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In the evolving global landscape, the vehicle industry is increasingly prioritizing sustainable solutions. A significant shift is underway from internal combustion vehicles to battery-operated vehicles as compared to hybrid or fuel cell options. This transformation is affecting every vehicle segment, and now it’s time for tractors to adopt electric technology.
Agriculture contribution to Indian GDP is around 18.2% in 2024 and registered an average annual growth rate of 4.18%. India stands as a global powerhouse in agriculture, boasting the world’s second-largest expanse of arable land. Overall agricultural mechanization rate in India is about 47% now, of which tractor comprises around 81.4% of the farm equipment market.
India being the biggest tractor market in the world, annually there is a sale of 10.5 Lakhs of units from India. As per the survey of Ministry of Petroleum C Natural Gas, tractors consume average 7.4% of India’s oil annually and account for 60% of total agricultural fuel usage, approximately the same share as consumed by buses (9.6%). As per ICCT report, emissions of PM and NOx increased by over 500% between 2015 and 2040. Thus, technical development would be required for tractor manufacturers to bring down emissions. This calls for electric vehicle technology adoption for the tractor segment.
Tractors are pivotal in modernizing Indian farming, enhancing efficiency and productivity by performing multiple tasks like ploughing, planting, and harvesting. Their widespread use has significantly reduced manual labour and increased agricultural output. Today, farmers are constantly looking for ways to increase farming efficiency and reduce costs.
Here, let’s try to delve into various cost factors associated with diesel and electric tractors.
For farmers, initial purchasing price is crucial. Tractors are a significant capital investment for them. High initial costs will be stressful affecting their overall budget and cash flow. For small and marginal farmers, high costs will limit accessibility for mechanization. So, it is important to price an electric tractor at par with diesel tractor.
For instance, a 50HP 4WD diesel tractor from various OEMs is priced around 11 lakh rupees in India. To ensure affordability for farmers, electric tractors should be priced around 11-13 lakh rupees.
Major ongoing costs associated with tractors is fuel. Diesel price fluctuates based on global oil prices, which leads to unpredictable operational costs. On the other hand, electric tractors run on electricity, which is significantly cheaper and stable in terms of pricing.
As of today, the average diesel price in India is around ₹90 per litre. The average price for DC fast charging in India is ₹20 per kWh and home charging price is around ₹8 per kWh.
For example, if a 50Hp diesel tractor consumes average 5 liters of diesel per hour, cost of diesel is ₹450 per hour of operation. Whereas a 50Hp electric tractor might consume average 10 kWh of electricity per hour, resulting a cost of electricity to ₹200 per hour of operation. Overtime, these savings will add up making EV tractor more cost effective.
Maintenance and repair are another critical factor for tractors. Diesel tractors have complex engines and more moving parts leading to higher maintenance and repair costs. Regular maintenance work being filter replacements, engine tune-ups and oil changes. These are regular expenses to maintain a diesel tractor. But electric tractors don’t have an engine eliminating the need for oil filters, engine repairs and engine oil changes. These will reduce the cost notably for maintain an electric tractor. However, it is essential to consider the battery life span that may need a replacement every 7-10 years, which can be a major expense.
State and central government regulations and incentives can influence the cost of owning and operating tractors. There are several tractor subsidy schemes across India aimed at supporting farmers and promoting agricultural mechanization. Various states have their own subsidy programs to support farmers in purchasing tractors. For example, schemes in Rajasthan, Uttar Pradesh, Karnataka, Maharashtra, and other states offer financial assistance to make tractors more affordable.
We need to wait and see if the subsidies available for diesel tractors will also apply to electric tractors. Additionally, we should consider if there will be any central subsidies similar to the FAME scheme for electric tractors.
The current GST (Goods and Services Tax) rates in India favour electric vehicles, including electric tractors, over diesel tractors. Diesel tractors with an engine capacity of less than 120 HP are subject to a GST rate of 12%. On the other hand, electric vehicles are taxed at a much lower rate of 5%. This significant difference in tax rates is designed to encourage the adoption of electric vehicles, promoting cleaner and more sustainable technology in agriculture.
Resale value is an often overlooked but important aspect of the total cost of ownership. Diesel tractors have a long-established market and typically hold their value well over time. Electric tractors, being a relatively new technology, may have a more uncertain resale value. However, as electric technology becomes more widespread and accepted, the resale value of electric tractors is likely to improve.
The effectiveness of electric tractors significantly hinges on battery technology and the availability of charging infrastructure. Recent advancements in battery technology have enhanced the performance and range of electric vehicles, but manufacturers must continue to focus on improving operating time and recharging speed.
Additionally, the availability of charging infrastructure is crucial. Farmers need access to charging stations or must invest in installing their own, which presents another initial investment challenge.
Conclusion: It’s evident that there are several factors to consider. Although electric tractors may come with a higher initial purchase price, their reduced fuel and maintenance costs can make them more economical over time. Furthermore, the environmental advantages and potential government incentives further shift the balance in favor of electric tractors. In the future, progress in battery technology and the growth of charging infrastructure will likely increase the competitiveness of electric tractors. As the agricultural industry continues to evolve, it’s essential for farmers to stay informed about these developments to optimize their operations and reduce costs.
(Disclaimer: The views expressed here are solely of the expert. Micelio does not claim ownership and serves only as a platform to share insights from industry leaders)
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About Expert:
Ravi Kulkarni
Co-founder & COO, Moon Rider
Ravi is a dynamic leader in the clean tech space. Passionate about sustainable mobility and electric vehicle technology, Ravi has fueled the growth of two clean tech startups, helping push the world toward carbon neutrality. With deep expertise in operations, manufacturing, and supply chain management, he’s led results-driven teams with skill. A thought leader in the EV industry, Ravi is committed to speeding up the shift to smart, eco-friendly solutions through innovative projects and strategic partnerships across India and beyond.
