INP-WealthPk

Subsidy on Tax Boosts Tractor Sales in Pakistan

February 28, 2022

By Ayesha Mudassar ISLAMABAD, Feb. 28 (INP-WealthPK): Thanks to the government’s Agriculture Fiscal Package, the production of tractors has grown about 59.03% in 11 months of the fiscal year 2020-21 compared to the same period of the previous year. [caption id="attachment_64242" align="aligncenter" width="696"] Tax Boosts Tractor Sales[/caption] Under the package, the government approved a sales tax subsidy of Rs1.5 billion on locally-manufactured tractors to help the industry come out of the impact of the Covid-19 pandemic, and to ensure motorisation of the agriculture sector. Under the subsidy initiative, the government withdrew 5% sales tax on locally-manufactured tractors for one year. The tractor industry is one of the most advantageous export-oriented sectors of Pakistan. Domestic sales of tractors increased by 6,600 units (43.42%) in the first half of the fiscal year 2020- 21 to 21,800 units as compared to the 15,200 units in the corresponding period of the previous year. Exports of Millat Tractors increased by 68% to $6.9 million during the first half of FY21 compared to $4.1 million during the corresponding period of previous year. A 70% growth was witnessed in terms of quantity as 850 tractors were sent abroad during the first half of FY 2020-21 compared to 500 tractors in the previous year. Pakistan produces tractors in technical collaboration with foreign manufacturers, including New Holland Tractors and Massey Ferguson. According to the provisional quantum indices of Large-Scale Manufacturing Industries (LSMI) for May 2021, the number of locally assembled tractors for the period of 11 months July-May 2020-21 was 45,432 units as compared to 28,568 units of the same period of previous year. Taking into consideration the month-on-month situation, the registered local production of tractors was about 4,105 units in May 2021 as compared to 3,560 units in May 2020, according to the data. The global market of agricultural tractors was valued at $60.4 billion in 2020 and is expected to reach $81.9 billion by 2026, registering a compound annual growth rate (CAGR) of 5.2% over the projected period (2021-2026). The local tractor industry is playing an important role in promoting the agriculture sector and strengthening the national economy. More than 250,000 people are linked with the tractor industry. Pakistan mainly exports tractors to eastern European countries and South Africa. The main reasons behind the increasing sales of tractors are the revival of the crop sector in the last three years, and the huge infrastructure development under the China-Pakistan Economic Corridor (CPEC). The recovery of the crop sector has contributed almost 70% to the revival in sales, and the remainder came from infrastructure development. In the past, the Pakistan’s tractor industry suffered from inherent problems due to the underutilisation of tractors and the absence of implements for different agricultural activities. The building and expansion of more than 1,800 kilometres of highways across the country has helped the growth in tractor sales.