KARACHI: The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), lauding the new tractor scheme in upcoming Punjab budget of 2015-16, has said that such schemes create an erratic demand in the market, resulting into a boom and bust in tractor industry.
PAAPAM Senior Vice Chairman Mumshad Ali said that the government had announced to provide a Rs200,000 subsidy per tractor in the next fiscal year as under the scheme 10,000 tractors will be distributed among farmers on subsidized rates.
The government should divert funds of tractor schemes to the total production capacity of the country, giving subsidy on each tractor to avoid the misuse of scheme, he said, adding that in this way, every farmer will find the tractor easily at lower prices, eliminating corruption element from tractor schemes, besides bringing consistency in tractors production, which has been suffering from ferocious cycle of boom and bust for a long time.
He said that partial financing creates distortion in the market and establish a parallel black market, disturbing the whole production sequence.
“These schemes, with government’s contribution amounting to billions of rupees, were misused at the same time by the investors while availing cash subsidy and buying tractors under provincial schemes and selling them in the market at a price lower than the price being offered by the tractor manufacturers thereby affecting the business of both tractor manufacturers and the auto part makers.”
Mumshad argued that increase in prices of tractors due to 17% sales tax in last regime made it difficult for farmers to purchase new tractors especially in view of reduction in loans from ZTBL, resulting in low production levels of the tractor manufacturing. But the present government’s decision to reduce it from 17% to 10% from July 1 last year, has gone a long way in boosting sales.
In federal budget FY15, the government announced reduction in General Sales Tax (GST) and increased agri-credit loan target from Rs380 billion to Rs500b. Both these measures provided the much needed growth, he added.
Mumshad said that countries including India, Thailand, Malaysia and even Japan protect their local industry as they have imposed heavy taxes and penalties to discourage import.
