Pakistan News

New facility for tractor production

New facility for tractor production

THE decision of a Belarusian company to set up a facility in Pakistan to produce tractors for the local market has upset the domestic tractor industry, which fears losing its domination over the market.

The import of Belarusian tractors over the years had never posed a threat, but the manufacturing or assembling of the same products within the country poses a grave threat to the local industry, say industry representatives.

So far, Belarus, had been exporting 3,000-4,000 machines a year to Pakistan. But the annual demand is more than 60,000 units. The local tractor industry, which claims to have achieved 92pc deletion, has a production capacity of 60,000 units, but its sales have come down to 40,000 units in the wake of the recent imposition of sales tax on tractors.

Currently, 24 models are manufactured locally by two companies. They claim that their products are cheaper than many foreign varieties. However, these are of “poor quality and need an engine overhaul after 100 hours of operations,” says food security minister Sikandar Hayat Bosan, who played a key role in convincing Belarus to set up an assembly plant in Pakistan.

It is because of quality concerns that Pakistani tractors lack export potential and only one manufacturer exports its products (though not more than 500 units) to Afghanistan.

Belarus’ state-owned company Minsk Tractor Works (MTW) has informed the government that it will start assembling tractors in Pakistan from next January. However, on the eve of the Belarus president’s visit to Pakistan, a symbolic ribbon-cutting ceremony to mark the opening of the assembly plant in Karachi was performed on May 28, and the first tractor, ‘Belarus-510’, rolled off the assembly line.

Islamabad had hosted an investment forum on May 25 and Belarus and Pakistan inked contracts worth $42m on the first day. The forum was attended by representatives of 25 companies from Belarus and a large number of their Pakistani counterparts. The MTW eyes Pakistan as an important market and it signed a contract worth $35m. The Eastern European country has offered to supply Pakistan’s entire line of engineering products, from trucks to mining equipment and harvesters.

To begin with, the MTW will assemble 500 tractors per annum, but as demand increases it will enhance its production to more than 20,000 units. At the same time, the delivery of MTW’s finished machinery will continue. Initially, the company plans to cater to the Pakistani market but it intends to use Pakistan as a hub for re-entry into the Middle East and North African markets. It had strong trade ties with Iran, Libya and Syria but lost its Arabian markets after the Arab Spring. It now wants a base in Pakistan to regain access to these lost markets.

The details of the project were finalised during the visit of Prime Minister Nawaz Sharif to the eastern European country last month. The two nations had established diplomatic relations 20 years ago, but a breakthrough came only after the opening of the Belarusian embassy in Islamabad last November. The bilateral trade was about $60m last year.

The Minsk company also manufactures heavy-duty trucks, buses, trolleybuses, road tractors and semi-trailers for trucks and cranes. Belarus also plans to set up joint companies to manufacture textile products and carpets from Pakistani raw materials.

Pakistan-made tractors are quite popular among middle-class farmers with at least 12.5 acres of land because of their low cost. Besides, farmers are given a subsidy of Rs200,000 per tractor — a sub­s­tantial amount for small farmers, in particular. On the other hand, the Bela­rusian tractors not affordable for an average farmer, and only rich growers and landowners prefer to buy them.

Local farmers also resent that they are denied the full extent of subsidies. For instance, the Sindh budget 2014-15 had sanctioned subsidies for 4,300 tractors, but they were provided for only 1,209 tractors. The Sindh and Punjab governments announce subsidies for a certain number of tractors in their budgets every year but actually pay for a much lesser number. The most popular instruments of mechanisation in the country are bulldozers, power rigs, tubewells and tractors with cultivators, wheat threshers, sprayers and trailers. One finds an increasing trend of their use.

Various tractor schemes have helped farm mechanisation. Official statistics show that about 76pc of big farmers now cultivate their land with tractors. And 20pc of the growers use a combination of both tractors and draught animals.

But a recent study conducted by the University of Agriculture Faisalabad found that wheat growers in large parts of Punjab use lesser-than-recommended numbers of machines, which affects the crop’s yield. The same can be said about growers of major crops in parts of other provinces as well.

Published in Dawn, Economic & Business, September 7th, 2015

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