Tottering automotive: Tractor sales plunge after delay in subsidy scheme

Industry blames inconsistent policies and lack of support

LAHORE: Sales of tractors have dropped sharply on a year-on-year basis indicating that the manufacturing industry is facing consequences of what experts say wrong policies of the government.

Total tractor sales in the first quarter of fiscal year 2015-16 stood at 6,745 units, down 28% from 9,363 units in the same period of last year.

“The negative growth is not a good omen for the tractor industry that just came out of the general sales tax (GST) fiasco,” said Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan.

The main reason Khan cited for the plunge in sales was that the provincial governments of Sindh and Punjab had failed to initiate tractor schemes which were announced in July.

“It is unfortunate that this industry, which has achieved more than 90% localisation, is being hurt by policies of the government,” he said.

“First, the government imposed a heavy GST, which knocked down the industry, and now it is mulling over allowing import of used tractors. It is not realising that a strategic industry for an agricultural economy cannot survive these kinds of misadventures.”

He stated the government could have taken a rational approach to help the industry fully exploit its export potential. “A locally produced tractor is available at $7,000 and the tractor with the same quality is sold for $13,000 in the international market,” added Khan.

He said the government had changed the GST regime for the industry five times in the last five years. Resultantly, the industry went into a tailspin in 2011 when production dropped to almost half and a full revival was still not in sight.

He was of the view that the tractor business was cyclic that depended on two main crops.

“Farmers have held back the purchase of tractors anticipating the start of provincial subsidised tractor schemes. Both the farmers and industry are suffering due to the indifference on the part of provincial governments.”

He added that inventories of major tractor manufacturers had gone up since they were expecting big support from these schemes and they had made all the preparation for increasing the production.

Published in The Express Tribune, November 3^rd, 2015.

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