The exports situation of the country is dire to say the least and any contributions that give a boost to waning exports should be welcomed. One initiative has recently been taken by Millat Tractors Ltd (MTL) which aims to boost tractor exports to the Middle Eastern region as well as African countries.

The tractor industry in Pakistan has enough capacity at the moment to meet local demands and also be able to export tractors given the cost competitiveness edge. However, the government could encourage the sector more by providing incentives which make production more competitive. The domestic tractor sales hit an all-time high of 71512 tractors in 2009-10 and have since been declining over the past five years.

Tractor models can be divided into three categories according to the horsepower (HP) capacity. The small segment is below 50 hp and has low demand due to the narrow margin difference between the small and medium categories. These tractors are imported mainly as completely built units (CBU) whereas the medium category (50-85 HP) is manufactured locally and has the highest demand amongst the three segments. The high HP capacity tractor which ranges from 100-250 HP is mostly used by corporate farmers such as dairy farmers and sugar mills. This segment has low local demand but high export potential and the tractor industry believes if given sufficient incentives it can fulfill this niche.

Some of things included in the wish-list include consistent policymaking which augments local manufacturers looking to invest in technology up-gradation and diversification of product base. This is especially applicable to agri-implements which are used as tools attached to tractors. These include combined harvesters, balers and feed mixer wagons amongst other things. It is important to realise that the eventual functionality and usability of the tractor depends on the implements attached to it.

Companies like Millat Tractors believe that the current import of these second-hand implements such as combined harvesters at concessionary duties discourages the private sector from venturing into the production of such implements. In addition, it also claims that these used harvesters are obsolete and cause crop losses and inferior quality which in turn affects crop exports such as rice.

The industry also believes the current mark-up on tractors including insurance is too high at around 14-15 percent. This coupled with the minimal share of tractors and farm machinery credit which amounts to less than two percent dampens industry sales.

To sum it up the tractor industry already has high backward integration which utilizes local manufacturing for parts ranging from tires to batteries. The part where the government should focus on is providing conducive measures for forward integration such as production of agricultural implements previously mentioned. This is much needed in times of deterioration exports and provides an avenue to diversify our limited export product base.