LAHORE: The duty-free import of parts of 85HP (horse power) tractors is a major reason for low localisation level of tractor components in this segment, according to industry sources.

Compared to them, 90 per cent parts of the smaller, standard tractors of 40-50HP are now being made in the country.

“The localisation level of bigger tractors has remained low because the import regime allows the manufacturers to import components at zero per cent duty,” an auto vendor told Dawn on Monday.

Vendors of tractor parts point out that under the previous Auto Industry Development Programme (AIDP) the government issued SRO 693 that imposed 32 per cent duty on all car parts manufactured locally.

The same duty was imposed on 40-50HP tractors manufactured by the two domestic tractor companies. “When the AIDP was approved seven years ago the local production of 80HP or bigger tractors was nominal ranging between 200 and 250 units per year.

The government planners at that time allowed the import of components of these tractors at zero duty. This effectively stalled localisation of this segment of tractors,” the vendor said.

At present 12,000 units of bigger tractors are being produced in the country every year.

“The situation demands that the efforts should be made to indigenise its parts to the same level as has been achieved in 40-50HP segment,” the vendor said.

“This can be achieved only if the government imposes duty on the imported parts so that the local components could be developed,” he said, adding the domestic vending base of the tractor industry was quite strong and capable of developing new parts bigger tractors.

The vendors claim that Pakistan has an edge over all its rivals in the type of tractors it produces and can compete with the imported tractors as the Chinese or Indian tractors of same quality as produced in Pakistan were more expensive than local tractors. The price difference between locally produced and imported tractor is said to be around Rs150,000-175,000 a unit.

The domestic production of tractors has remained robust during the last 10 years. In 2001-02 the industry produced 24,000 units that rose to 69,200 units in 2010-11 before declining to 49,700 last year because of imposition of 16 per cent general sales tax on tractors.

The GST has now been reduced to five per cent. In the first half of this fiscal to December, 27,400 tractors have been produced.