Refund ‘suspension’: Paapam says tractor parts-manufacturing SMEs facing severe liquidity crunch

LAHORE: At least 300 tractor parts manufacturing SMEs have been forced to shut their units amidst a total crash in tractors’ demand along with a severe liquidity crunch following the suspension of refunds by the Federal Board of Revenue to tractor assemblers, which was due for a long time.

In a hurriedly called meeting held here on Thursday, the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) discussed the gravity of the situation being faced by the auto parts industry of the country. The meeting submitted an alarming report that the closed industrial units had laid off around 100,000 workers in and around Lahore during this unprecedented ongoing crunch, which was very unfortunate.

PAAPAM Chairman Munir K Bana, Senior Vice Chairman Usman Aslam Malik, former chairmen, including Engr Mumshad Ali, Abdur Razzaq Gauhar, Abdul Rehman Aizaz, and Tariq Nazeer, former VC Irfan Ahmed Qureshi and MC members, including Shahid Daad, Syed Mansoor Abbas Shah, Saeed Iqbal, Javed Hafiz, and Secretary General Ghulam Murtaza attended this meeting.

The house was of the opinion that the present crunch, followed by the floods, would cause acute food shortages if the government did not take stock of the situation immediately.

A large number of jobless people were rendered homeless in tractor and ancillary industries which were closed down in recent days. The closer of AGTL, followed by Millat Tractor, has aggravated the situation, they added.

PAAPAM Chairman Munir K Bana informed the meeting that both plants carried surplus inventories of CBUs and parts worth billions of Rupees and were not purchasing parts from local parts-making SMEs, leading to their closure and redundancies of over 100,000 skilled workers, technicians, and engineers.

The house further registered that due to a drop in fresh bookings and stuck-up GST refunds, the assemblers needed more much-needed cash for making payments to part makers. It would cause a crippling effect on the agro-sector when low yields would necessitate importing wheat for which government has no foreign exchange, the house apprehended.

If the tractor sales drop to 3000 units a month, it will no longer be commercially viable for part makers to produce parts, and they will therefore be forced to close their operations. PAAPAM Senior Vice Chairman Usman Aslam Malik, addressing the meeting, said that tractors production in the first six months of the current financial year was expected to remain at around 10,000 units averaging around 1600 units per month, which was far short of the industry breakeven point.

Copyright Business Recorder, 2023