November 01, 2014 – BR Report –
Due to government support and improving rural economy, sales of locally-assembled tractors is expected to rebound, analysts said. According to Topline Securities, after falling in last few years, tractor sales are expected to grow by 37 percent in FY15 and 10 percent in FY16.
In Federal Budget FY15, the government had announced reduction in General Sales Tax (GST) from 16 percent to 10 percent and increased agri-credit loan target from Rs 380 billion to Rs 500 billion. Both these measures will provide the much-needed growth in tractors sales, the report said.
Agriculture makes up 20 percent of Pakistan’s GDP. Consistent increase in commodity support prices (wheat support price doubled in last 5 years), rising farmers’ education on using modern techniques and booming remittances (up 166 percent in last 5 years) have improved buying power of farmers in Pakistan. As rising population base and inheritance have resulted in lesser available crop area per person, farmers are more concerned on improving yields.
In this attempt, farmers are relying more on fertilisers, pesticides and modern equipment. Higher agri-credit, mainly from Zarai Taraqqiati Bank and rising remittances would also help in rising tractors sales in addition to lower GST and supportive govt policies.
According to Topline, dominated by two players, Pakistan tractor sector is more like a monopoly providing opportunity to pass on increase in cost. Millat Tractors (MTL) has a market share of 64 percent, followed by Al-Ghazi (AGTL) 34 percent. The tractor industry has achieved 90-95 percent localisation levels while cost pressures are driven by fluctuations in local input costs.