Abstract Background : Agricultural mechanization remains difficult to scale in land-scarce smallholder systems, where fragmented holdings and credit constraints limit household ownership of capital-intensive equipment. Across South Asia, service-based access via rental markets has become an increasingly important pathway to mechanization. However, micro-level evidence on how these markets function, particularly with respect to participation patterns and pricing behavior, remains limited. Methods : Using primary household survey data from Nepal’s Terai plains collected during 2016–2017, this study examines tractor rental markets as a focal case. The study documents ownership and use patterns across the farm-size distribution and describes how observed rental rates vary with social attributes and local supplier availability. All findings are based on cross-sectional associations and are interpreted as descriptive evidence. Results : Tractor services are widely used despite very low ownership, indicating that access is primarily mediated through rental arrangements. Participation spans the farm-size distribution, with substantial reliance among marginal and small farms. Rental rates are higher under wet land tillage conditions associated with greater operating costs and show limited systematic variation by user landholding size. Rates are lower in locations with greater local tractor availability in the point estimates, though this relationship is imprecisely estimated once standard errors are clustered at the ward level. Overall, pricing varies with observable costs and local market conditions, with limited evidence of systematic variation by user characteristics. Conclusions : The evidence indicates that private rental markets can play a central role in mediating access to mechanization in fragmented smallholder settings. From a policy perspective, measures that support market entry and local service availability, including improved access to credit for service providers and investments that facilitate equipment mobility, may complement or outperform approaches centered on individual ownership. Future research using panel data or experimental designs could examine dynamic market responses and the longer-run productivity and distributional implications of service-based mechanization.
K. Sharma (Sat,) studied this question.