Tractor parts industry fears slump in sales

Lower income of farmers likely to hit tractors, parts demand

LAHORE:

The tractor parts industry is bracing for a downturn in sales, like the previous financial year (2022-23) when sales remained thin due to poor economic conditions in the country.

Tractor sales this year are likely to touch 40,000 units, thanks to the low mark-up loan scheme of the government. However, sales of parts are still 50% lower than the tractor production capacity in the country, said Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Abdul Rehman Aizaz.

He pointed out that the Punjab government had the tradition of purchasing a substantial quantity of wheat at the announced support price but due to the paucity of funds and the lack of storage capacity following heavy imports from Ukraine, it did not happen this year.

“This has forced farmers to sell their bumper wheat crop in the market at lower prices,” he said, adding that the drop in farmers’ income would directly affect the tractor parts industry, which was highly localised and helped produce affordable tractors.

He lamented that changes in the general sales tax (GST) regime had adversely impacted the vendor industry. Similarly, natural disasters such as floods have also hurt the sector as well as withdrawal of subsidies.

Rumours of GST imposition on the sale of tractors have sparked fears among farmers and the tractor and parts sectors. “If these rumours turn out to be true, they will undoubtedly impact tractor sales in the coming year,” Aizaz cautioned.

In the past, tractor subsidy from both federal and provincial governments and the zero-rated GST regime had taken tractor sales beyond 70,000 units per annum.

However, “these subsidies come and go, so does the GST regime, resulting in a boom and bust cycle for the highly indigenous tractor and parts industry. These policy shifts need to come to an end,” remarked Paapam Senior Vice Chairman Mumshad Ali.

Office-bearers of the association emphasised the importance of the farming sector because of its wide-reaching implications for the tractor and vendor industries as well as the livelihoods of thousands of families. They urged the authorities to abandon plans to slap sales tax on tractors.

In fact, the tractor loan scheme should be continued in the coming budget for fiscal year 2024-25, as a prosperous farming community was a key indicator of national prosperity, they added.

Published in The Express Tribune, May 23^rd, 2024.

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