INDUSTRY
The long awaited ‘Automotive Development Plan’ was announced during the last month after a lapse of almost five years. The plan provides lucrative incentives for almost all segments of the automobile sector, which includes passenger cars, light commercial vehicles, buses, trucks, and prime movers. Two categories have been developed for the investors in this plan, which include the Green Field Project and the other, the Brown Field Project.
In the Green Field Project, the incentive has mainly been given to the new investors in the passenger cars segments with strict conditions of introduction new ‘make’ rather than new ‘model’. According to this scheme, only those investors who will invest in purchasing of land and development of infrastructure and will introduce only those makes, which are not yet previously assembled in Pakistan will be given incentives in the shape of imports of 100 units of CBUs of that particular make at 50 percent of prevailing rate of custom duty, one time duty free imports of plant equipments and machines and five years relaxation on imports of 100 percent CKD at the rate of 10 percent custom duty for passenger cars only and for three years for buses, trucks and prime movers only to import 100 percent CKD at prevailing rate of custom duty for non localize parts.
In Brown Field Scheme those assembly plants which are closed since 2013 are given a chance to re start their operations by importing 100 percent CKD at the rate of prevailing rate of custom duty for non localize parts for three years for buses, trucks and prime movers only.
Pakistan is basically an agricultural country and our main source of food is agriculture farming. Tractors and agricultural equipments play a major role in mechanized farming. Due to shortage of water resources, unstable input prices of agricultural seeds and fertilizers, lack of research and development and having no advisory services to farmers in Pakistan, the total land utilization could not be significantly increased.
In 1991, it was 21.35MHa and till 2010-2011 it was 23.40MHa out of 79.61 MHa lands, despite the fact that tractor population has been increased over the last 23 years, which are approximately 700,000 units today which according to experts should be more than one million.
The present per hectare horsepower (HP) availability in Pakistan is only 0.90 HP per hectare as opposed to 2.31 HP in India. The requirement of 1.4 HP per hectare Pakistan is recommended by FAO which can be achieved through high volumes of tractor manufacturing industry.
In Pakistan there are six tractor assembly plants, however only three are in production. The accumulated annual productions of all three active units are around 45,000 to 50,000 where as the estimated demand of tractors are more than 70,000 tractors. To fulfil this demand and supply gap, since last ten years imports of CBU were allowed at zero rate of custom duty.
However from the fiscal 2014-15, 15 percent custom duty and 10 percent sales tax is imposed on CBU to support the local tractor industry, which is now further reduce to only five percent in current fiscal year of 2016-17.
Tractors are required by the farmers, construction companies, and land developers. Government is also working on large number of projects and requires large number of tractors.
An in-depth study of last twelve years local production and sales of tractors revealed that the industry is not able to meet the increasing demand of tractors while calculating AAGR the industry shown growth of only 2.16 percent over the last 12 years .There may be different reasons behind this shortfall , such as withdrawal of government’s Green Tractor Schemes , failure of local parts supplies , old equipments, conventional type of production lines or other managing problems, therefore the government is forced to allow imports of CBU tractors to meet the farmers demands.
Pakistan needs more tractor plants to support its farmers and to provide food to its people. In spite of all these knowing facts , in the new ADP 2016-21, this important sector is totally ignored and no incentives in shape of Green or Brown Field is allowed to this important sector. The reasons for this ignorance are best known to the high ups of BOI, EDB and other government departments.
Pakistani people needs foods at affordable price and not new make of lucrative European cars. This important ignorance from a very important government ministry leaves many questions. Anyone can go to the Pakistani Court and can quash this policy at any time similar to the tractor scheme announced in president Pervaiz Musharaf era, which was totally quashed by the Sind High Court. Therefore the concern ministry should immediately review the announced policy and gives similar incentives to this important sector as given to new passenger cars.
The writer is a industry official
