, , , , , , , , , , , , , , , , , ,

Adbuzz LeadOver the last two decades, Pakistan’s agricultural sector has witnessed rapid growth in terms of crop quality and output. This growth can largely be attributed to the increased use of machinery such as cotton pickers, threshers and the mainstay of agricultural automation – the trusted tractor.

Tractors in Pakistan are either imported or manufactured by the Pakistan Tractor Corporation, which was set up in the 1960s and since its inception, the Pakistani tractor industry has been globally competitive. Currently, 24 tractor models are available, many of which are manufactured in Pakistan. Most models have features such as power steering, multi-disk brake systems and fuel efficient engines and come at an affordable price tag that starts as low as Rs 600,000.

The cost of production (and consequently the cost of tractors) has decreased over the years due to the high rate of localisation of parts (about 80 to 95% for varying models) and the employment of semi-automated tractor manufacturing plants; the industry is poised to export parts to manufacturers in China and India.

Yet, despite the fact that sales crossed 50,500 units in the last fiscal year (2012-13), the industry has been shrinking over the last two years, a development which experts attribute to irregular taxation which is threatening manufacturers and allied industries.

Up until the fiscal year 2008-09, a tax free regime enabled manufacturers to sell 70,000 units a year and the industry was doing well. Then, in the following fiscal year (2009-10) 10% GST was suddenly imposed which led to a plummet in sales. To salvage the industry, the government reduced GST to five percent halfway through the year. This short term tax relief enabled the industry to increase production to the above mentioned 50,500 units, registering an increase of 36% from the previous year.

In January 2013, GST on tractors was doubled to 10% and is now subject to another increase in the current Budget to 17%, which has raised many concerns about the future of this essential and once thriving industry.

– Mazhar M Chinoy

First published in the Adbuzzzz Section on September 1, 2013.