Tractor orders drop as farmers await promised sales tax reduction

Published June 5, 2020
Growers are expecting a price cut as locally made tractors carry 5pc sales tax. — Dawn/File
Growers are expecting a price cut as locally made tractors carry 5pc sales tax. — Dawn/File

KARACHI: Tractor assemblers have been facing massive slowdown in order bookings for over a week as growers/farmers have adopted a wait-and-see attitude following the government’s de­­cision of allowing five per cent sales tax subsidy on tractors under the agric­ulture package announced on May 13.

The package would include Rs2.5 billion subsidy on locally manufactured tractors for a period of one year.

Millat Tractors Ltd Senior Director Sohail Bashir Rana told Dawn from Lahore that the growers are expecting a price cut as locally made tractors carry 5pc sales tax.

In anticipation of the price cut under the agriculture package, growers are waiting for the implementation of the government’s May 13 decision. He said the timing of announcing subsidy and delay in the issuance of SRO is making a negative impact on sales as a number of buyers have almost put on hold their decision.

Besides, Budget FY21 is also around the corner thus making growers more reluctant towards purchase of farm machinery. “We had been getting 80-100 tractors booking per day ahead of the subsidy announcement. It has now reduced to 25-30,” he said, adding per day tractor reservations vary during harvesting and sowing seasons.

However, he feared that the cut in price of tractors under a sales tax subsidy is coming at a time when the rupee continues to lose its strength, making parts and accessories imports expensive. However, localisation level in tra­c­­tors is 94pc but domestic assembly also requires some imported parts and kits.

Tractor manufacturers were allowed to resume their operations in mid April for the wheat harvesting season but total production and sales of Fiat and Massey Ferguson remained dismal. The former produced and sold 9,306 and 9,762 units in July-April FY20, down by 40pc and 38pc. Meanwhile, the latter’s respective figures were down 43pc and 42pc to 15,581 and 15,617.

Al Ghazi Tractors Ltd CEO Mohammad Shahid Hussain said customers who were planning to purchase tractors are now waiting for the SRO to become effective to avail discounted price due to subsidy.

The industry would continue to pile up inventory of tractors which may lead to production cuts and plant shutdown.

He urged the government to issue the notification of this subsidy urgently to revive the orders and also requested for release of remaining sales tax refu­n­­ds of the tractor industry, which wou­ld help in resolving cash flow issues.

However, Hussain warned that if not implemented immediately, this subsidy would do more harm than good to the already ailing tractor industry.

Published in Dawn, June 5th, 2020

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