Not implemented: Delay in tractor subsidy disrupts supply chain

Industry considering stopping production until stock is cleared

LAHORE: A delegation of the Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam), led by its Senior Vice Chairman Mumshad Ali, raised the issue of delay in implementing the tractor subsidy scheme in a meeting with Federal Minister of National Food Security and Research Sikandar Hayat Khan Bosan.

The tractor scheme announced by the Punjab and Sindh governments was the right step forward as this would boost tractor production, which had seen a decline in the last few years due to changes in the general sales tax rate, said Paapam in a press release.

After the announcement, the tractor assemblers and their associated suppliers made preparations for their production to meet the demand. However, the association said months had passed but there had been no news from the provincial governments on the timeline of the scheme or on the amount of subsidy per tractor.

According to the association, tractor yards of the main assemblers are brimming with machines ready to meet the demand, while cash-starved farmers await the launch of the scheme so that they can apply for tractors. The assemblers were now considering stopping production until they cleared their current stock, it said.

“Such delays and last-minute changes to the subsidy per tractor and the number of tractors to be subsidised are common and have adversely affected the supply chain in the past also,” commented Saeed Iqbal, senior Paapam member, who manufactures tractor parts.

Syed Mansoor Abbas Shah, another tractor part producer, said last year tractor production was relatively stable as no such schemes were announced and the market demand drove production.

Shah added tractor business was a cyclical business, which was disrupted by such schemes, therefore, the government should take the supply side of the business on board before launching the schemes.

The association proposed that funds for such schemes should be diverted to Zarai Taraqiati Bank, which would then reduce loan mark-up, so that farmers could buy tractors at a lower cost and in this way the subsidy would go direct to the small growers.

Published in The Express Tribune, September 8^th,  2015.

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