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New Pollution Standards For Tractors Unlikely To Cause Substantial Disruption: Icra

TNI || New Delhi || 28th March 2022

According to ratings agency Icra, the transition to new emission standards in the tractor sector is unlikely to be a big disruption as it will only apply to vehicles with engine capacities of more than 50 horsepower, affecting about 10% of overall industry volumes.

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Tractors with engines greater than 50 horsepower will be subject to the new TREM IV emissions requirements beginning in April 2022, but a large chunk of the total industry with engines less than 50 horsepower will remain regulated by TREM III A standards.

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TREM III A emission rules are currently in effect in India for tractors in various horsepower (HP) categories and were introduced in April 2010/2011, according to Icra.

With over 80% of revenues originating from the 30-50 HP categories, India is a medium-to-high HP market.

The revised pollution standards will only apply to tractors exceeding 50 horsepower, affecting just about 10% of total industry volume, says Rohan Kanwar Gupta, Icra Vice President and Sector Head, Corporate Ratings.

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He noted that technological know-how is easily accessible with OEMs because export models currently fulfil the evolving emission criteria.

On its impact on the tractor prices, Gupta adds that, in their estimations, the cost increase due to new emission requirements will be in the region of 6-8 percent, which the OEMs will only slowly pass on to the customers.

Furthermore, he stated that OEMs are realigning their product portfolios, with tractors with higher torque at lower horsepower being introduced to the mix.

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Because of this, the HP wise mix may shift, with the 41-50 HP segment benefiting at the cost of the 50 HP category. Previously, the higher pollution standards for tractors were set to go into effect in October 2020.

In the aftermath of the coronavirus pandemic, it was initially postponed for a year and thereafter again for six months.