Provincial affairs: PAAPAM concerned over delay in tractor subsidy scheme

Scheme based on total production and shortage of tractors.

LAHORE: The Punjab government allocated Rs5 billion to provide subsidy on 25,000 tractors, while the Sindh government announced a subsidy on 29,089 tractors in the provincial budgets 2015-16. These announcements were hailed by the Pakistan Association of Automobile Parts and Accessories Manufacturers (Paapam) members who have seen a drop in tractor sales in the last two years.

Paapam, however, suggested to both governments to divert funds for tractor schemes based on the total production capacity of the country and the shortage of tractors. Giving subsidy on a limited number of tractors results in the misuse of scheme putting vending units in financial hardships.

Papaam Senior Vice Chairman Mumshad Ali lamented that about two months had lapsed since the announcement of the budget but details of the tractor schemes have not been made public so far. This has resulted in a slowdown in tractor bookings as farmers wait for the scheme.

The impact of these schemes would be felt in downstream industries as well as in the output of the agriculture sector.

As such, the companies serving as vendors to the tractor industry are also expected to benefit from the announced scheme.

Paapam Vice Chairman Iftikhar Ahmad added that such tractor schemes in Punjab as well as the Sindh government for providing cash subsidies to farmers will create an erratic demand in the market, resulting into a vicious circle of boom and bust in the tractor industry. He said that partial financing on a limited number of tractors in the past created distortion in the market of artificial demand surge followed by a lull.

Ali exclaimed that such schemes, with government’s contribution amounting to billions of rupees, were misused at the same time by the investors while availing cash subsidy and buying tractors under provincial schemes. Then they would sell them in the market at a price lower than the price being offered by the tractor manufacturers thereby affecting the business of both tractor manufacturers and auto part makers. The provincial governments should ensure transparency in the schemes giving preference and equal opportunities to all the local tractor assemblers of the country, while discouraging imported tractors, he said.

Ali requested both governments for the immediate implementation of the tractor schemes incorporating the proposals submitted by Paapam for the benefit of all stakeholders.

Published in The Express Tribune, July 31^st, 2015.

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