Production of tractors has dropped by 50 percent in the country after levy of 17 percent Revised General Sales Tax (RGST) with effect from 15th March 2011, industry sources told Business Recorder here on Wednesday. They said tractors of different makes and horse powers have become costlier by Rs 0.1 million to Rs 0.25 million after levy of RGST since tractor manufacturing industry had been zero-tax rated for past twelve years.
A senior executive of the industry said that before 15th March tractor manufacturers were rolling out 6,000 to 8,000 tractors every month. The monthly production has now fallen to 3,000 to 4,000 tractors. "We have been working on two shifts basis to meet all demands of the farmers and other users since long, but after lesser demand of tractors we have closed down one shift and laying off its workers", he added.
The worst sufferers would be the 200 to 300 vending units who provide over 90 percent parts and accessories of the tractors to the assemblers, he added. He recalled that Pakistan's annual production of tractors was 15000 to 20,000 before Nawaz Sharif government zero rated the tractor manufacturing industry in 1998."This small step gave a quantum jump to the annual production of tractors, which rose to 70,000 to 80,000 tractors giving a tremendous boost to the agriculture sector and vending industry across the country.
He said the tractor manufacturing industry, Millat Tractors and Al-Ghazi tractors being the lion's share-holders, had succeeded in sourcing 92 percent of the purchases locally which was possible due to the efforts and co-operation of the 200 to 300 vendor associates. This helped achieve foreign exchange savings of over billions of rupees. Most importantly the tractor industry continued to contribute to the national economy by selling tractors with nominal increase in the prices over the past 13 years due to economy of scale meaning thereby reduction in cost due to increased production.
When reminded that the Federal government is pumping millions of rupees in the tractor manufacturing industry by reviving Benazir Tractor Scheme under which it envisages to give 10,000 tractors to farmers on subsidised rates, the senior industry executive alleged that the BTC is not transparent as instead of small and deserving farmers only cronies and workers of the ruling party would benefit from this scheme.
"If the government is sincere to give a boost to the agriculture sector and help the small farmers, then it should form a unified policy and its action should be across the board like withdrawal of RGST on tractor manufacturing industry that would benefit all farmers of the country, he added.
He said during the past two years automobile/tractor/and vending industry was still trying to recoup from the extreme international slump of recession that peaked to its worst effects at the dawn of 2009, coupled with the country's severe problems like law and order situation and energy crisis, rising inflation and unemployment. "The bombshell of 17 percent RGST will not only ruin the tractor manufacturing and vending industry but also reduce the agriculture production including food items due to reduce per acre horse power, he added.
Automobile industry analysts and agronomist say that the tractors produced in Pakistan were the most competitive in the world in terms of quality and price before the drastic levy of 17 RGST. Our tractors were 50pc to 60pc less expensive from even those produced in China and India. Before 15th March tractors were much more within the reach of the farmers compared to the past as 10 years ago one would need 1624 mounds of wheat to buy a 50-HP tractor while a month ago only 507 mounds would be required to purchase the same tractor. Similarly, 780 mounds of cotton 10 years ago versus 313 mounds just earlier this year.