Tractor prices to drop by up to Rs80,000 after cut in sales tax

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The government’s decision to cut sales tax on imported and locally-manufactured tractors to five per cent from 10pc will bring down prices by Rs35,000 to Rs80,000 per unit, depending on the power of the engine, the industry says.

Finance Minister Ishaq Dar announced the cut in ST while addressing the National Assembly on Friday.

Pakistan Automotive Manufacturers Association (PAMA) Chairman Sohail Bashir Rana said the price of a 50 horsepower (HP) tractor would come down by Rs35,000, followed by 50,000-54,000 in 75-85HP, whereas four-wheel drive 85HP tractor price would decline by Rs80,000.

He said market reports suggest the government was likely to implement the ST decision either from June 24 or from July 1. Cut in ST coupled with incentives to the agriculture sector in Budget 2016-17 would augur well for farmers, and the tractor and allied industry.

On possible increase in sales of tractors in the upcoming fiscal year after 5pc reduction in ST, he said much would depend on production of various crops, their prices in the local and global markets, and prospects of exports.

However, there may be slowdown in sales of tractors during the current month as farmers may wait for the implementation of budget decision to avail price benefit on farm machinery. He urged the government to quickly implement its decision by issuing notification.

He recalled tractor makers had a tough current fiscal year due to poor agriculture sector performance coupled with farmers’ wait-and-see attitude over tractor subsidy scheme announced by Punjab and Sindh governments in Budget 2015-16.

After losing hope over non-execution of subsidy scheme, farmers resumed tractor buying from January 2015 onwards pushing up sales every month. But the sales for July-May FY16 remained lower compared to the same period of the last fiscal year, he said.

Fiat sold 11,653 tractors in the 11-month period compared to 15,703 a year earlier while Massey Ferguson sold out 18,208 units compared to 26,155.

According to Economic Survey 2015-16, the agriculture sector as a whole witnessed a negative growth of 0.19pc against 2.53pc growth during the same period of the last year. The growth of sub-sectors including important crops, other crops and cotton ginning posted a negative growth of -7.18pc, -0.31pc and -21.26pc, respectively.

During 2015-16, the cotton crop was sown on an area of 2.92 million hectares, showing a decrease of 1.5pc over last year’s 2.96m hectares. Cotton production for the year 2015 stood at 10.074m bales against 13.96m bales last year, reflecting a decline of 28pc.

Sugarcane production for the year 2015 increased to 65.5m tonnes from 62.8m tonnes of last year’s production, up by 4.2pc. Rice production remained 6.8m tonnes, showing a decline of 2.7pc over last year’s record production of 7m tonnes.

The production of wheat stood at 25.48m tonnes during 2015-16, up by 1.6pc over the last year’s production of 25.09m tonnes.

Maize crop production stood at 4.9m tonnes during 2015 showing a decrease of 0.3pc over the last year’s production of 4.94m tonnes.

Gram crop, one of the largest Rabi pulse crops in Pakistan which accounts for 76pc of the total production of pulses in the country and occupies about 5pc of the Rabi cropped area, witnessed a decline of 17.7pc. The production of barley and rapeseed and mustard witnessed decline in production by 3.2pc and 1pc, respectively, during 2015-16 as compared to the same period last year. The decrease in production is due to decreased area of cultivation.

During FY16, the production of potatoes, chillies and onions grew 3.4pc, 2.1pc and 0.2pc, respectively, compared to a year ago.

In pulses, the output of maash, masoor (lentil) and moong fell 15.6pc 4.4pc and 0.8pc, respectively.

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