Tractors’ import likely to hurt local industry

KARACHI: Import of secondhand tractors is likely to hurt the local industry, which faces underutilisation of production capacity due to subdued demand, industry officials and analysts said on Monday.

Industry officials said if the government approves plan to import secondhand tractors it would drain out billions of rupees in investment made in the industry, while keeping thousands of jobs at risks.

“Millions of dollars would be needed to foot the import bill,” an official said, requesting anonymity. Officials said some tractors’ manufacturers have to keep production 30 to 40 percent of their capacities because of low demand.

“We have to sell tractors below the factory price,” the official added. “Selling price has been down because of low purchasing power of farmers, high interest rate by commercial banks, political uncertainty and delay in payments from buyers.”

Price of 50Hp tractor is between Rs770,000 and Rs800,000, while price of 80Hp is between Rs1.3 to 1.7 million. Government planned to allow import of reconditioned tractors to support agriculture sector’s growth, following its decision to import around 100,000 tons of urea and restore gas supplies to three urea plants that were closed for more than a year because of non-supply of gas.

Sales of tractors fell 19 percent to 7,913 units in the first two months of the current fiscal year of 2018/19. Main local tractors makers in the country include Millat, Al-Ghazi Tractors and Orient Automotive Industries.

Shumalia Badar, head of research at Ismail Iqbal Securities, however, said demand is robust as local tractors are able to closely meet the market demand.

“Yet, import of reconditioned tractors would have a negative impact on local producers,” Badar added. Millat Tractors, which sells Massey Ferguson tractors, has been operating at overcapacity over the past one year, while the second biggest local manufacturer Al-Ghazi Tractor that sells Fiat tractors is working slightly under capacity.