The downturn in the tractor industry continues as the tractor sales has further declined to just over 15200 units during the first half of current fiscal, after almost a 40 percent drop fiscal to fiscal. According to the figures by Pakistan Automotive Manufacturers Association (PAMA), the sales of tractors declined down to 50405 units in FY2018-19 from 70887 units in 2017-18 and the situation has further worsened in the first six months of this fiscal. “The downturn in the tractor industry is now becoming alarming as we enter the new decade,” said Mohammad Shahid Hussain – CEO Al-Ghazi Tractors Ltd.
He added that the sales of Alghazi tractors has went down to only 5881 units in the first six month of this fiscal, a considerable drop from 17993 units in FY2018-19 which was already much lower than 27839 units in FY2017-18. Shahid said that numerous factors are contributing to the massive downturn including but not limited to current economy, farmer’s yield and crop prices, inflation and high borrowing rates etc. “The backbone of the tractor industry is its 200+ vendors who employ over 10,000 skilled and unskilled workforces. In this situation, they are about to collapse owing to either no or extremely low ordering levels from the tractor industry, and we are in no position of providing them any hopes of short-term improvements owing to uncertainties” reasoned Shahid.
“There is therefore a dire need from the government to take note of the situation and provide some relief and breathing space to the industry for partial revival,” said Shahid. “However, in a situation where the industry’s profitability has shrunk visibly, coupled with the depressed affordability of the farmers (end users), the government in July 2019 introduced an additional sales tax and enhanced customs duty on the imports of CKD components being imported by auto manufacturers including the tractor assemblers.
The government should consider that tractor sales is primarily Agro based and should not be treated or clubbed together with any other segment other than agriculture,” he said, adding that this is another massive blow that would be hard to absorb or passed on to the end consumers who are already suffering. Back in 2015, he added, the imposition of sales tax by the government raising it to the level of 15% already backfired, as the sales volume and revenue collection nosedived.
The authorities had to revert back to the previous regime in 2017, bringing the sales tax down to 5% which not only revived the industry but it saw one of its best years. “Keeping that in mind and for the sake of speedy revival of the tractor industry saving it from non-reversible damage, it would be prudent on the part of the government to seriously consider reversal of the mentioned new levies on immediate basis while treating the Agri based tractor industry in isolation,” he added.