CNH India gears up for emission norms with new engine plant

CNH Industrial is close to completing its engine production facility, adjacent to its current Greater Noida operations. 

This strategic move positions the construction equipment, tractors, and other agricultural machinery provider to address requirements of the upcoming stringent emission standards, with the initial production runs expected to commence in the coming months. 

Speaking on the sidelines of the company's 25th anniversary celebrations in India, Narinder Mittal, country manager and managing director of CNH India and SAARC region, said, "The same engine will be used for agricultural equipment and construction equipment." He added that this modular engine facility has been designed to cater to TREM 4 and TREM 5 engines and also has the capability of making fuel-agnostic engines. At full capacity, the plant is expected to produce approximately 50,000 units annually, catering to both domestic and international markets, Mittal said.

While the plant is ready, the recent deferments in the emission norms mandate for construction equipment and farm equipment by six months and two years, respectively, keep in mind the prospective spike in cost, resulting in inflation. 

For construction equipment, the mandate has now been set to October 2024, while for farm machinery, which primarily means tractors in India, the next stage of emission norms will not be until April 2026. The development effectively means that CNH now has some time to adjust customer demand around its production date. 

CNH's current tractor manufacturing facility in Greater Noida boasts the capability to roll out around 60,000 machines annually, an average of about 1 tractor in eight minutes. The plant recently reached the milestone of churning out 6.7 lakh tractors. The company has so far spent roughly around Rs 1,600 crore in the  Greater Noida plant.The total investment in India over the last 10 years has been Rs 2,800 crore.

Mittal pointed out that tractors, which remain the mainstream industry among all agriculture equipment industries in India, are likely to grow further due to the sustained policy push by the government and focus on increasing farmers' income. Even though the demand for higher HP tractors is increasing in India, even compact tractors, which have their use in smaller landholdings and other applications, are also witnessing a demand, including for exports.

He continued that currently, around 20% of the company's total production in India is exported. Major export markets, which include Europe, Australia, and the US,  together account for over 50% of exports. The company plans to export compact tractors starting next year. 

The development should be seen in the context of India's agriculture segment, which is witnessing a surge in demand for farm machinery. A McKinsey report states that by 2030, Indian agriculture could contribute a staggering $600 billion to the GDP, a 50% jump from 2020 levels.

However, the road ahead demands tackling various hurdles. Fragmented landholdings, antiquated supply chains, and limited access to technology and credit remain major roadblocks. Modernising infrastructure, boosting irrigation efficiency, and fostering innovation are all crucial steps for propelling the sector forward.

Push from the government

The government's data on the country's agricultural sector presents a paradox. While its contribution to GDP has halved since 1990–91, shrinking to 15% amidst the rapid rise of industry and services, it has maintained a steady beat in recent years, growing at an average of 4% annually over the past five years. This trend aligns with the global experience, where agriculture's share of GDP has steadily dwindled, currently hovering around 4%.

The decline in agriculture's GDP footprint is often a natural consequence of economic development. As nations ascend the development ladder, industries and services typically outpace agriculture's growth, leading to its shrinking share. 

It is here that the government's role becomes extremely crucial. Union Agriculture Minister Arjun Munda said in a written reply to Lok Sabha in December last year, "The government has adopted or implemented several developmental programmes, schemes, reforms, and policies towards increasing agricultural productivity, enhancing resource use efficiency, promoting sustainable agriculture, strengthening infrastructure, and ensuring remunerative prices to farmers."

The government data claims that during the period from 2014–15 to March 2023, an amount of Rs 6405.55 crore was allocated for agricultural mechanisation. A total of 15,23,650 machines and equipment have been provided to farmers on subsidy. Furthermore, 23,018 customs hiring centres, 475 high-tech hubs, and 20,461 farm machinery banks have been established to make agricultural machines and equipment available to farmers on a rental basis. 

During 2023–24, Rs. 252.39 crore has been released to states for the distribution of 37937 numbers of agricultural machinery, the establishment of 1916 customs hiring centres, 41 HiTech centres, and 82 numbers of farm machinery banks.