet on loans. Understandably, loan waivers like one Rs 60,000 crore announced by Centre act as deterrents to banks farming loans,” says Kumar.

However, Punjab Tractors Limited zonal marketing head N K Bhogra claims his firm’s share in the Punjab tractor market has remained intact. “Rather we are growing,” claims Bhogra. Founded in 1974, PTL rolls out its tractors under the brand name of Swaraj.