A Green Advantage in Tractor Exports

Introduction

Lowering GST on tractors to 5% cuts costs, speeds mechanisation, and strengthens the home base for exports. At the same time, rich-country emission rules are tightening fast. India now faces a clear choice: stay only low-cost, or move up to cleaner, higher-value tractors that meet global norms and win premium markets. A Green Advantage in Tractor Exports.

Overview of the tractor market

• India is a leading supplier, with $1.15 billion in tractor exports to 162 countries in 2024–25.
• India tractor market is projected to witness a 5.97% CAGR (FY2026–FY2033F), from USD 11.41 billion (FY2025) to USD 18.15 billion (FY2033F)

Reasons behind the momentum

1. Policy push and cost alignment: The GST cut to 5% lowers ownership costs. A strong home market supports scale for exports. Reliability and affordability also lift sales in places without emission norms, including Bangladesh, South Africa, and Thailand.
2. Regulatory alignment as a trade lever

• India jumped to Bharat Stage (TREM) IV in 2023, cutting particulate limits by up to 94% and narrowing gaps with the U.S. and EU.
• TREM V by April 2026 will align most tractors with U.S. Tier 4f/EU Stage V. Alignment lets firms sell common models at home and abroad and enables scale.

3. Early signals in key destinations

• United States: Overall tractor exports declined by 40% in 2023–24 and 10% in 2024–25. However, exports in the 75–130 kW category—where India’s and U.S. standards align—increased during this period.
• Europe (Belgium): Following the rollout of TREM IV, exports jumped sharply. Shipments of 37–75 kW tractors in 2023–24 were nearly 200 times those in 2022–23, and large-segment exports reached $28 million in 2024–25.
• Brazil: Because Indian models already met MAR-I (2017/2019), exports rose from $4.5 million in 2017–18 to $88 million in 2024–25, implying a ~65% CAGR.

4. Technology development

• Precision tools like GPS guidance and telematics are spreading, improving efficiency and reducing downtime.
• Digital platforms for sales, service, and support make ownership easier.
  • Electric and hybrid models are emerging, while rental and leasing expand access. • Platform standardisation helps manufacturers share components and speed compliant upgrades.

5. Rising domestic demand

• Mechanisation needs are growing across crops and terrains. Farmers want timely field operations, especially in monsoon-dependent regions, to protect yield and food security. This steady on-farm demand supports scale and product upgrades.
  • Rising farmer incomes are improving willingness to invest in better machines. Compact models and higher-horsepower options both see interest as users match machines to field size and tasks.

Major Concerns

1. Emissions externality: International Council on Clean Transportation (ICCT) projects emissions from tractors and other non-road equipment in India could surpass road vehicles by 2030.
2. Protectionism and positioning: Rising U.S. tariffs strain a pure low-cost strategy. Staying only low-cost risks missing premium, regulated segments in the U.S./EU.

3.Compliance & transition risks: Upgrading to cleaner tech requires investment, certification capacity, and supply-chain readiness; delays could erode market access.

4. Affordability and access constraints: Small and fragmented landholdings limit the practicality of larger machines. High-interest financing and upfront costs make purchases difficult for small and marginal farmers. Ownership and upkeep expenses can strain cash flows.
5. Environment degradation: Heavy machines can cause soil compaction and increase fuel use, adding to environmental costs

Way forward

1. Advance regulatory alignment: Ensure the move to TREM V to smooth entry into Europe and the U.S. while extending leadership in emerging markets.
2. Move up the value chain: Prioritise medium/large segments where alignment already helps; keep serving price-sensitive markets with reliable, efficient models.
3. Targeted incentives for clean tech: Use GST relief and focused incentives for electric/cleaner-technology tractors to accelerate adoption and scale.
4. Build certification and R&D depth: Strengthen testing, compliance, and design capabilities to reduce transition costs and speed market entry.
5. Evidence-led export plan: Track destination-wise outcomes (U.S., Europe, Brazil, and non-norm markets) and continually align product mixes with evolving standards.

Source – The Hindu