Globally, approximately 450 million tonnes of crop residue are burnt each year (FAO 2024). Between 2003 and 2020, the global annual cropland area affected by burning ranged from 64 million to 102 million hectares, averaging approximately 81 million hectares (Hall et al. 2024). The customary practice of burning crop residue is a significant concern in many South Asian regions, including the Indo-Gangetic Plain (Lin and Begho 2022). In India, agricultural residue burning contributes to almost 13 per cent of all PM 2.5 emissions (TERI 2021). Extending beyond air quality, it also depletes soil microbes and nutrients such as nitrogen and carbon, decreasing soil fertility and increasing reliance on irrigation, which can lead to further groundwater depletion in an already stressed agricultural landscape (Gupta 2019).

In response, the Indian government launched a centrally sponsored Crop Residue Management (CRM) Scheme in 2018 to subsidise the procurement of CRM machines, such as Super Seeders and Happy Seeders, in Punjab, Haryana, Uttar Pradesh, Madhya Pradesh, and NCT region of Delhi to mitigate crop residue burning (Mo&AFW, 2018). The scheme offers a 50 per cent subsidy on machinery costs to individual farmers and an 80 per cent subsidy to CHCs enabling them to procure and rent machines to farmers. Such CHCs can be set up by cooperative societies, cluster-level federations, self-help groups (SHGs), farmer producer companies/organisations, panchayats, registered farmer societies (RFSs), and village-level entrepreneurs. Although the subsidy rate is lower for individual at 50 per cent, some farmers have also established rental services as an additional income stream by providing crop residue management solutions.

Evolution of the custom hiring ecosystem for farm mechanisation in India

India’s agricultural machinery rental ecosystem has steadily evolved to improve the accessibility and affordability of farm mechanisation solutions for farmers. The history of CHCs in India can be traced back to 1961, when the union government established agro industries corporations (AICs) to offer agricultural machinery rentals along with training in maintenance and upkeep (Bethi and Deshmukh 2023). This support infrastructure was further expanded in 1971 with the launch of agro-services centres, which provided machinery rentals, financial assistance, and labour support (YES BANK-GAA-FICCI 2016). In the 1990s, the National Agricultural Technology Project (NATP) and National Agricultural Innovation Project (NAIP) also introduced machinery rental services, albeit to a limited extent. In 2010, the National Institute on Climate Resilient Agriculture (NICRA) established 100 agricultural extension centres across drought-prone and flood-prone regions, hilly areas, and other difficult agricultural terrains to promote custom hiring services (YES BANK-GAA-FICCI 2016).

A significant boost to farm mechanisation came in 2014–15 when the union government launched the Sub-Mission on Agricultural Mechanisation (SMAM) as a centrally sponsored scheme under its 12th Five-Year Plan. The mission aimed to establish village-level machinery banks and hi-tech equipment hubs, build awareness through demonstrations and capacity building, and conduct performance testing of the equipment to maintain quality standards (Mo&AFW 2017). In the early 2000s, states such as Punjab also promoted the custom hiring of tractors and agricultural equipment through agro machinery service centres (AMSCs) run by primary agricultural cooperative societies (PACS) (Singh 2017).

While the SMAM broadly focuses on farm mechanisation, the CRM Scheme is explicitly targeted at crop residue management. It supports the subsidisation of CRM machinery and capacity-building efforts to curb agricultural residue burning in selected, more severely affected north Indian states (Mo&AFW 2022). As of 2024, these initiatives have resulted in the establishment of ~45,000 CHCs under SMAM and ~41,000 CHCs under the CRM Scheme (Figure 1) (Rajya Sabha 2024).

Table 1. Key milestones in the evolution of custom hiring centres in India

Source: Authors’ compilation

Figure 1. Punjab and Andhra Pradesh are the states with the maximum CHCs under the CRM Scheme and SMAM respectively

Source: Authors’ compilation from Rajya Sabha proceedings (2024).

Custom hiring services in the global context: Countries across the world have adopted diverse models to provide custom hiring services to farmers. For instance, China and the European Union have adopted a policy-driven approach to promote custom hiring, similar to India. In China, the agricultural machinery operation services (AMOS) market, operated by business enterprises, provides rental machines for farm operations, supported by financial incentives from the government for machinery purchases (Lu and Wei 2024). Europe’s Common Agricultural Policy (CAP) supports equipment rental through financial incentives, encouraging farmers to utilise rental services to comply with EU environmental regulations on emissions and resource conservation (Grand View Research 2024).

Conversely, in South Asian countries such as Thailand, Sri Lanka, Nepal, Cambodia, Vietnam, and Bangladesh, the hiring model for farm machinery is primarily driven by the private sector, particularly individual machine owners (FAO 2021; CAPSA-ESCAP 2017). In Thailand and Cambodia, contractors often serve as intermediaries, brokering deals between service providers and farmers for a commission. Similar models are observed in African nations such as Nigeria and Ghana, where digital brokerage platforms such as Hello Tractor and TROTRO Tractor connect farmers with equipment owners (Hilmi 2021). In Brazil, machinery rental services are primarily offered by independent companies such as Primavera Concessionaire (Schavinski 2024), whereas in the United States, they are provided by agribusinesses such as Gripp Custom farming Corp. Globally, CHCs primarily provide services related to land preparation, irrigation, and post-harvest operations (Koike 2009; CAPSA-ESCAP 2017). Notably, CHCs in Sri Lanka also facilitate crop residue recycling to curb burning practices, similar to India (CAPSA-ESCAP 2017).

Why provide rental services for CRM?

The seasonal nature of crop residue burning results in intermittent use of straw management machines. In Punjab, for example, paddy is harvested between September and November each year (MoEFCC 2023a). This limited window of use impacts the economic viability of owning such machines (Chahal et al. 2014). In such cases, renting becomes a practical solution, allowing for more productive use of the equipment (Tanubala 2020; Nissa et al. 2017) and enabling cost recovery for machinery owners.

Moreover, high upfront machinery costs (for example, INR 2.4 lakh per unit for Super Seeders), combined with limited operational knowledge and space constraints, prevent many farmers from owning such specialised equipment (Nagaraj and Srilatha 2020). Renting, therefore, becomes an optimal option. It offers substantial economic benefits through financial savings while enabling capital-intensive, high-quality mechanisation opportunities through short-term machinery control (Singh 2013; Vaja et al. 2016). It bridges the gap between farmers’ needs and their financial limitations (Bethi and Deshmukh 2023; Rawal et al. 2023). Renting also reduces investment needs, maintenance responsibilities, and planning complexities, allowing farmers to manage their financial resources more efficiently and also allocate their time to other tasks (Kisku and Singh 2022). For many, this has helped ease financial stress and lower input costs. Additionally, renting safeguards farmers from the risk of owning such specialised and expensive machines that may become redundant if there is a change in farming practices (Singh 2013).

CHCs function as machinery banks for farmers, equalising access to sophisticated technology by distributing equipment costs over a large user base (Chahal et al. 2014). Revenue generated from the rental business is reinvested in society, contributing to broader social benefits (Nissa et al. 2017). Additionally, CHCs promote rural entrepreneurship and innovation by providing farmers with a platform to experiment with new technologies at affordable rates (Singh 2010; Bethi and Deshmukh 2023).

Status of CHCs set up for CRM practices

Under the CRM Scheme, the union and state governments have spent about INR 3,698 crore subsidising machines and setting up CHCs in the states of Punjab, Haryana, Uttar Pradesh, Madhya Pradesh, and the NCT of Delhi since 2018.

Table 2. Punjab has received the maximum funds across all states under the CRM Scheme

Source: Authors’ compilation based on Lok Sabha (2025) and Rajya Sabha (2024) proceedings.

Despite a significant inflow of funds into the ecosystem, CHC - operated machines remain underutilised. In Punjab, CHCs own nearly 45 per cent of the total CRM machines (Figure 2); yet, only 15 per cent of the farmers practising in-situ CRM accessed their services (Kemanth et al. 2024). Among these, while 12 per cent rented from cooperative societies showing their relative success, just 3 per cent used machines provided by other CHCs, such as those run by FPOs, panchayats, and RFSs.

Moreover, the share of new machines procured by CHCs has also declined significantly in recent years, from over 50 per cent before 2022 to just 10 per cent in the last two years. Overall, nearly 85 per cent of the CRM machines currently held by CHCs were procured between 2018 and 2021, during the scheme’s initial years of rollout (Figure 2). In recent years, CHCs have been procuring new machines, albeit to a limited extent. According to state officials, demand for CRM machines through CHCs have slowed recently compared to the early phase of the scheme.

Figure 2. The procurement of new machines by CHCs in Punjab has declined significantly since 2021

Source: Authors’ compilation based on Agriculture Schemes Subsidy Portal of the Department of Agriculture and Farmers’ Welfare, Government of Punjab

Study objectives

Considering CHCs’ large share in machine ownership, coupled with low lending rates, we sought to answer the following key questions:

• Are CHCs operating efficiently in the context of crop residue management?
• What are the challenges that prevent their effective functioning?
• Can CHCs be transformed into thriving machinery banks to promote crop residue management? If so, how?

Through this study, we aim to inform the union and Punjab state governments about the working model of CHCs and the challenges they face. We also recommend strategies for the Department of Agriculture and Farmers’ Welfare (DoAFW), as well as the Cooperative Department, Government of Punjab, to improve the uptake of CHC services among farmers. Our goal is to support the transformation of these machinery banks into business centres that serve as one-stop solution for CRM operations at the village level. Additionally, the study can inform village-level entrepreneurs looking to invest and operate CHCs by outlining best practices to improve CHC performance, promote machinery adoption, and thereby reduce farmers’ dependence on stubble burning as a residue management measure.

The CHCs have evolved to offer a range of machinery rental packages for both in-situ and ex-situ CRM to farmers. This section outlines the scope of services provided by government and privately run CHCs, and their operational structures. Further, we outline the types of rental packages available, the target beneficiaries, and the payment frameworks followed as part of the rental business. We also assess the uptake of digital tools and their integration into the rental ecosystem.

Government-run CHCs have been more proactive in providing rental services than private ones

CHCs offer a variety of services to farmers. These include the exclusive rental of CRM machines, bundled packages that include the rental of CRM machines with a fuelled tractor and driver, and/or baling services (Table 5).

Table 5. CHCs provide diverse renting solutions for CRM based on farmer needs

Source: Authors’ compilation

In our interviews with CHCs, we found that all CHCs involved in ex-situ operations were renting out their machines. In contrast, only 71 per cent of CHCs engaged in in-situ management were doing so. While all government-run CHCs reported renting out their in-situ CRM machines, only half of the private CHCs reported renting them to other farmers (Figure 5). Despite receiving an 80 per cent subsidy on CRM machines, the other half of the private CHCs used their machines exclusively for their own group members. This is a missed opportunity, as private CHCs collectively own 75 per cent of all CRM machines deployed to CHCs in Punjab (Figure 2).

When asked why they did not rent out their machines, 47 percent of the non-renting private CHCs cited a lack of demand, particularly for machines such as Happy Seeders. A further 40 percent attributed it to their large landholdings, which often left them with little time to manage operations for other farms. Other factors included the cumbersome nature of rental operations. Some CHCs that owned both in-situ and ex-situ machinery also reported being fully occupied with delivering ex-situ management services to farmers.

Fewer private CHCs offer rentals, but those that do provide an end‑to‑end CRM solution

Government and private CHCs differ in the nature of rental services provided to farmers. In Punjab, only 45 per cent of CHCs owning in-situ CRM machines offered a packaged solution that included a fuelled tractor and driver alongside the machine. The remaining CHCs rented out only the CRM machines, leaving farmers responsible for arranging associated inputs, such as tractors and fuel. Based on our survey, 39 per cent of government CHCs and all renting private CHCs (50 per cent of all private CHCs) offered CRM services as a package. The limited availability of packaged services is primarily due to a low tractor ownership with CHCs and a shortage of skilled labour, such as drivers, to conduct the CRM operations.

Figure 5. ~39% of government and ~50% of private CHCs provide CRM as a packaged service

Source: Authors’ analysis
Note: The sample comprised 55 CHCs in total, including 23 government CHCs and 32 private CHCs.

During our survey, we also identified certain individual farmers who, despite receiving machines at a 50 per cent subsidy, had initiated rental operations. Some even provided packaged solutions by operating the CRM machines themselves on others’ farms, generating additional income. In recent years, the Government of Punjab has also recognised such models as part of the broader CHC ecosystem.

CHCs represent a significant opportunity for rural entrepreneurship and employment generation in the village ecosystem. Most CHCs renting in-situ CRM machines reported employing 2–20 people, including drivers, depending on the number of machines deployed. In comparison, CHCs employed in ex-situ CRM reported employing up to 50 workers for baling operations.

Certain CHCs have invested in ex-situ CRM solutions, but face challenges in sustaining operations

In recent years, with significant support from the union and state governments, some CHCs have begun offering ex-situ CRM services to farmers, particularly for baling operations. Although the overall share of CHCs providing ex-situ services remains small, those engaged in such operations have adopted a range of service delivery mechanisms (Table 6).

In our sample, government-run CHCs were primarily providing baling services to farmers for personal use, such as for livestock fodder, or had subcontracted their balers to other aggregators. In contrast, privately run CHCs were typically engaged in large-scale ex-situ operations, conducting baling activities across multiple farms and supplying agricultural residue for industrial use at contracted rates (Table 6).

Table 6. CHCs provide baling services for the end use of residue for both industries and farmers

Source: Authors’ compilation

Among the government-run CHCs, a cooperative society based in Ludhiana was offering balers to farmers for personal use at a rental cost of INR 2,600–2,900 per acre for a 20–25 kg baler, along with a rake and cutter. Another cooperative society in Ludhiana, which had initially provided baling services, had suspended operations due to the unavailability of spare parts for its mini baler.

Among the privately run CHCs, one RFS in Sangrur was charging around INR 1,000 per acre for raking and baling. In contrast, three RFSs and one FPO had signed contracts with industry bodies that use paddy straw as feedstock, charging them INR 155–180 per quintal for bale supply. The cost of baling includes capital expenditure (CAPEX) for purchasing balers, rakes, and trolleys, as well as associated operating expenditure (OPEX) for workforce salaries, fuel, transportation, and other related expenses. However, the CHCs we interviewed were neither collecting payments from farmers for these services nor compensating them for the collected residue.

Due to logistical challenges such as workforce shortages, limited transportation infrastructure (e.g., trolleys), and access to storage sites, some CHCs had leased their baling machinery to other aggregators. Two cooperative societies and one FPO reported such arrangements. One cooperative society charged INR 5,000 per day, while the other society and FPO had leased their balers for INR 1.1 lakh and INR 1.75 lakh, respectively, for the entire kharif harvest season.

Box 1. Lapran Farmer Producer Company’s tech-enabled solutions for efficiency in CRM operations

In 2022, Dr. Gurbir Singh, a PhD in business management, initiated a community-driven effort to address the issue of stubble burning. The group first acquired an old baler to understand the mechanics and efficiency of ex-situ CRM. Following this experiment, they procured a new baler in 2023 under the CRM Scheme, with a focus on managing crop residue through ex-situ management measures. They report that their efforts have significantly reduced stubble burning in Machhiwara, Ludhiana.

Today, the FPO manages around 2400 acres under ex-situ CRM, collecting about 3500- 3800 tonnes of paddy straw annually in and around Machiwara. The collected residue is supplied directly to industry under secured contracts, ensuring timely payments and eliminating the need for on-ground bale storage.

The FPO schedules its operations to ensure operational efficiency and smooth logistics. For instance, baling activities typically begin later in the morning to avoid moisture-related issues caused by dew. In some cases, bales are transported before dawn to reduce the risk of road accidents. The FPO also leverages technology-enabled solutions for smooth inventory management, including GPS-equipped tractors to track fuel usage and log routes for up to six months. Communication among workers and drivers is coordinated through WhatsApp to facilitate seamless bale delivery. Additionally, they prioritise regular machinery maintenance before the harvest season to minimise downtime and ensure uninterrupted baling operations.

The group also plays an active role in knowledge dissemination. They regularly collaborate with other farmer welfare groups and government departments to organise approximately five training sessions every season, focusing on CRM and soil health. With substantial investments in machinery and operations, the FPO has not only achieved profitability but is also reshaping the agricultural landscape, one bale at a time.

In-situ CHCs have shown an interest in diversifying towards ex-situ CRM, but to a limited extent

We interviewed 48 CHCs engaged exclusively in in-situ management to assess their willingness to diversify into ex-situ operations. Nearly 26 per cent of CHCs (11 per cent of government-run and 34 per cent of privately run CHCs) expressed interest in entering the exsitu business. While almost all CHCs cited high capital investment and workforce shortages as key barriers to undertaking baling operations, these concerns were more pronounced among government CHCs. Some CHCs also cited challenges, such as unreliable and delayed payments, concerns over bale moisture levels, issues with contract renewals, and the absence of clear bale pricing mechanisms. Additionally, a few CHCs believed that sufficient balers were already available in their area, reducing the incentive to invest in additional capacity.

CHCs use varied payment models depending on service offerings

CHCs adopt different pricing frameworks to collect rental payments from farmers. They typically charge rents on a per-acre, per-hour, or per-day (eight-hour) basis. Across both government and private CHCs, when renting only CRM machines, the per-hour model most common. In contrast, CHCs offering a bundled service, including a fuelled tractor and driver, prefer the per-acre model. The per-acre pricing approach guarantees a consistent rate of return and simplifies tracking, unlike the per-hour model, which may fluctuate due to delays in machinery returns.

Across the CHCs surveyed, the most commonly rented machine was the Super Seeder. When bundled with a fuelled tractor and driver, the service costs approximately INR 2,000 per acre. In terms of the cost breakup, this includes INR 275 for the CRM machine, INR 750 for fuel, and around INR 1,000 for the tractor and driver. Alternatively, farmers could rent the Super Seeder alone at approximately INR 200 per hour and arrange the tractor and driver independently. The four panchayats interviewed offered CRM machines free of charge to farmers. Despite this, they mentioned limited uptake due to outdated and ill-maintained machinery.

Table 7. The rental rates for CRM machines across all CHC types and districts are similar

Source: Authors’ compilation

The DoAFW, Punjab, has prescribed rental rates for CHCs (Table 8), along with guidelines mandating that machines be provided to small and marginal farmers at zero rents but only at operational charges. During our interviews, 50 per cent of renting CHCs reported applying uniform rates to all beneficiaries for the machines. However, the remaining 50 per cent stated that they offered CRM solutions either free of cost or at subsidised rates to small and marginal farmers. This practice was observed across both government and private CHCs. In some cases, cooperative societies converted rental payments into credit, allowing farmers to pay in instalments, further enhancing the affordability of CRM solutions.

Table 8. The government of Punjab has fixed rental rates for CHCs renting CRM machines to farmers

Source: Department of Agriculture and Farmers Welfare, Government of Punjab, 2024

Box 2. Renting versus buying the CRM equipment: Which is more economically viable for a farmer?

Individual farmers can purchase Super Seeder at a 50 per cent subsidy for ~INR 1.2 lakh. Additionally, the farmer also needs to invest in a high HP tractor for conducting the CRM operations which can cost ~INR 12 lakh at full cost. Assuming a lifespan of five years for the CRM machine and fifteen years for the tractor, the cost of ownership of the machines varies depending on the farmer’s total landholding. For running the CRM operations, a farmer also needs to invest in fuel for running the tractor and requires an operator for conducting the CRM operations.

For small and marginal farmers, self-ownership is particularly expensive, at ~INR 25,845 per acre. However, these costs decline significantly with increase in landholding, averaging ~INR 7,245 per acre for semi-medium and medium farmers, and ~INR 3,525 per acre for large farmers (Table 9). In contrast, the rental rate for the CRM services as a package ranges from INR 1,800 to INR 2,500 per acre. Thus, renting is particularly beneficial for small, marginal, semi-medium and medium farmers. While small and marginal farmers can access the rented CRM machines by paying zero rents but only at operational charges (~INR 1700 per acre ; machine rents exempted) with a fueled tractor and driver at less than 10 per cent of the entire cost of owning and running this equipment, even semimedium and medium farmers can access the whole package of the CRM machine, fuelled tractor and driver at less than one-third of the ownership costs of these machines.

Table 9. CHCs are democratising access to CRM solutions at less than 10 per cent of the cost of ownership for small and marginal farmers

Source: Authors’ analysis
Note: All values represent costs in INR per acre.

Owning a CRM machine and conducting the CRM operations themselves can be a practical investment for farmers cultivating more than 45 acres when rental rates in their area are INR 1800 per acre; for farmers cultivating more than 50 acres when rental rates are INR 2000 per acre and for farmers cultivating more than 65 acres when rental rates are INR 2500 per acre. However, renting through CHCs is far more cost-effective for farmers with lower landholdings. Renting not only reduces capital investment and maintenance burdens, but also improves access to expensive equipment at significantly low prices. Moreover, larger farmers who own CRM machines can further reduce their costs and generate additional revenue by renting them out to other farmers. They can earn up to INR 29,000 by renting out the CRM machine alone and up to INR 2 lakh per season when offering it as a packaged service. For more information, see Annexures 5 and 6.

Figure 6. Running the CRM operations using owned equipment is practical only for farmers with landholdings more than 45 acres

Farmers prefer traditional interactions over digital solutions for accessing CRM solutions

CHCs reported renting out CRM machines to farmers on a first-come, first-served basis. Although not explicitly stated, our interactions with private CHCs suggest that their own members are often prioritised over others. In terms of communication, almost all CHCs – both government and private – relied on in-person visits and phone calls as their primary mode of interaction. Around 10 per cent of the renting CHCs also maintained WhatsApp groups, which were used for multiple purposes, such as sharing information on machinery availability, renting coordination, and training sessions. Government CHCs additionally used these groups to market agricultural inputs to farmers. Some cooperative societies supplemented verbal communication with wall paintings displayed outside their premises. Certain CHCs, though not directly engaged in ex-situ operations, also connected interested farmers with baling aggregators by sharing their contact details.

For digitising the CRM rental ecosystem, the government has launched apps such as i-Khet and Unnat Kisan to promote machinery sharing among farmers. These platforms enable machinery owners to list CRM equipment for rent and allow users to locate the renters and book CRM services for their farms. However, uptake of these apps remains limited, even among CHCs. For instance, among CHCs renting in-situ machines, only 16 per cent had heard of i-Khet (24 per cent of government-run and 8 per cent of privately run CHCs), and none had ever used the app. This limited usage can be attributed to two main reasons. First, the app is perceived as cumbersome compared to more familiar and direct communication channels. Second, being a shared digital ecosystem, it requires both farmers and CHCs to be onboarded. Currently, only 1 per cent of farmers in Punjab use the i-Khet app, and it has not generated noticeable demand for CRM machines (Kemanth et al. 2024). Consequently, CHCs do not list their services on the platform.

The Unnat Kisan app, launched in 2024, has also struggled with adoption among CHCs. Only ~13 per cent of CHCs reported having heard of it, and just ~3 per cent had used it, with awareness levels of the app poor across both government and private CHCs.

Due to the poor uptake of digital platforms and the limited availability of rental data, such as the number of beneficiary farmers or the acreage covered through CRM machine rentals, assessing the service delivery of CHCs remains challenging. While all CHCs maintain manual records, only cooperative societies periodically upload such information on the CS Posible website, a pilot initiative by the India Paryavaran Sahayak Foundation (IPS Foundation). No such system exists for RFSs or other private entities. Additionally, while 95 per cent of CHCs reported collecting verbal feedback, none documented this feedback in written form. This lack of documentation limits the ability to track the CRM machine usage, evaluate service delivery, or recognise CHC efforts in providing quality services to farmers.

CHCs also favour partial burning on farms

In interviews with CHCs renting in-situ CRM solutions to farmers, 76 per cent expressed support for partial burning. This method involves farmers burning the loose straw remaining after the use of combine-harvesters, rather than using cutters or Super Straw Management Systems to spread the residue after combine harvesting (CII Foundation 2019; Rajpurohit 2022). This trend is concerning, as partial burning is gaining traction in Punjab. Around 50 per cent of farmers practising in-situ technologies also practised partial burning prior to machine use during Kharif 2022 (Kemanth et al. 2024). Although CHCs have a communal responsibility to educate farmers, they largely believe that partial burning should be permitted. CHCs report that burning loose straw improves CRM machine performance, such as Super Seeders, by reducing their wear and tear, lowering diesel consumption, and aiding in pest control. Reported benefits include a reduction in diesel use of about 18–20 per cent, translating to fuel savings up to 1.8–2 litres per acre and cost savings of approximately INR 140–180 per acre. Some CHCs even reported charging an additional fee up to INR 200 for clearing a no-burn field compared to a partially burnt one. To address this challenge, targeted government-led training initiatives should be introduced for CHCs, enabling them to actively promote the complete elimination of burning practices.

While the CHC ecosystem in Punjab has evolved significantly through policy initiatives, literature critically assessing the profitability of CHCs in the context of CRM remains scarce. Our study presents a first-of-its-kind assessment, offering a nuanced understanding of CHCs’ business models and their field-level constraints.

CHCs aim to deliver social and environmental impact with an entrepreneurial spirit

When asked about their primary motive for establishing a CHC, most operators cited environmental and social goals, such as providing affordable stubble management solutions to farmers. Among government-run CHCs, 78 per cent were primarily motivated by the aim of supporting farmers, while 66 per cent of privately run CHCs identified the need for sustainable stubble management solutions.

Additionally, privately run CHCs were also driven by an entrepreneurial spirit. About 42 per cent cited profitability as a key motivation, while 39 per cent highlighted entrepreneurial aspirations as their primary driver. In contrast, 22 per cent of government-run CHCs indicated that compliance with government mandates was also a factor behind their establishment.

Figure 10. All CHCs are driven by environmental and social motives, but private CHCs also have a profit-driven focus

Source: Authors’ analysis
Note: The sample comprised 65 CHCs in total, including 27 government CHCs and 38 private CHCs.

Therefore, ensuring the efficient use of CRM machines to support farmers and improve the profitability levels of CHCs is crucial to ensuring the long-term sustainability of CHCs involved in the CRM business.

CHC investments are wide-ranging: modest for insitu, higher for ex-situ residue management

To avail subsidies under the CRM Scheme, CHCs must propose a total project cost between INR 10 lakh and 75 lakh, with at least 35 per cent of the project cost allocated to CRM implements. Among the CHCs that shared project cost details (40 in-situ; 8 ex-situ), nearly half (48 per cent) had invested less than INR 10 lakh in CRM machines. This includes 37 per cent of government-run CHCs and 44 per cent of privately run CHCs, indicating that most operate with modest capital. However, investment levels vary significantly, particularly between in-situ and ex-situ management (Figure 11).

Among CHCs involved in in-situ management, 47 per cent of government-run and 56 per cent of privately run CHCs had invested under INR 10 lakh. Higher investments were relatively rare, with only 13 per cent of government and 4 per cent of private CHCs having invested more than INR 40 lakh as part of their project cost. Median investments stood at INR 13.5 lakh for government CHCs and INR 8.9 lakh for private CHCs, likely reflecting the larger machinery inventories and user bases of government-run CHCs for in-situ management (Figure 11).

Ex-situ CHCs, conversely, reported significantly higher investments. All three government CHCs had invested between INR 30–50 lakh in the CRM business. Private CHCs often invested more, with amounts starting at INR 30 lakh and even reaching INR 1–2 crore in some cases. Median investment levels were INR 38.5 lakh for government-run CHCs and INR 48.5 lakh for privately run CHCs. This is likely because private CHCs often take on industrial contracts requiring larger machinery fleets, while government CHCs typically provide baling services for individual farmers and therefore invest relatively less (Table 6).

Figure 11. ~44% of CHCs have invested INR 0–10 lakh, while ~17% had invested more than INR 40 lakh in the CRM business

source: Authors’ analysis
Note: The sample comprised 48 CHCs in total, including 19 government CHCs and 29 private CHCs.

Box 4. A story of how Punjab’s entrepreneurial farmers are improving access to CRM machines in their personal capacities

accessing CRM machines through the 50 per cent subsidy available to individual farmers, many are establishing machinery banks in their personal capacities. Driven by a mix of entrepreneurial ambition to earn additional income and a communal responsibility to reduce crop residue burning, they are improving access to CRM solutions at the village level.

In Bhundri, Ludhiana, Mr. Prabh Sivia purchased a Happy Seeder in 2016 and later availed the 50 per cent subsidy to procure a Super Seeder under the CRM Scheme in 2019. Recognising the need to support small and marginal farmers, he primarily rents his CRM equipment, along with tractors, at rates significantly lower than those charged by other CHCs. During the harvest season, Mr Sivia drives the machinery himself and works seven days a week. In addition to CRM, he also practices direct seeding of rice (DSR) in his fields using short-duration paddy varieties such as PR 126, and actively demonstrates its effectiveness to other farmers. He collaborates with the DoAFW, PAU, krishi vigyan kendras (KVKs), and NGOs such as Manav Vikas Sansthan (MVS) to organise and host training camps on CRM and DSR techniques, offering practical insights and hands-on learning techniques to the farming community.

Mr. Gurcharan Singh from Ghagga, Patiala, also procured CRM machines through the 50 per cent subsidy scheme and has made machine rentals his primary source of income. Farmers can contact him via phone calls or in-person to rent machinery. He maintains detailed records to ensure transparency and accountability of his operations. Mr. Singh and his family members personally operate the machinery on the farmers’ fields availing their services, guaranteeing proper handling of the machines. Despite incurring high diesel and upkeep costs, his Super Seeder covers an optimal area of about 120 acres per season, earning him a steady rental income.

Sources of income and expenditure for CHCs

While private CHCs primarily earn through rental payments for CRM machinery, governmentbased CHCs have additional revenue sources beyond CRM machinery rental payments. Cooperative societies typically generate their revenues from providing loans and selling agricultural inputs such as seeds, fertilisers, and pesticides to farmers. Their major expenditures include employee wages and salaries, as well as machinery maintenance costs. In our survey, 83 per cent of cooperatives cited loans as their most significant revenue source, while 50 per cent identified wages and salaries as their most significant expenditure. Both government and private CHCs allocate a significant portion of their seasonal expenditure to repairing and maintaining CRM machines. Additionally, several CHCs also invest part of their income in procuring new machines to align with farmers’ evolving needs.

Box 5. Virk Farm Group’s hands-on learning tools are improving farmer awareness through practical learning experiences

Virk Farm Group, a registered farmer society (RFS) based in Ludhiana, procured two Super Seeders in 2020 to address the issue of stubble burning. While they rent out CRM machines to farmers, what sets them apart is their active engagement with the farming community through live, on-field demonstrations of CRM machines. By showcasing the utility and practical benefits of CRM machines through hands-on learning tools, they have helped build trust and improve the adoption of CRM practices. The group’s initiative highlights the power of farmer-to-farmer learning and knowledge sharing in accelerating the uptake of zero-burn farming practices on the ground.

Government CHCs have a wider reach for in-situ CRM, while private CHCs lead in providing ex-situ CRM solutions

Although CHCs procure CRM machines at an 80 per cent subsidy, they must cover sufficient acreage per year to ensure financial viability. For instance, a Super Seeder procured for about INR 48,000 would need to cover ~105 acres (42 hectares) annually to break even over five years (Annexure 3). Based on our survey, about 36 per cent (46 per cent of government-run and 27 per cent of privately run CHCs) met this threshold, covering ~100 acres with one Super Seeder in a single harvest season.

Government CHCs renting out in-situ CRM machines outperform their private counterparts in both land coverage and farmer reach. The median land area covered per government CHC was ~300 acres, compared to ~75 acres for private CHCs using in-situ CRM machines. Similarly, the median number of farmers served stood at 50 for government CHCs and 10 for private CHCs. One key reason for this disparity is that all government CHCs engage in renting out CRM machines, while nearly half of the private CHCs use their equipment exclusively within their own groups, limiting their scope and reach. Additionally, government CHCs tend to invest slightly more than private ones in setting up operations for in-situ management (Figure 12).

Figure 12. Government CHCs cover approximately 4 times the area and 5 times the number of farmers as compared to private CHCs through their in-situ machines

Source: Authors’ analysis
Note: 1) In the chart above, the sample comprised 34 CHCs in total, including 14 government CHCs and 20 private CHCs.
2) In the chart below, the sample comprised 30 CHCs in total, including 14 government CHCs and 16 private CHCs.

However, in the case of ex-situ management, private CHCs generally cover a much larger area. One government CHC32 reported covering 150 acres, while private CHCs covered areas ranging between 800–3,000 acres through their baling operations.

Box 6. Nurpur Bet’s model is a win-win with high machinery uptake and high profits

The Nurpur Bet multipurpose cooperative society in Ludhiana exemplifies how CHCs can become profitable. Starting with a single Happy Seeder in 2008, the society has since expanded its fleet to over 40 CRM implements and 12 tractors. Initially established to improve CRM access within the village, the CHC now provides both in-situ and ex-situ CRM services to six more nearby villages.

For in-situ management, the society rents out CRM machines along with tractors, covering approximately 750 acres and supporting nearly 150 farmers. Each Super Seeder alone covers around 175 acres per season, well above the optimal range of ~100 acres.

The CHC employs six permanent staff members to oversee the cooperative’s operations. In addition, chowkidars are assigned to monitor fuel levels before and after field operations to ensure the efficient functioning of the equipment. Tractor drivers are incentivised with performance-based incentives to ensure timely services, reduce attrition rates, and maintain the availability of skilled labour during the crucial harvest season.

The cooperative also offers baling services for farmers’ personal use at a rental cost. To maintain operational efficiency, baling operations are limited to a 15-kilometre radius, enabling timely service and minimising delays. Given the short harvest window, this is critical as farmers prefer fast field clearance for sowing the next crop. On average, the society successfully covers about 150 acres per season in 20–25 days through ex-situ residue management practices. With their broad coverage, high revenues, and effective functioning, they remain profitable under both in-situ and ex-situ operations.

The society is also proactive in staying informed about the latest government schemes. It is fully aware of the 2024 CRM operational guidelines, including the credit-linked back-ended subsidy (CLBES) mechanism. They are also digitally-inclined, using WhatsApp to disburse information regarding CRM practices and sell agricultural inputs to farmers.

Acknowledging the disparate situation of smaller societies with limited machinery stocks and their reliance on larger societies for equipment during the peak harvest season, the society also emphasises the need for more substantial support from the Cooperative Department to strengthen such smaller societies.

The Noorpur Bet model exemplifies how a well-executed CHC model can lead to the adoption of sustainable farming practices, community empowerment, and economic success.

Private CHCs tend to make more profits than their government counterparts

Among the 31 CHCs (25 in-situ; 6 ex-situ) that shared financial data for this study (17 government-run; 14 privately run), 55 per cent reported operating profitably. However, profitability varied across services: 52 per cent of in-situ CHCs and 67 per cent of ex-situ CHCs reported running a profitable venture.

Privately run CHCs involved in in-situ CRM tend to be more profitable than their governmentrun counterparts. While government CHCs typically serve a larger number of farmers over a wider area through in-situ rental services, only 40 per cent were reported to be profitable, compared to 70 per cent of private CHCs. This disparity may be attributed to several factors. For instance, government CHCs generally maintain a larger workforce, including administrative staff and machinery operators resulting in higher salaries and labour costs. In contrast, private CHCs often manage operations themselves, keeping overheads relatively low. Many government CHCs also own underutilised machines, which can further reduce profitability. Additionally, a higher proportion of private CHCs offer CRM services as a package, leading to higher profitability levels (discussed in section 5.6).

This trend is visible in ex-situ services as well, where a greater share of private CHCs reported profitability, primarily as a larger share of government CHCs had leased out their balers to aggregators. CHCs engaged in ex-situ CRM and supplying bales to industry users reported average profits of about INR 4,200 per acre.

Figure 13. A majority of private CHCs across both in-situ and ex-situ CRM reported profitable operations

Source : Authors’ analysis
Note : The sample comprised 25 CHCs in total, including 15 government CHCs and 10 private CHCs.

Private CHCs offering a one-stop solution for CRM accounted for the largest share of profitable centres

CHCs offering a one-stop solution, including a fuelled tractor, a driver, and in-situ CRM machines, tend to be more profitable than those offering only the machines. All private CHCs engaged in the rental business provided tractors along with CRM machines. However, only 39 per cent of government CHCs offered tractors with their CRM machines (discussed previously in section 3.2). Of these government CHCs offering the end-to-end CRM solution, 50 per cent reported profits. On the other hand, among government CHCs providing only CRM machines, just 33 per cent were profitable. On average, CHCs providing a one-stop solution earned profits of around INR 1,037 per acre, accounting for approximately 50 per cent of the revenue per acre. Comparatively, CHCs only renting the CRM machines made profits of INR 90 per acre forming about 30 per cent of their revenue per acre figures. This disparity may stem from higher costs of machinery mishandling and delays faced by CHCs only providing the machines. Although tractors involve a high-cost investment, the 2024 CRM guidelines allow CHCs to procure tractors at an 80 per cent subsidy, presenting an opportunity for these centres to boost their machinery rentals and improve their profitability levels in the coming years.

Figure 14. Providing a one-stop CRM solution is set to make more profits than only CRM machines

Source: Authors’ analysis
Note: The sample comprised 24 CHCs in total, including 9 CHCs renting only CRM machines and 15 CHCs renting CRM machines with tractors.

CHCs play a pivotal role in ensuring the last-mile delivery of CRM solutions to farmers. Their relevance is particularly critical for small and marginal farmers, who often lack access to farm machinery and tractors. This report examines the CHC ecosystem, with a particular focus on CRM, drawing insights from an assessment of 65 CHCs across three districts of Punjab. While government initiatives have significantly helped increase the establishment of CHCs and the distribution of CRM machinery, concerns remain about the operational effectiveness and long-term sustainability of these centres. It is thus crucial that we evaluate the performance of existing CHCs before establishing new ones. Doing so will help ensure that current centres remain viable and continue to serve farmers effectively over time.

The establishment of CHCs is primarily driven by environmental concerns, social responsibilities, and entrepreneurial aspirations. While government-run CHCs primarily aim to support farmers, privately run CHCs also seek profitability and aim to generate employment. The data indicates that private CHCs tend to be more profitable, particularly those offering comprehensive solutions, providing tractors and drivers along with the machinery, resulting in higher rental uptake and profit margins. These findings underscore the need to re-examine the current business models of government-run CHCs and strengthen their operational efficiency to ensure their long-term success.

We note that challenges such as machinery mishandling, delayed returns, high maintenance costs, and a lack of skilled labour contribute to the operational difficulties faced by CHCs. These issues are more commonly encountered by government CHCs, suggesting the need for improved machine management frameworks. Additionally, some CRM machines, particularly Happy Seeders, have reduced uptake among farmers. The year-on-year introduction of newer machinery models has rendered older equipment obsolete, resulting in financial losses for CHCs. A notable emerging trend is the increasing participation of CHCs, particularly private CHCs, in ex-situ CRM options. While this shift reflects a desire to enhance profitability, their operations are often constrained by logistical challenges and misaligned priorities between farmers and baling aggregators.

The report also highlights CHCs’ limited awareness and adoption of digital platforms such as i-Khet and Unnat Kisan, which were designed to streamline machinery rentals in Punjab. There is a pressing need to develop more user-friendly, well-promoted digital solutions that cater to both CHCs and farmers. Broader adoption of such platforms could support authorities with data in monitoring CHC performance and service delivery more effectively.

The CHC ecosystem holds significant promise for Punjab’s transition towards zero stubble burning. CHCs have the potential to boost rural incomes, generate employment opportunities, and reduce emissions. To realise this potential, the Punjab government must implement targeted reforms – leveraging information technology for improved tracking and service management, introducing an end-of-life machine management plan, and providing CHCs with business management training. While this report focuses on Punjab, its findings and recommendations offer broader relevance for policymakers in other states striving to address the stubble burning crisis.

While our study serves as a starting point in examining the effectiveness of CHCs established to promote zero - burn CRM operations, future research should aim to use a more representative sample of CHCs and apply quantitative methods to identify the key drivers of CHC performance, as well as the primary and secondary barriers hindering their success. This would contribute significantly to policy discourse and help prioritise areas for intervention, ensuring that CHCs evolve into a robust and scalable model for delivering CRM services.