By Imran Ayub
KARACHI: Local assemblers and traders eye import of over 30,000 tractors during 2006-07 following the government’s move to exempt them from customs duty in an attempt to meet growing demand of the agriculture sector.
Dealers say the importers have started placing orders for tractors and first shipment under the new tariff structure is likely to arrive by the second week of July.
“Major suppliers of these tractors are Romania, the United States and Russia,” said Yasin GM, Director Technical GM Tractors. “It would be too early to give the total number of importers but they may be around 9 to 10 including local manufacturers and some trading houses.”
He said majority of the importers preferred placing orders for 60-horsepower to 65-horsepower tractors, but a large number of tractors ranging from 45-horsepower to 70-horsepower were due during the next financial year in line with the incentives offered by the government.
“Our company plans to import 5,000 tractors of different capacities, so it can be realistic to predict more than 30,000 tractors will be imported during 2006-07 with 10 importing parties in the run,” said Yasin.
The government in the budget for 2006-07, announced earlier this month, exempted the import of tractors from customs duty. However, the budget move automatically reversed the government’s earlier decision taken a few months ago, which allowed duty-free import of 5,000 tractors to three local assemblers.
Under the facility awarded to the three assemblers, over 1,000 tractors reached the country in CBU (completely built unit) and CKD (completely knocked down) condition. Dealers say the government’s directives to the three assemblers are no more effective as it has now offered a level-playing field to all, which may bring down prices of tractors.
“Average price of Belarus tractor is between Rs500,000 and Rs555,000,” said another importer. “The recent imports may dent the local assemblers’ interests to some extent as, like cars, they are also charging premium on tractors’ sales, which sometimes touches Rs70,000.”
But, he said, it would not hit their real market share as gap between local production and demand remained higher during 2005-06, prompting the authorities to allow duty-free import of tractors.
“On an average, some four assemblers are producing 30,000 tractors a year,” he added. “But demand in the current financial year stood at 70,000, recording a gap of 40,000 units, which affected agriculture activity across the country.”
The country’s auto industry witnessed a sharp jump in farm tractor sales during May 2006, increasing by 43.3 per cent to 4,155 units compared to 2,898 sold in April 2006.
A monthly report compiled by the Pakistan Automotive Manufacturers Association shows local production of tractors rose by 57 per cent to 4,501 in May 2006 against 2,866 units produced in April 2006. Dealers say imported tractors would also be offered to farmers on bank loans.
“Almost 90 per cent of current sales depend on financing facility,” said another importer, who asked not to be named. “Same is the case with imported products, which will be available by the end of July.”
He said the government should also introduce special financing facility for tractors from all commercial banks and financial institutions, which could explore more options for farmers.
“Some banks are offering good deals,” he said. “But these should be followed by all the major banks and leasing companies for larger benefit of the agriculture sector.”