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Tractors sale down by 30pc on yoy basis: PAAPAM.

Lahore -- PAAPAM the representative body of auto part makers reported sharp drop in orders placed on its members by two major tractor assemblers of the country. The drop in sales of tractors is around 30% if data of tractor sales in July-April 2017-18 is compared with July-April 2018-19.

In the first 9 months of last financial year over 60 thousand tractor were produced and in the same period of this financial year just over 43 thousand tractors have been produced ie a short fall of 17 thousand units. PAAPAM has warned its members of further drop in volumes in the tractor industry due to price increase of tractors due to inflation and devaluation and possible levy of higher slab of sales tax .

It is pertinent to mention here that removal of GST concessions to tractors by the PPP government under IMF program conditionalities back in 2011 severely affected tractor sales and the then Minister Industries Ch. Pervaiz Elahi reduced this duty to 5% after 9 months of low sales, and low tax collection. Severe sale drop is expected this time round as country is faced with a more severe economic crisis.

The production cost of tractor part makers has already increased due to increase in bank markup rates, increase in cost of gas, electricity and materials.

Drop in volumes due to overall economic conditions, less than expected wheat yield, slowdown in CPEC projects, is going to put further financial pressure on the part makers. The assemblers are also going to see the cash crunch due to low demand of tractors and stuck up billions of rupees of GST refunds with FBR.

The next financial year is expected to be worse than this year as tractor demand is likely to drop to 35 thousand units on the back of slow economic growth, high inflation, high mark up, withdrawal of tax subsidy and marginal loaning by ZTBL.

Many part makers will not be able to survive this down turn after surviving the 2 month shut down by tractor assemblers last winter due to the sugarcane episode.

Solution lies in low markup tractor financing, producing export quality tractors for African market, after sales service support, and making local tractor aftermarket part of the formal economy.

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Publication:Pakistan Observer (Islamabad, Pakistan)
Date:May 25, 2019
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