Tractor makers feel the pinch of inconsistent policies

LAHORE: Experts regret low farm mechanisation in Pakistan pointing to the lowest number of farm tractors per 100 hectare of arable land among major agriculture producing countries.

According to the data of Pakistan Automotive Manufacturers Association (PAMA), tractor production in Pakistan was constantly on decline since 2010-11 when the country produced 70,770 farm tractors. The production dipped to 48,120 units in 2011-12 as the government slapped 15 percent general sales tax on tractors that were exempt for sales tax since 1998-99. They said tractor production in 2012-13 stood at 50,859 units that dropped to 34,521 units in 2013-14. After that the government reduced the GST to 10 percent, following which production rose to 48,883 units in 2014-15.

“This year, tractor production in the first five months of this fiscal stands at 12,251 units against production of 20,568 units during the corresponding period last year,” said Syed Mansoor Abbas, the oldest tractor parts manufacturer of the country. He said the declining trend was expected to continue if the government policies were not changed immediately. At the current rate of 2,450 units per month during the first five months of this fiscal, tractor production would remain below 30,000 units, the lowest in a decade. “It was in 2002-03 when 26,230 units were produced,” he added.

Abbas said the vendors and the tractor manufacturers enhanced their production capacities between 1998-99 and 2011. Localisation of tractor parts crossed 94 percent during this period, making Pakistani tractors the cheapest of its type in the world. This, he added was the reason that imported tractors could not make inroads in the Pakistani market.

Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) former chairman Syed Nabeel Hashmi revealed there were 47 tractors per 100 hectares of arable land in Pakistan, three times lower than 158.7 tractors per 100 hectares in India. He said to catch up with the current level of tractor use in India, at least 800,000 additional tractors were required. Even if the peak tractor production of 71,000 was achieved, it would take 11 years to match the number of tractors in India.

Hashmi said the future of agriculture was linked to mechanisation. Agriculture and economic planners of the country should take measures to boost farm machinery use in Pakistan. Tractors, he added were the basic tool for mechanisation in agriculture. He said Pakistan lags behind other countries in use of tractors. He said per 100 hectares tractors are 148 in Russia, 269 in United States, 4,612 in Japan, and 158.8 in Iran.

Another former chairman of Paapam, Usman Malik said inconsistency of policies was extremely harmful for the engineering sector. Since the engineering industry was capital intensive, to recover even the investment cost, the units have to operate at 80-100 percent of the installed capacity. He said the tractor manufacturers operated at 40 percent of their capacity, while tractor parts vendors operated at 10-20 percent of their installed capacities. He said there were two to three vendors for each part, so the orders were divided among them.

Malik said vendors were actually operating at loss, as operating at 10-20 percent capacity was not commercially feasible. However, he added the vendors kept producing parts because if they did not comply with the orders of manufacturers they would lose business and their facility would be closed. In fact many tractor vendors have been forced to close their units, and reviving them would be an uphill task.

Speaking of the two major manufacturers who have halted production, Malik blamed the inconsistent government policies. He said the government for instance changed the GST regime for the industry five times in the last five years.

On top of that, the tractor subsidy schemes announced by the governments of Sindh and Punjab have not been activated yet. “It was because of this announcement that the cash starved farmers held back their buying options,” he added.