Why do so few farmers use India's custom hiring centres?

Picture a cooperative society's machine shed in a Punjab village in late October. Inside sits a Super Seeder bought with an 80% subsidy. Two lanes away, a farmer with five acres needs his wheat sown within days. On the best evidence available, the odds are that he will not hire it.

01What is a custom hiring centre, and who pays for it?

A custom hiring centre, or CHC, is a rental yard for farm machines. A cooperative, farmer producer organisation, panchayat, self-help group or rural entrepreneur buys tractors and implements with a subsidy. Farmers then hire them by the hour or the acre.

Two central schemes pay for them. The Sub-Mission on Agricultural Mechanisation, SMAM, began in 2014-15 and covers machines for every crop. The crop residue scheme, started in 2018, pays for straw machines in Punjab, Haryana, Uttar Pradesh, Madhya Pradesh and Delhi.

The SMAM subsidy for a centre is credit-linked and paid at the back end. The owner borrows from a bank first, and the subsidy is set against the loan later. So a centre needs a lender's approval as well as the department's.

03Why do farmers skip the centre down the road?

CEEW interviewed 65 centre operators in Ludhiana, Patiala and Sangrur between September and November 2024. Their answers point to six problems, and all six are about how the centres run.

Many centres rent the seeder but not the tractor. A Super Seeder needs a high-horsepower tractor, fuel and a driver. Only 45% of renting centres offered all of that as a package, and 39% of government ones. The rest left the farmer to find a tractor in the busiest weeks of the year. Why Punjab's farmers keep buying their own is the subject of our piece on tractor sales in Punjab.

Everyone needs the machine in the same few weeks. Paddy comes off between mid-September and mid-November, and wheat must go in fast behind it. Centres book first come, first served. An earlier CEEW study found farmers doubt a rented machine will arrive on time, which pushes them to buy.

Sheds hold machines bought to meet targets. About 62% of government centres reported procurement targets from the state, and new models arrive almost yearly. As a result, 53% of renting centres own at least one underused machine, usually the Happy Seeder. Punjab has 13,719 of them, about a tenth of its residue machines.

Half the private centres do not rent at all. Private centres hold about 75% of the residue machines owned by centres, yet only half of them hire out. Their commonest reasons were weak demand (47%) and no time beyond farming their own large holdings (40%).

Booking still runs on phone calls. Only 16% of renting centres had heard of the i-Khet app and 13% of Unnat Kisan; about 3% had used Unnat Kisan. Through the ministry's FARMS app, just 21 implements were hired in Punjab between September 2019 and September 2021.

Wear and tear eats the margin. About 77% of renting centres reported mishandled machines or late returns. Maintenance can take 35 to 55% of rental income. Only 40% of the government centres that shared figures were profitable, against 70% of private ones.

Not one of the six is a shortage of machines, so buying more fixes none of them. Mechanisation across the rest of India is uneven for related reasons, set out in our note on farm mechanisation.

05What should you check before setting up or funding a hiring centre?

1. Price the package, not the implement. A Super Seeder alone earns a Punjab centre about ₹275 an acre; with a tractor and driver it earns ₹2,000 to ₹2,500. Profit follows: about ₹90 an acre against about ₹1,037.
2. Ask farmers what they will hire before you buy. The Happy Seeder was popular when centres stocked it, and now sits unused in many sheds.
3. Plan for the peak. CEEW's 2021 study estimated one Happy Seeder covers at most 64 hectares a season. Add up your members' acres and divide before deciding how many machines to buy.
4. Budget for repairs. Set aside 35 to 55% of rental income for maintenance, and write down who pays for damage and late returns.
5. Line up the loan first. The SMAM centre subsidy is paid against a bank loan, so the lender's appraisal sets your timetable.

Agritech founders should read the app numbers carefully. Farmers and centres book by phone because the hard part is the tractor, the driver and the date, not the screen. Our agritech page sets out how we work with businesses building for farmers.

If you run or plan a centre, scheme matchmaking checks which subsidy fits and capital grants covers the application. The bank loan sits with debt and blended finance. The wider money picture is in funding food and agriculture in India.