Local tractor industry is playing a strategic role in the promotion of the agriculture sector and strengthening national economy. More than 250,000 people are associated with tractor manufacturing industry. Pakistan was able to export locally manufactured tractors to eastern European countries, including South Africa during the current year. The tractor industry is showing signs of revival after a critical period of five years, which saw sales down by almost 80 percent.
The lion’s share went to two main sellers, i.e. Massey Ferguson and Fiat, which sold 23,263 and 14,776 tractors, respectively. Two major 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 crop recovery has contributed 70 percent to the revival in sales; the remainder certainly came from infrastructure development. In the crop sector, rice and sugar cane have particularly helped the tractor industry.
In September 2015, the federal government had to come up with a package of Rs340 billion after rice prices fell to Rs700 per maund (40 kilograms). In April 2016, the Punjab government also associated in a package of Rs200 billion. The rice crop recovered as a result, with its production rising from 3.39 million tons to 3.5 million tons in Punjab alone while prices increased by more than 100 percent. For sugar cane, the acreage has increased by almost 25 percent to over 2million acres in the last three years. Yields have also risen from 550 maunds per acre to 635 maunds. The sucrose recovery went up to 10 percent against earlier 7 percent.
Apart from the current year when farmers have suffered varying levels of price crash, the last two years have relatively been financially good for farmers. Farmers buy tractors whenever they can as they are the only means of transporting cane to mills during the four-month crushing season.
In 2016, when the industry’s sales and production fell 80 percent, the federal government slashed general sales tax by 5 percent. This made tractors cheaper by Rs32, 000 to Rs50, 000, depending on the model and horsepower.
For CPEC’s impact on the tractor industry, it is believed that the more than 1,800-kilometre-long network of new major highways and expansion of old ones at a cost of over $8 billion have helped the industry like never before. In Pakistan, the industry has always suffered inherent problems owing to the underutilization of tractors amid the absence of implements for different agricultural activities.
All along the CPEC routes, contractors and sub-contractors need them for a range of activities during construction. They either have to purchase new machines or hire them from local owners or farmers. In either case, the industry benefits from the megaproject.
The industry now expects production to hit 80,000 units in the coming years. The tractor industry is striving for revival from the adverse impact of taxation, as the present production figures of 53,975 units are still behind the pre-taxation figures of 70,770 units that were achieved years ago. The industry stakeholders said that the imposition of tax has not only overturned the momentum but also the growth, already achieved, was also lost.
Sindh Government, in the past, has been under severe criticism for introducing tractor schemes that lacked transparency. It was the 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.
Currently, GDP growth is not equalizing 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. The increased growth of both agricultural and industrial sector is need of the hour to create jobs and ensure food security.
In this aspect the role of the local tractor industry needs to be reviewed by all stakeholders, particularly the government, further boost its effectiveness.
No doubt the industry’s performance has been quite satisfactory.
The self-reliance in production of indigenously built tractors has been achieved through a very long process over a period of five decade.
Tractor industry holds a unique position in the automobile sector as it has played a basic role in the transfer of technology and transformation of the fledging local light engineering sector into a robust and 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.
A 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 Rs4.5 billion, exporting tractors, implements and spares of $100 million and creating job opportunities for 500,000 families.
The industry has proved its production capacity by 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 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 core strengths, the 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.
There are some new business avenues in agriculture sector, which have tremendous economic potential and can be grasped with the help of mechanization.
Dairy sector is becoming more viable after introduction of Fodder Silage technology. The export of grasses and fodders to Gulf countries is increasing and bio-mass waste (straw, cotton sticks etc) is generating revenue to farmers as a fuel for power generation.
These new avenues are yet at their primitive stage and need support of both private and public sector. The local tractor industry has the technical and financial muscles for R&D in these areas to offer economical solutions and equipment.
It will not be possible without policy support of the government to ensure a conducive environment for investment. Non-friendly government policies have adversely impacted the pace of the Industry’s progress towards greater diversification and technical enhancement, e.g. 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.
Thus in order to boost the potential of our agriculture and related farm machinery sector to its right output level, a firm commitment from all stakeholders duly initiated and guaranteed by the government with the objective to especially attract and protect the investment is essentially required.