Tractor prices surge despite localisation

KARACHI: In the outgoing fiscal year, tractor prices witnessed a steep rise despite achieving higher localisation of up to 94 per cent.

While feeling proud, the assemblers and their vendors always refer to the stability in tractor prices as a result of the massive presence of locally made parts used in its assembling.

A comparison showed the prices of Al-Ghazi Tractors model 480S (55HP), Ghazi 65HP, model 640 (75HP), Dabang (85HP) and NH-70-56 (85HP) rose to Rs1.772 million, Rs2.037m, Rs2.651m, Rs2.728m and Rs3.654m in the first nine months of the FY23 from to Rs1.170m, Rs1.352m, Rs1.733m, Rs1.790m and Rs2.355m in July-March FY22.

The prices of various models of Millat Tractors Ltd (MTL) like MF240 (50HP), MF-350 Plus (50HP), MF260 (60HP), MF360 (60HP) and MF385 4WD (85HP) had risen to Rs1.524m, Rs1.770m, Rs1.756m, Rs1.856m and Rs3.083m as compared to Rs1.192m, Rs1.380m, Rs1.378m, Rs1.455m and Rs2.410m prevailing in July-March FY22.

Defending the price hike, a Punjab-based tractor assembler said the supply of tractors was chargeable at 5pc general sales tax till June 2022 and in Finance Act 2022-23 it was exempted by placing in the 6th Schedule of Sales Tax Act.

Accordingly, he added that the input sales tax paid on the purchase of raw materials at 18pc is not adjustable and became part of the cost. Therefore, the prices of tractors have sharply increased as sales tax is no more adjustable.

In addition to changes in the GST pattern, other financial burdens on local assembly included higher power and gas rates and rising labour charges, he said.

Part makers are also dependable on imported raw materials and the rupee depreciation makes an adverse impact on the cost of manufacturing, he said.

Amid mixed trends in the country’s agriculture indicators during FY23, tractor sales remained highly depressed.

Sales of Fiat (Al-Ghazi) and Massey Ferguson (MTL) plunged by 45pc and 46pc during 11MFY23 to 11,466 and 16,486 units from 20,741 and 30,616 units in the same period last fiscal year.

Wheat production rose by 5.4pc to 27.634m tonnes in FY23 as compared to 26.208m tonnes.

During 2022-23, the cotton area sown increased to 2,144 thousand hectares against 1,937 thousand hectares last year, revealing a growth of 10.7pc. However, due to floods that swept away the entire crops in Sindh and Balochistan, production remained low at 4.910 million bales against last year’s 8.329m bales, showing a dip of 41pc.

In Punjab, cotton-producing districts Rajanpur, DG Khan and Taunsa were the worst hit. Moreover, the insect pests, especially pink bollworms, whiteflies and thrips remained prevalent during the season.

Published in Dawn, July 2nd, 2023