Presented in ACIAR-IFPRI two days Regional Dialogue on Machine Reforms’ for Sustainable Intensification of Agriculture in South Asia on July 21-22, 2017 in New Delhi, India

1. Innovations on Business Models of Custom
Hiring Services of Agricultural Machinery
(CHS-AM)
Presented at “Farm Mechanization Regional Dialogue”, NASC Complex, New Delhi
on 20-21 July 2017
Madhusudan Bhattarai, Economist

2. Sharing economy is growing on all aspects of economy?
The rise of the sharing economy:
On the internet, everything is for hire
Mar 9th 2013 |

3. 1. Land preparation
3. Planting of Paddy
8. Residue handling
6. Harvesting of Paddy
7. Transportation
2. Puddling
Mechanization component for Rice
Even a large farmer can not own all of these machines!
4. Spraying Paddy
5. Spraying Paddy

4. 1. To illustrate importance of custom hiring services for
promotion of agro-machinery uses in India
2. To present classifications of business models of Custom
Hiring Services of Ag. Machineries (CHS-AM) in India
3. To illustrate recent innovations on rental market services and
specially private sector led Custom Hiring Services of Ag.
Machineries (CHS-AM) in India.
II Objectives

5. Diffusion of Tractors across the states of India, 1962 -2012
0
20
40
60
80
100
120
140
160
1960 1970 1980 1990 2000 2010
Haryana J & K Punjab UP
Bihar WB Gujarat MP
MH Rajasthan Karnataka All India
(In No. of Tractor per 1000 ha of NSA)
=> Tractor is a lead farm machinery

6. Effective use of farm machinery (tractor) depends upon how its
fixed cost per unit of use is managed
5 ha
Annual operated land area of the machine (in ha)
Cost
in Rs/ha
40 ha
Rs 300/ ha
Rs 18,00/ ha
Operating cost
Rs. 700/ ha
Rs 600/ ha
300
Rs 15,00/ ha
Rental rate of custom
hiring of tractor, if it is
used under rental services
Rental rate if the
tractor is used only
its owner’s field
Operator’s profit

7. Custom Hiring Services of
Agricultural Machinery

8. Different Models of Custom Hiring Services of AM
1. Individual farmer led …(a)……(b)….
2. Farmers group purchased machineries
3. Cooperative managed CHSC-AM & services
4. Implement Traders’ led CHSC-AM
5. Individual entrepreneur (LSP) operated
6. NGO (non-profit group) supported AMS
7. Govt. supported center (PPP mode)
8. CHSC- AM set up under PPP mode
9. Big Business operated center (TRRINGO, EM3, Zamindara).
10. Start-up firm, with app based coordinated–CHSC-AM

9. Power uses trend across major sources in agriculture, 1971- 2012
SCAM, 2014; Mehta, et al 2014

10. Evolution of Custom Hiring Services
Informal
Semi-formal
Formal
Time Trend
Mechanization
index

11. Types of Business Models of CHSC- AM by Institutions
I. Informal II.Semi- Formal CHS-AM III. Formal CHS - AM
1 Individual farmer
(most widely followed
in all villages in SA)
2.1 Govt supported
(Yantradoot Villages in MP) ; or
Implement traders’ business
3.1 ) Govt. Led CHS-AM
a) DOA- Ext- CHS-AM
b) Yantra Doot village in MP
1a) Landlord System 2.2 Un-registered CHS-AM 3.2) Farmers’ cooperative
managed CHS- AM (in Punjab.)
1b) Service Providers
(LSP)
a) Kerala – Food Security
Army ( by KAU)
3.3 Intermediate led CHS-AM
- Development Project
supported (CSISA,
etc).
b) Labor bank (green bank),
formed/facilitated by
Coops/SHG
3.4 Private Sector – Corporate led
CHSC-AM (this list is big..)
- Other NGOs c) Kudumbasree N groups
- Govt. support
- Individual
entrepreneur
d) NGO (or SHG) supported
Machinery Users Groups

12. Interesting Innovation (models) on Harvesters use in India
1. Large farmers, privately owned harvester with
limited renting out to fellow farmers nearby.
2. Traders , entrepreneurs , drivers, doing rental
business of harvesters (dominant one);
1 machine cover= ~ 1,500 acre/year (~1,000 km)
1. Farmers Groups, PACS, Multipurpose Societies.
2. Custom Hiring Center (govt., cooperatives, etc.)
3. Individual farmer operators (at limited scale)
6. Corporate firm - (Tata chemicals, EM3 Agri
services, etc.)
First Harvester
brought in India
(1968)
Over 50,000 harvesters are
operating in India

13. II. Semi- Formal CHS-AM
a) Kerala – Food Security Army ( by KAU)
b) Labor bank (Green bank)
formed/facilitated by Coops/SHG
c) Kudumbasree N groups
d) NGO supported PT – LSP in Nepal
Dr. U. JAIKUMARAN,
KAU, Ashoka Fellow
Dr Jaikumaran, prof. at Keral Ag. Univ., =>
Fixed module practical training to create
“Food Security Army”
The FSAs were encouraged
to form societies called
Agro Machinery Operation
Service Centres (AMOSC).

14. Selected formally organized CHSC-AM models
A) PACS operated CHSC-
AM (Punjab)
=> Over 1200 CHSCs-AM
• Credit is also allowed
• Low operating cost
• Users are also members
of the PACS (inclusive)
• State govt. subsidy of Rs.
3-4 lakh for purchasing
implements (one time)
• Range of implements
B) Karnataka – PPP
model
b1) SKDRPD led CHSC-AM
b2) John Deere led
consortium (FARM TRACK).
16 centers in 2016, plan to
set up 116 in KA total
=> Different service
providers are involved at
different districts (IT based
start-up for service
collection using mobile)

15. Karnataka- CHSC-AM- under PPP model
In mid 2014, Karnataka state govt. gave contract to run
178 CHSC-AM around the state for six years.
Shri Kshethra Dharmasthala Rural Development Project,
(SKDRDP) – (A temple trust )= 161 (in 2014-15)
The Indian Society of Agribusiness Professionals, New
Delhi = 17 centres.
Each center costs: = 5 million Rs + 2.5 million Rs ( in 1st
and 2nd year). (75 % of cost is supported by Govt.).
In March 2016 ( scaling out):
VST Tillers and Tractors has entered into an agreement
with the Karnataka govt. to set up 92 custom hire service
centres (CHSC) in 9 districts. VST will invest 400 million Rs.
(Later John Deere has another agreement ( FARM TRACK
center) = 548 centers ( Dec 2016)

16. 3.4 Private Sector – Corporate led formal CHS-AM (in India )
Key Player Location Remarks
1) Tata Farmers Services Aligarh, UP Profit from Input sales
2) Yamaha – CHS-AM for rice
transplanter
Tamil Nadu &
AP
More implement sale,
demo of new
implements
3) Coromandal Corp. in South India TN and in AP Profit from Input sale
4). John Deer Tractor company led
PPP mode of CHSC – AM in Karnataka
in Karnataka Tractor & attachments,
francize & app based.
5) Zamindara Farm Solution- Punjab Fazilka dist.
Punjab
a) Library system
b) Taxi system
6) Mahindra & Mahindar (Kisan
Sambridhi Yojana)
Tractors and
attachments
7. UPL operated high tech Sprayer Punjab &
Haryana
Renting out auto-
mated sprayer
B). E M3 Agri Services (unique) In 10 villages in
MP
Profit from renting the
machines
9) Start-up - app based coordinated –
CHSC-AM
Several places
in KA, PJ,
On commission basis,
low transaction costs.

17. V. CONCLUSIONS AND
IMPLICATIONS
Carrot washer used in Haryana

18. Conclusions and Implications
• The new model with new organization set up of Custom
Hiring Services (CHSC-AM) are emerging. Their structures
and functions vary across the regions (development
pathways) of a place.
– Punjab model of mechanization different than Haryana, and the
model operating in Karnataka, MP, and so in other parts of India.
• Transaction costs of doing business with large no of farmers
are high, application of apps and smartphone has provided
new opportunities for pulling services demand and payment
monitoring
– Private corporations have also shown keen interest in CHSC- AM
with prospectus of high business opportunity.
• (~ USD 15 billion/year of market in India, if only 50% of area
comes under rental services)

19. • Innovations are taking place at faster pace and wide
spread across the regions.
• Most of the privately operated CHSC-AM are in intensive
production areas, or at high cropping intensive areas.
• Operating such formal CHSC-AM in interior rural places
for modernize farming (still a challenge!).
• The implementing agencies, even under PPP mode,
should be free in setting fees and in operating and
managing the business center as per local context. No any
subsidy for operational cost of machineries.
Conclusions and Implications …II

20. Acknowledgments: Dr. P K Joshi (IFPRI), Farmers, LSP,
harvester drivers, CHSC managers, coop. secretaries, several
other stakeholders.
Thank you very much for
your attention
1. Application of smartphone and mobile apps have reduced
cost of transaction of services and cost of doing business.
2. There is no one-size-fits -for-all CHSC-AM models to address
machinery uses all over India. Machinery use to be promoted
as per local farming context, and stage of farming.