Production of tractors comes to a halt

Parts’ suppliers fear massive lay-offs

LAHORE: The production of tractors ground to a halt in December last year and the industry was hopeful of the beginning of operations at the beginning of the new year but it did not happen, said Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Ashraf Sheikh.

“The assembly plants have extended their closure due to the absence of orders,” he said.

Elaborating, Sheikh said the assembly plants were supported by around 250 tier-I suppliers and employment at each of the supplier ranged from 50 to 500. “This supply chain retained workforce in December, but with the delay in payments from assemblers and no future orders forced them to shut down, which rendered at least half of the workforce redundant,” he said.



“The situation is particularly grave in and around Lahore where a majority of the tractor parts manufacturers are located,” said Paapam former chairman Mumshad Ali.

He pointed out that most of the parts makers continued to produce in December even though supply schedules and payments were cancelled or postponed by the assemblers.

“This was done to convert raw material into finished goods and to keep the workforce employed. But with cash reserves drying up, it is no longer possible to continue production,” he lamented.

Other impacts would be fall in tax payments and bank defaults, he said. “The assemblers and parts makers pay income tax, withholding tax and sales tax, and with no sales in December and now January, there will be no tax collection from this sector,” he said.

The assemblers are also facing a cash crunch due to unsold stocks and stuck sales tax refunds that hover around Rs5 billion. Industry experts say the drop in sales is caused by rupee depreciation that has resulted in price increases.

Published in The Express Tribune, January 8^th, 2019.

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