FBRs revenue collection from the tractor industry to drop this year: PAAPAM

LAHORE: Chairman PAAPAM Mr Usman Aslam Malik has warned the government that the revenue collection from the tractor industry will drop due to low production volumes. Tractor sales are expected to be below 30000 units mark this year compared to 50,000 units last year and 70,000 units in the year 2010-11. ‘As tractor volumes drop so does revenue collection from the farmers, assemblers and part manufacturers.

Industry experts say, at 70000 tractor’s production under the 5% GST regime in the year 2011-12 the revenue collection from the industry and farmer was approximately Rs 7.3 billion, this volume dropped to 50,000 units in the year 2012-13 under the 10% GST regime and the revenue collection from this sector stood at Rs 6.8 Billion. This year government will be collecting around Rs 5 Billion from this sector under the 16% GST regime with tractor production expected not to exceed 30,000 units. The negative impact on the rural/urban economy and unemployment will be in addition to this.

Mr Malik criticized the government for ignoring one basic fact about the tractor market, which is the buying power of the Pakistani farmer. Currently the Pakistani farmer is paying over Rs 100,000 as GST on a 50Hp tractor while this amount is over Rs150,000 for a 85 Hp tractor. The tractors are subsidized not just regionally but globally.

Mr Usman Malik added that Pakistan currently produces the cheapest tractor in the world but this advantage has been offset by the high GST rate and now the industry has totally closed due to government apathy. Hundreds of tractor parts producing factories in and around Lahore and across the country will be shutting down production in February due to tractor assembly plant closures rendering a massive surge in unemployment. This industry is estimated to employ over 300,000 people in the total supply chain.

There seems to be a discord in the government in dealing with this sector. On one hand GST rate has increased by 6% to the current 16% from the previous 10%, while on the other hand provincial and federal subsidy schemes have been withdrawn, namely Benazir tractor scheme of the federal Government, Green Tractor scheme of the Punjab Government and Sindh tractor scheme of the Government of Sindh. Without government support to agriculture this industry with 40 billion contribution to the GNP has dark days ahead.

On the revival of the tractor industry, Engr Mumshad Ali ,EC member and head of the standing committee on engineering at LCCI and a manufacturer of tractor parts is of the view that a national tractor scheme be launched with an aim to provide 100,000 tractors annually for five years at Rs 100,000 subsidy. The Rs.10billion annual fund be created from the taxes collected from the industry and farmers. The ZTBL network to be utilized for the disbursement purpose, while the subsidy to be provided to only those farmers who have an NTN number. This will also help document the Agri economy of the country whose contribution to the treasury falls short of its actual pie size in the national economy.

This will provide stable demand to the tractor industry by making the tractor more affordable for the farmer. This will not only create employment in urban and rural areas, but also give a boost to the agri economy and help enhance government revenue and tax net.