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Potential of tractor industry for the growth of agronomics

Agriculture is the mainstay of Pakistan’s economy. It contributes 19.2 percent to GDP and employs 42 percent of the country’s labour force. It provides food security and raw material to various industries. Growth in agriculture sector not only energies domestic demand for industrial goods and other services but also supports considerably in foreign exchange earnings.

The current GDP growth is not identical with the fast growing population. Poverty level is increasing day-by-day and Pakistan is ranked 146th in the world in relation to per capita income. There is no other option but to improve the crop yields and reduce the pre- and post-harvest losses.

Share of food and cotton based items in our exports are 20 percent and 53 percent respectively. The performance of this sector is not satisfactory in terms of global competitiveness as our yields are very low. For example sugarcane’s yield is 40 percent lower, wheat’s and cotton’s 20 percent lower, non-basmati 40 percent lower and milk’s 90 percent lower.

Pakistan’s agriculture sector also faces over 40 percent to 80 percent post-harvest losses if compared with the global standards. The low output and high losses are negatively damaging farmers and national economy.

The area under cultivation is also declining on account of urbanization and failure to bring the additional areas under cultivation from the available cultivable area.

UPLIFTMENT TO TRACTOR INDUSTRY

Tractor industry plays significant role in agriculture sector and strengthens national economy. In this regard the role of the local tractor industry needs to be analyzed by all stakeholders, specifically the government. The industry holds specific position in the automobile sector due to the fact it has played a basic role in the transfer of technology and transformation of the fledging local light engineering sector into a quality conscious Auto Vending Industry, which comprises more than 250 units.

These vendors besides being helpful to the local tractor industry are also necessary to the entire automobile sector and even to the Defence Industry of Pakistan.

Local content of more than 90 percent has been attained in tractors, which is the highest in the automobile sector of Pakistan. The industry and associated vendors are also supporting the national economy by paying taxes and duties up to the tune of Rs 4.5 billion. It is exporting tractors, implements and spares of $100 million and creating job opportunities for above 500,000 families. Its production capacity is over 70,000 units per annum and is offering a wide range of models from 50hp to 85hp to cover the entire spectrum of local customers as per their needs and affordability.

Tractors produced in Pakistan are cheapest in world. The price of competitive tractor models of Pakistan is $130/hp, against Indian’s $200/hp, China’s 150/hp and Japan’s $900/hp. The tractor industry has also diversified its business for other products such as Prime Movers, Diesel Generating Sets, Forklift Trucks and Agri-Implements.

New projects are also under way to address the emerging needs like Combine Harvesters, Fodder Harvesters, Balers for bio-mass handling, Green engines for international markets and future conformity to local emission standards compliance, development of new tractor models in 100/hp and above ranges, etc.

Tremendous economic potential can be utilized with the help of mechanization. The local tractor industry has the technical and financial expertise for R&D in the areas offers economical solutions and equipment. It requires support of the government to ensure a conducive environment for investment.

The import of CBU tractors had been allowed at zero duty till recently while the import of second hand combine harvester is still allowed, which is hampering the investment prospects of the industry in this sector.

In order to boost the potential of agriculture and related farm machinery sector to its right output level, a firm commitment from all stakeholders and guarantee by the government is essentially required.

From the last year 2016 and now in 2017 tractor sales has boosted the industry. Due to good financial health of farmers through cotton and sugarcane crop tractor has been purchased by most of the farmers.

According to Agriculture Machinery Census 2010 population or number of tractors in Pakistan is 80,000 to 90,0000, which was 40,000 in Census 2004. Growth of 100 percent volume created the need of tractors through modern agricultural practices.

Among the all provinces Punjab has the higher number of tractor which is almost above 75 percent. Tractor industry in Pakistan has a lot of scope; farmers are getting awareness through the masses. Last number of years has major growth in tractors industry sales in result of more cultivation requirements. But there is lot of gaps where people/farmers remained conservative and using old farming techniques.

Government of Pakistan keeps providing subsidy scheme like Green Tractor Scheme in Punjab, Sindh Tractor Scheme. Other than agriculture sector, institutes like Agriculture Department, NHA, PHA, Municipal Committees, Sugar Mills, Construction Companies converting to mechanization thus creating the more demand for tractor.

As per FAO Horse Power for per hectare must be 1.4, but in Pakistan it is 1HP/Hectare. There is much requirement of horse power which will be filled through higher HP tractors or more tractors in volume, creating lot of scope for tractor industry.

In Pakistan one tractor is required for 50 acres then we need about 1 million more tractors. International standards are 1 tractor for only 25 acres or less than this which creates bright future of tractor industry in Pakistan.

Agreements of Millat Tractors with international tractors manufacturing companies were a good omen which would help promote the export of locally made agricultural tools in abroad. The government would cooperate with local tractors industry to promote this sector. Uninterrupted electricity was being supplied to industry in the country.

ISSUES AND CONSTRAINT

Pakistan was able to export locally manufactured tractors to eastern European countries, including South Africa during the current year. Tractor industry seeks abolition of customs duty, cut in input tax. The Pakistan Automotive Manufacturers Association (PAMA) has requested the government to abolish custom duty, additional custom duty, and reduce the rate of input tax on tractors.

While submitting Budget Proposals 2017-18 for the tractor industry, PAMA stated that due to these issues the entire industry was facing liquidity crunch, affecting the trust of foreign investors/shareholders.

The Engineering Development Board (EDB) had earlier allowed import of those components for manufacturing of agricultural tractors which had not been developed in Pakistan at zero percent custom duty. The association, while giving the rationale behind this suggestion, stated that additional duty on input items like raw material, component, sub-components and CKD of the automotive industry that were not manufactured locally had impacted the highly cost sensitive sector. It will keep the prices of agricultural tractors within the buying power of small and medium scale farmers.

The abolition of customs duty and additional customs duty on import of components allowed by EDB will help the company that has no other alternative besides import, said PAMA.

Reduction of GST from 16 percent to 5 percent also greatly helped the tractor industry to stand on its feet.

Mark up on the agriculture loans was very high which must be reduced so that more farmers could buy the locally manufactured high quality tractors for mechanized farming and other economic activities.

 

ACHIEVEMENTS

The China-Pakistan Economic Corridor (CPEC) has given a tremendous boost to the depressed tractor industry in Pakistan as farm tractor sales have spiked up to 38,620 in the first nine months of the current financial year as against 22,169 units during the same period of the previous year. A large number of farm tractors are being used in the under construction CPEC a collection of infrastructure projects throughout Pakistan.

The sources said that Millat Tractors Ltd sold 24,590 Massey Ferguson tractors against last year sale of 13,524 pieces from July to March. The sales of Fiat Tractor manufactured by Al-Ghazi Tractor Ltd increased from 7,947 to 13,926 pieces in the first nine month of the current financial year.

TRACTOR COMPANIES AND BRANDS IN PAKISTAN

Major well known tractors brands available in Pakistan are:

  • New Holland by Al Ghazi Tractors Ltd
  • Massey Ferguson by Millat Tractors Ltd
  • IMT Tractors
  • Belarus Tractors
  • Ursus by Farm All Technology Pvt Ltd
  • Euro Ford Old Tractors
  • John Deere

Other than these some big farms are using CASE Tractors, Claas Tractors, and some China made Dewan Foton, Rahi etc.

New Holland NH Tractors are being locally manufactured by Al Ghazi Tractors along with MF are made by Millat Tractors.

NH and MF are the 90 percent share holders of total tractor market and IMT & Belarus are at 3rd position.

AGTL and MTL are selling through their strong dealership networks in Pakistan. A good number of tractors are also exported to Afghanistan and African countries.

All tractor companies in Pakistan are focusing on Zarai Taraqiati Bank Ltd and Commercial banks to produce sales.

MILLAT TRACTORS LTD – PRODUCERS OF MASSEY FERGUSON

Millat Tractors is manufacturing MF tractors locally in Pakistan, Plant is located at Lahore. Models of MF tractors with Horse Power are given below. MF tractors are mostly used in haulage sector especially in sugarcane areas.

MODELHORSE POWER
MF24055
MF35055
MF26060
MF37575
MF38585
MF385 (4WD)85
AL GHAZI TRACTORS LTD – PRODUCERS OF NEW HOLLAND TRACTORS:
ModelHorse Power
NH 480 SP55
NH 480 SP Power Steering55
NH Ghazi65
NH Ghazi Disc Brake65
NH 64075
NH 640 Disc brake75
NH 640S85
NH 640S Disc Brake85
NH Dabung85
NH 70-56 (4WD)85
NH 55-5655
NH605665
IMT TRACTORS MODELS
ModelHorse Power
IMT 54955
IMT 56565
IMT 57775

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