Govt’s policy to eat up tractor manufacturers’ market share

Imports from Belarus to hit domestic players and employment base

LAHORE: The federal government is ruining the local tractor manufacturing industry and contrary to claims of promotion, it is pitting the manufacturers against importers of subsidised tractors from Belarus, which will be assembled in Pakistan, say industry experts.

The state-owned company of Belarus will initially assemble 500 tractors a year, and with the increase in demand it plans to enhance production to more than 20,000 units.

The tractor manufacturers, however, are surprised at the government’s move to bring in a foreign competitor at a time when the local industry is producing the cheapest tractors with localisation of parts at over 92%

Successive governments have encouraged the import of Belarus tractors through incentives and concessions, but failed to cause a dent in the dominant share of Pakistani manufacturers in the market.

The tractor industry, through localisation, had gained a good foothold as its products are even cheaper than those of neighbouring India. Pakistani tractor costs around $7,000 while international prices of the same product are around $14,000.

According to the industry experts, during the PPP government in the 1990s, the federal government allowed import of tractors at zero duty and the Sindh government even offered a subsidy of Rs300,000 per imported unit.

The record revealed that even then only 1,860 Belarus tractors were sold while local tractor sales crossed 60,000 units, they pointed out.

They called it a callous move to favour imports over domestic products, but said the industry survived because it produced cheaper tractors - cheaper than even China and India that were known for producing low-priced tractors.

They added the tractor industry was already in hot waters due to decreasing demand and sales and instead of promoting agriculture and adoption of new technology to boost the output, the government was only damaging the industry by allowing new entrants.

The tractor industry has the production capacity of 60,000 units, but by stretching shifts, it produced over 70,000 units per annum in the two years before the imposition of sales tax on tractors.

Currently, sales are around 40,000 units, far less than the industry’s production targets.

Published in The Express Tribune, August 29^th,  2015.

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