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Fall in sale of farm machinery

Updated August 05, 2013

WITH the sale of tractors declining, imports of implements sliding and local manufacturers reporting a plunge in agricultural machinery making and sales, these are worrying times for businesses.

Without mechanisation of farms, it would be increasingly difficult to enhance productivity and keep the sector competitive. In the last few weeks, reports suggest about 22 per cent decline in import of agriculture machinery in 2012-13 as compared to 2011-12.

According to official figures, Pakistan imported $98.428 million of agricultural machinery during the fiscal year 2012-13 against $125.632 million during 2011-12. In June, the drop was even bigger at 65 per cent — from $14.91 million in June 2012 to $5.265 million in the same period this year.

These figures have come on top of a huge drop in tractors sale. The manufacturers maintain that their sales have dropped from around 70,000 to 50,000 in a span of few years, and the trend is expected to continue. The general sales tax (GST) would go up by seven per cent from next January — from current 10 per cent to 17 per cent — making these machines even more expensive and taking them further out of the fiscal reach of farmers, according to an industry source.

Small manufacturers of agricultural implements are no less worried. They say that crippling power crisis, especially in the rural areas, has affected their business like never before; manufacturing, routine maintenance and repairs is virtually impossible because of the crisis. Most of the manpower has been thrown out of business as overheads spun out of control.

With these figures of sale, how is the government planning to continue with farm mechanisation, enhance farm productivity and keep the sector locally and internationally competitive?

The land holding pattern in the country is already such that it does not leave much space for farm technology. Around 55 per cent of farmers own less than five acres and cannot invest in any form of technology because they cannot afford it and it does not make economic sense to them. So businesses are left with a minority to increase productivity and sell technology.

Whether this minority is reaching a saturation point for some machines, like tractors, needs to be judged. This situation necessitates a fresh look at the policies regarding tractors that drive agriculture and off-farm rural life. If the number of applicants in the government subsidy schemes every year is something to go by, there is still a huge demand for tractors: 200,000 to 250,000 people apply for tractors each year.

Similarly, statistics suggest that Punjab — for its around 33 million acres — houses around 450,000 tractors, almost one tractor for 75 acres, which is not a bad average. Both these figures suggest that tractor may be needed more for off-farm activities, being a complete employment unit in rural settings.

Each year, the government announces subsidy package for tractors and receives applications of up to 250,000 potential buyers. Critics say the schemes are leading to ‘tractorisation’ of farms rather than mechanisation. The last scheme that Punjab ran for some implements other than tractors was in 2008-09.

Punjab also needs to bring the 55 per cent of small farmers in the technology net so that their crop yield improves. Most of the agriculture experts agree that the only way to bring those farmers in the net is to enroll them in some kind of community farming. Only then would they be able to benefit from technology and better implements. For that, the Punjab government may need a two-pronged approach: make them join hands in cooperatives and start packaging technology for these cooperatives through subsidy and policy incentive regimes.

“The government should first plan to push them out of poverty through introduction of better technologies,” says an agricultural economist. The government can not only prepare subsidy packages for farm machinery for the farmers but also establish farm machinery centres at union council level, where all such implements can be hired for entire spectrum of agricultural activity. Unless, this approach is taken, the government would only strengthen hands of big farmers in the name of productivity enhancement, rendering these farmers non-competitive, pushing them out of market. That is a risky proposition, warned the economist.