'The Indian tractor industry is ready to face the Chinese threat'

Mallika Srinivasan, director of TAFE, the tractor manufacturing company of the Amalgamations Group, belongs to a rare category of women. She is one of the few Indian women to have broken the glass ceiling to emerge as a successful corporate head.

Mallika who inherited TAFE from her family has worked hard to take the company to the top. She is married to Venu Srinivasan, chairman of the TVS Motorcycle.

In an interview with Shobha Warrier, shes discusses issues ranging from the tractor industry to foodgrain surplus to the WTO.

According to the Central Statistical Organisation, the Indian economy grew at only 4 per cent in 2000-2001. Moreover, agriculture saw a negative growth of -0.4 per cent. What is the reason for this negative growth despite good monsoons ?

Yes, the monsoons had been very good, and contrary to the report, agricultural production is expected to be quite good for this season, and is likely to show a positive growth.

Our problem lies in the godowns, which are overflowing with an enormous stock of foodgrains. If we want economic buoyancy, we will have to seriously think of measures to tide over the situation.

If we don't evolve the right policies and enable investments to be made in primary processing, secondary processing and storage, and allow the output moving into other value added foods or into the export markets, there is no point in producing foodgrains and allowing them to rot. I think this is where we are getting stuck.

As far as the tractor industry is concerned, it's future lies in the investible surplus of the farmers going up.

And for the farmers' surplus for investment in tractors to go up there has to be better movement of goods, otherwise we are choking the system.

Recently at the Foodpro Summit, you said we waste foodgrains worth about Rs 500 billion. What do you feel the government should do to stem this waste?

I hope the government would take a different approach to procurement and distribution of foodgrains to facilitate easy movement. I would also like to know if the government is contemplating measures such as open market mechanism and income support system.

These areas need attention so that the surplus income of the farmers goes up.

We are also looking for a new model, a combination of private and public sector encouraging investments in the processing sector.

For the tractor industry, I am looking forward to a review of lending norms for tractors after taking into account the fact that fragmentation of the land in this country is still continuing, and productivity in our country is quite low, compared to international standards.

Other than Haryana and Punjab, intensity of mechanisation is also very low.

As regards lending norms, I hope the policy makers will take into account the fact that the tractor is a multi use vehicle and therefore, revenues of a tractor owner are going to come in, not from lands of his own but also through contract farming or hiring of land or product.

I want the government to balance the entire excise structureso that we can catch up with the rest of the world.

Seventy five per cent of Indians are involved in agriculture, still it seems they are being neglected...

Over the last few years, I think the focus has shifted from agriculture to IT and allied industries. Some noise is made during the Budget but nothing much transpires at the grassroots level.

We talk a lot about the World Trade Organisation. But do we talk about the kind of subsidies that the developed countries give to their farm sector?

There is a lot of scope to encourage agriculture with WTO-compatible modes, but we are not really exploring the options.

Dr M S Swaminathan has said the WTO pact would kill Indian farmers as they would not be able to compete with the developed nations where farming is mechanised.

Yes. I think we can do a lot more for our farmers to encourage them and promote them without changing the ownership pattern and yet be WTO-compatible. We are not giving enough attention to this. This is something I would like to see in the Budget.

Changing the ownership pattern of the land and trying to make it a country of large farms is, to me, not a practical proposition.

Instead why not develop wastelands and use them for farming? You can also have corporate farming, which I feel is a viable option for the country.

So, without touching the ownership pattern of land, you can evolve a model of contract farming, where technology to improve quality and increase productivity can be provided by corporates. This is better than turning your lands into large farms in order to have mechanised farming on a large scale.

This will remove some of the uncertainties associated with farming. I would say, give them technology but don't touch the ownership pattern.

Will the corporate sector be interested in investing in the rural sector?

Yes. They will be interested in investing in processing with contract farming as a model for getting your input.

Agriculture production has come down because we have a buffer stock everywhere. How has it affected the tractor industry?

I think the industry has been affected by two things happening simultaneously.

On the one hand, we had surplus and, on the other, states like Gujarat and Rajasthan suffered severe drought. So, there was plenty on one side and scarcity on the other. Therefore, demand has genuinely fallen.

Some people in the industry have taken a view that there is a demand recession, so costs needed to be cut.

Have you been cutting costs?

Yes, we have been doing that. We don't unnecessarily push things into the market. We are looking at dealer viability. We do not want to sacrifice the long-term interest for short-term benefits.

Which areas are you investing in these days?

We are investing in IT, new products and market development at the grassroots level. That is how we are dealing with the present situation.

Because of the glut in the market, there is a concept of giving the farmers things in advance. We tell them, you take the tractor now, and pay later. So, you are advancing the purchases. Yes, the demand is low today. But we have brought forward tomorrow's demands by giving the tractor in advance. All of us have done this but in varying degrees.

We believe that once the situation improves; as the investible surplus of the farmers improves, there will be an upswing in the market.

Agricultural experts warn that Indian farmers would be affected badly due to the WTO pact. According to them, Indian dairy, poultry, and the fruits and vegetables industries would be most badly hit. What do you think?

I would definitely say that there is a potential impact. I cannot comment whether it has affected seriously because it is too short a period to feel the impact. But it has the potential to damage our farmers. If India wants to match China, and if we want to play a fairly big role in the food chain of the world, our economy has to grow fast enough. We should be able to say we are growing at 8 per cent or 10 per cent.

Without agriculture and the food sector growing, our economy cannot grow. Under WTO, we cannot give away too many concessions in these sectors.

For example, we are the largest producers of fruits and vegetables in the world. We, thus, cannot have our apples rotting when our market is being flooded with American or Australian apples.

When the Chinese Premier was here, he asked the Indians to buy a lot more Chinese products as they are 3 to 4 times cheaper. In fact, it was reported that many traders are buying Chinese products and flooding the Indian market with them. Do you see the Indian industry being affected because of this?

One cannot deny that China is a threat. If you take agriculture, we are quite competitive as far as raw food is concerned. But when it comes to processed or packaged foods, we lag behind.

If we gear ourselves up, the tractor industry can face the Chinese threat, as they don't have the products for this market. But that does not mean that they will not be a threat.

They are very good in developing products that are cost-effective. North America, China and India are the three largest markets for tractors. We also have a well-established auxiliary base. Our quality is fairly good and is beginning to get accepted in the world markets.

However, I am not sure about the kind of formula model we are going to come up with to deal with the Chinese threat. But I feel that we have a reasonable chance to compete.

I can't say we are prepared. I can say that we are aware. But if any sector has a chance to face the Chinese threat, then it is the Indian tractor industry.

Rural India is very poor. How committed is the Indian corporate sector to alleviating rural poverty? Do you feel you should be more concerned about rural poverty?

True, we have a good pulse of rural India. We are one of the few people who say, "Don't cut subsidies for the farmers."

Talking about commitment to society, it is a different thing altogether. In a developing country, every company has to contribute something back to society. Rather, all of us have to do it. I don't think there is a difference there.

There are many companies that are not working in rural India, but doing a lot for the sector all the same. You can be selling to the richest yet you can do a lot for the poor.

We indulge in village-adoption programs, provide primary health centers, and employment to handicapped women from poorer homes.

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