At least 300 small and medium enterprises (SMEs) manufacturing tractor parts have shut their units amidst a total crash in the demand for tractors besides a severe liquidity crunch following the suspension of refunds by the Federal Board of Revenue (FBR) to the tractor assemblers. The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) called a meeting to discuss the gravity of the situation faced by the auto parts industry.

According to a report, the closed industrial units have laid off around 100,000 workers in and around Lahore during the ongoing unprecedented crunch. PAAPAM Chairman Munir K. Bana, Senior Vice Chairman Usman Aslam Malik, former Chairmen, including Engr Mumshad Ali, Abdur Razzaq Gauhar, Abdul Rehman Aizaz, and Tariq Nazeer, former VC Irfan Ahmed Qureshi and MC members, including Shahid Daad, Syed Mansoor Abbas Shah, Saeed Iqbal, Javed Hafiz, and Secretary General Ghulam Murtaza, attended the meeting.

The present crunch followed by floods would cause acute food shortages if the government did not take an immediate stock of the situation, according to the meeting. The closure of tractor and ancillary industries in recent days has rendered massive unemployment. The closure of AGTL, followed by Millat Tractor, has aggravated the situation.

Munir K. Bana said at the meeting that both plants carried surplus inventories of CBUs and parts worth billions of rupees and were not purchasing parts from local parts-making SMEs, leading to their closure and rendering over 100,000 skilled workers, technicians, and engineers jobless.

Due to a drop in fresh bookings and stuck-up GST refunds, the assemblers need the much-needed cash for making payments to the part makers. This would cause a crippling effect on the agro-sector when low yields would necessitate importing wheat for which the government has no foreign exchange. If the tractor sales drop to 3,000 units a month, it will no longer be commercially viable for the makers to produce parts, and they will therefore be forced to close their operations, according to the meeting.

PAAPAM Senior Vice Chairman Usman Aslam Malik said tractor production in the first six months of the current financial year was expected to remain at around 10,000 units averaging around 1,600 units per month, which was far short of the industry breakeven point.

The PAAPAM calculated that if the industry doesn't achieve 3,000 units of average production per month in the next six months, the industry will not be able to revive in future. It recommended that the government should take concrete corrective steps now rather than wait for the next budget.

Usman Aslam Malik appreciated the government scheme of low markup tractor financing through commercial banks but said more actions are needed to achieve the industry's breakeven sales of 3,000 units per month for the next six months. He warned that if collective actions were not taken as as soon as possible, the tractor industry's ship would be bound to sink lock, stock, and barrel.

Munir K. Bana recommended the facilitation of tractor exporters as the current GST regime is making Pakistani tractors totally uncompetitive in the African market. He also urged the government to remove the customs duty, additional customs duty, and regulatory duties on the import of tractor-specific auto parts and pass its benefit on to the farmers.

The PAAPAM, the apex body of local auto parts manufacturing, assured all-out support to the tractor and parts manufacturers of the country and agreed to take up the matter of this vital national industry head-on with the ministries of finance, commerce, and industries, both at the federal and provincial levels.

Credit : Independent News Pakistan-WealthPk