Tractor industry suffers from erratic policies

Low income of farmers, absence of subsidy hurt tractor sales.

KARACHI: The Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) has said that tractor sales are expected to decline by 25% by the end of June 2016 due to low income of farmers and inconsistent government policies.

“This financial year is expected to close at 30,000 units in tractor sales compared to over 40,000 in the previous year, a drop of 25%,” said Paapam Chairman Mumshad Ali while urging the government to replace tractor subsidies with interest-free loans.

Tractor demand was the only segment within the automobile sector that was facing a recession, he said, adding there were three to four reasons behind the sudden drop in sales in the outgoing fiscal year 2015-16.

According to a press release, the deteriorating financial position of farmers due to drop in prices of farm produce and delay in implementation of the Rs5 billion tractor subsidy scheme have adversely affected the industry.

Moreover, the delay in the launch of the Sindh tractor scheme due to corruption allegations and scandals related to such schemes in previous years and high interest rates on loans provided by Zarai Taraqiati Bank Limited have also contributed to the low sales.

Among other reasons is the volatile tractor business in the outgoing fiscal year. “Tractor assemblers and about 300 small and medium-sized enterprises that produce tractor parts cannot bear the boom and bust in tractor sales that has been the result of uncertain government policies,” he said.

Owing to continuous losses, Ali said, many vendors manufacturing tractor parts may close this year while around 10% have already been forced to shut their facilities.

Published in The Express Tribune, May 24^th, 2016.

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