Transition to new emission norms unlikely to be a major disruptor, would apply only to >50 HP tractors impacting ~10% of the overall industry volumes: ICRA

23 Mar 2022 , 09:33 AM

At present, TREM III A emission norms are applicable for tractors across HP categories in India and were implemented in April 2010/2011. The revised emission norms are set to become applicable for >50 HP tractors from April 2022 even as a big proportion of the overall industry (<50 HP) would continue to be governed by TREM IIIA norms. The revised emission norms for tractors were earlier slated to be implemented from October 2020; the transition was, however, initially deferred by one year and subsequently by another six months, with the Government being cognizant of the disruption brought about by the pandemic.

Commenting on the impact of the revised norms on the tractor industry and as per a recent report published by ICRA on Tractors, Mr. Rohan Kanwar Gupta, Vice President & Sector Head, Corporate Ratings, ICRA, says, “India remains medium to high HP market, with ~80% of the sales coming from the 30-50 HP categories. The revised emission norms would apply only to >50 HP tractors, impacting only ~10% of the overall industry volumes. Technological know-how is readily available with the OEMs as the export models are already meeting the evolved emission norms. In our estimates, the cost increase because of new emission norms will be in the range of 6-8%, which the OEMs will only gradually pass on to the customers. In addition, OEMs are in the process of realigning their product portfolio, with tractors offering higher torque at lower HP being added to the portfolio; the same could lead to a shift in HP wise mix with the 41-50 HP segment gaining at the expense of the >50 HP segment.”

As things stand, the emission standards for tractors and construction equipment are regulated separately from the broader automobile industry in India. While significant progress has been made for the regulation of on-road vehicles over the years, especially with the expected implementation of BS-VI norms (from April 2020), the emission control regulations for non-road vehicles have been less stringent and are behind the norms implemented in developed countries. Even as emission norms were revised for construction equipment from October 2021, the same are slated to become applicable for tractors from April 2022.