LAHORE - The tractors industry of the country will get another boost after Sindh and Punjab, the two provinces with the strongest agriculture base, have announced schemes in their budget for fiscal year 2015-16, marking collective subsidy for about 55,000 tractors.
The Punjab government allocated Rs5 billion for the distribution of 25,000 tractors, while the Sindh government marked 29,089 tractors at a subsidy of Rs200,000 to Rs300,000 on each unit. This means a total of 54,089 tractors would be made available at subsidised rates.
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Chairman, Siddique Misri has welcomed the new tractors schemes in provincial budgets 2015-16 of Punjab and Sindh, however, suggested both the governments to divert funds of tractor schemes to the total production capacity of the country, as giving subsidy on each tractor to avoid the misuse of scheme.
“In this way, every farmer will find the tractor easily at lower prices, eliminating corruption element from tractor schemes, besides bringing consistency in tractors production, which has been suffering from ferocious cycle of boom and bust for a long time,” Siddiq Misri added.
These schemes will help sales and its impact will be felt in downstream industries as well as in the output of the agriculture sector. The tractor industry in Pakistan encompasses high localization levels. As such, the companies serving as vendors to the tractor industry are also expected to benefit from the announced scheme.
PAAPAM SVC, Mumshad Ali said that such tractor schemes of Punjab as well as Sindh governments to provide cash subsidies to farmers, create an erratic demand in the market, resulting into a vicious circle of boom and bust in tractor industry. The partial financing creates distortion in the market and establish a parallel black market, disturbing the whole production sequence. These schemes, with government’s contribution amounting to billions of rupees, were misused at the same time by the investors while availing cash subsidy and buying tractors under provincial schemes and selling them in the market at a price lower.
than the price being offered by the tractor manufacturers thereby affecting the business of both tractor manufacturers and the auto part makers. Iftikhar Ahmed, vice chairman argued that increase in prices of tractors due to 17% sales tax in last regime made it difficult for farmers to purchase new tractors especially in view of reduction in loans from ZTBL, resulting in low production levels of the tractor manufacturing. But the present government’s decision to reduce it from 17% to 10% from July 1 last year, has gone a long way in boosting sales. Experts said that countries including India, Thailand, Malaysia and even Japan protect their local industry as they have imposed heavy taxes and penalties to discourage import.