Tractor assembling nears collapse amid lockdown

KARACHI: Tractor assembling came to a grinding halt as the government couldn’t let auto vendors operate amid the lockdown, disrupting supplies to the assemblers who were already facing double-digit fall in their sales, industry officials said on Monday.

The tractor industry urged the Prime Minister Imran Khan to take notice of imminent near collapse of tractor manufacturers as the whole industry, including 350 vendors are currently closed down.

“The symbolic permission given to tractor industry to commence production cannot function in isolation unless and until a proper notification allowing its allied vendors and traders to produce and transport components is given,” Shahid Hussain, chief executive officer of Alghazi Tractors said. “This is an urgent need of the time if we have to save the harvesting and the upcoming sowing season from a total collapse.”

Tractor production has stalled since the lockdown for over two weeks and it is zero. The industry was down 23-24 percent year-to-date.

Tractor sales fell to 20,588 units in the first eight months of the current fiscal year from 32,013 units in the corresponding period a year earlier. Production slumped to 20,408 from 31,879.

“Assemblers were already fighting for survival even before the coronavirus episode occurred, which needless to mention has multiplied their problems,” Husain said in a statement. Alone Alghazi Tractors has around Rupees 700-800 million under claim.

Tractor manufacturers called for expeditious and urgent payout of their genuine sales tax refunds that have been in pending for long. “Immediate refunds would improve the cash flow of the industry and its value chain.”

Hussain said if refunds are not made the tractor assemblers would need additional financing to fund their vendors during the financial crunch which certainly would add to the misery and cost of operation.

“The downturn in the tractor sector is most severe compared to other industries as it is not limited to just tractor industry but having a snow ball effect on agriculture as well, being perhaps the only equipment that is helping the farmers in mechanisation to improve crop yield,” Hussain said.

“The vendor base developed in the last three decades facilitated the country to locally produce up to 90 percent of the parts used in tractors. This vending base could survive only if the assemblers continue to produce and sell their units.”

Constant decline in tractor production for almost two and half years has largely weakened the parts producers and some of them have already closed down with limited chance for revival, eliminating thousands of jobs.

"If the remaining vendors are not looked after it will be a huge tragedy for our agriculture as Pakistan is producing the lowest cost tractors of its type in the world,” Hussain said. ”Since tractor demand is bound to rise, the country would be forced to go for costly imports if the tractor industry is not revived.”

Federal and the provincial governments should give cash incentives to the farmers to buy tractors against bank loans on easy installments to improve crop yields and bring can back on to survival track. “In addition, this is the time where a subsidy on tractors for farmers would come handy as the affordability of framers at this junction is highly compromised.”