PAAPAM warns green tractor scheme is undermining tractor parts industry

LAHORE: The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has raised serious concerns over the Green Tractor Scheme, warning that it is destabilising the tractor parts industry instead of fostering growth. The scheme has disrupted market stability, strained cash flows and put thousands of jobs at risk.

PAAPAM Chairman Usman Aslam Malik, following a recent meeting at the Punjab Small Industries Corporation (PSIC) House, highlighted the significance of the tractor parts sector, which comprises over 250 small and medium-sized engineering units in Punjab. The industry directly employs more than 35,000 skilled workers and supports over 300,000 others indirectly.

With local manufacturers producing over 900 of the 1,000-plus components required for tractor assembly, the sector plays a crucial role in supporting Pakistan’s agro-economy. However, the current subsidy model has led to a sharp decline in industry volumes, with sales plummeting to a decade low.

Originally announced in May and launched in October, the scheme failed to align with the natural sales cycle of tractors. Farmers, enticed by the promise of a Rs1 million subsidy per unit, postponed purchases, severely impacting sales during the Kharif season. The government’s decision to scale down the scheme from 30,000 to 10,000 tractors further destabilised the market, while delays in disbursing funds to assemblers exacerbated cash flow issues. The lack of clarity on future subsidy programmes has left farmers hesitant to make purchases, affecting ongoing sales.

Malik stressed that short-term, politically driven subsidy schemes disrupt rather than strengthen the industry. He pointed out that Pakistan’s per-hectare horsepower remains low and that inconsistent interventions hinder sustainable mechanisation. Instead of sporadic subsidies, a structured, long-term approach is needed to stabilise the market and drive growth. PAAPAM has proposed a five-year plan with an annual budget of Rs10 billion to subsidise 20,000 tractors per year, capping individual subsidies at Rs500,000. This model, they argue, would ensure stable annual sales of over 50,000 tractors while preparing the sector for future mechanisation with higher-horsepower tractors.

To address the immediate crisis, PAAPAM has urged the government to clear outstanding payments for tractors supplied before Eid, confirm that no new subsidy schemes will be introduced in the current financial year, and ensure that future subsidies are planned with a multi-year budget to prevent artificial demand surges and subsequent market crashes. PAAPAM has recommended launching subsidy programmes ahead of the Rabi and Kharif seasons, reducing the subsidy per tractor to below Rs400,000 to improve accessibility, and introducing a low-markup tractor financing scheme to provide farmers with more sustainable purchasing options.

Given the severity of the situation, PAAPAM is calling for an urgent joint meeting with representatives from the ministries of finance, agriculture, and industries, alongside tractor manufacturers and PAAPAM members. Malik warned that without immediate intervention, many industry players will struggle to sustain operations, leading to widespread job losses and economic setbacks.