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CPEC’s growth, crops revival bring tractor industry delight

In the first seven months of the current fiscal year, tractor sales rose 45 percent year-on-year to 38,173 units, according to data of the Pakistan Automotive Manufacturers Association (PAMA). The lion’s share went to two main sellers, namely Massey Ferguson and Fiat, which sold 23,263 and 14,776 tractors, respectively.

The reasons behind rising sales are the revival of the crop sector in the last three years, and the massive road infrastructure development under the China-Pakistan Economic Corridor (CPEC). The rise infrastructure development contributed 70 percent to the revival in sales. Rice and sugar cane have particularly helped the tractor industry. The rice crop recovered as a result, with its production rising from 3.39 million tonnes to 3.5 million tonnes in Punjab. Also the price increased dramatically. This extra money is now being used for farm mechanization. For sugar cane, yields have also risen from 550 maunds per acre to 635 maunds. This helped the use of tractors substantially.

Farmers suffered levels of price crash; the last two years have relatively been financially best for farmers. Farmers usually buy tractors whenever they can as they are the only means of transporting cane to mills during the four-month crushing season.

The federal and provincial policies helped the tractor industry. In 2016, tractor industry’s sales and production fell 80 percent; the federal government slashed general sales tax by 5 percent. The industry now expects production to cross 50,000 units this year and attain the pre-recession level of 60,000 to 70,000 units next year if the agriculture sector does not relapse into a crisis.

CPEC’s impact on the tractor industry, that 1,800-kilometre-long network of new major highways and expansion of old ones have helped the industry like never before. The agriculture sector did not have this kind of money or activity that could help push tractor sales up a part of it must have come from other sectors. It has frankly opened a new path for tractor owners, especially those falling on and around the roads being constructed. The tractor industry is striving for revival from the adverse impact of taxation.

The industry stakeholders say that the imposition of tax has not only reversed the impetus but also the growth, already achieved, was also lost. Sindh Government, in the past, has been under harder criticism for introducing Tractor Schemes that lacked transparency. It was only after an outcry from farmers and also complaint by PAMA on the irregularities in Sindh Tractor Scheme then, Sindh Government allocated only 6200 units to be divided equally amongst all local manufactures only to silence the protesting companies.

The best option is that government should let this be the choice of the customers i.e. farmers, to choose freely from amongst the available local brands and the Sindh Government should not interfere with the market mechanism in this regard. Farmers are well aware with the standing of one brand against the other in terms of their general performance, credibility on quality, and value for their money.

The role of the local tractor industry needs to be reviewed by all stakeholders, particularly the government, further boost its effectiveness. So far, the industry’s performance has been quite satisfactory. This self-reliance in production of indigenously built tractors has been achieved.

The industry holds a unique position in the automobile sector as it has played a major role in the transfer of technology and transformation of the fledging local light engineering sector. A local content of more than 90 percent has been attained in tractors. This 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 has exported tractors, implements and spares of $100 million and creating job opportunities for 500,000 families. The industry has increased its production capacity by over 70,000 units per annum. It 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.

Cheapest brands in the world

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

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. There are some new business avenues in agriculture sector, which have tremendous economic potential and can be grasped with the help of mechanization. The local tractor industry has the technical and financial muscles for R & D in these areas to offer economical solutions and equipment.

The China-Pakistan Economic Corridor has given a tremendous boost to the depressed tractor industry in Pakistan. 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 which is a collection of infrastructure projects throughout Pakistan.

The sources said that Millat Tractor Ltd sold 24,590 Massey Ferguson tractors against last years’ 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.

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

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