KARACHI: Demand for tractors has plummeted so sharply it is now threatening an industry shutdown amid reports of widespread layoffs.

Chief Executive Officer Al-Ghazi Tractors Ltd (AGL) Shahid Hussain said production has plunged to 8,155 units in the first half of current fiscal year from 12,061 units last year following the slowdown in the market coupled with the non-release of massive sales tax refunds by the government.

“Our sales and distribution activities are going on but the company has unsold stock of 1,000 tractor units,” he said adding the assembly line was shut down last week due to annual maintenance and it may continue till second week of January.

Vendors for the tractor industry say they have already begun employee lay-offs amid declining demand from assemblers.

The decline in demand for tractor parts since Nov 2018 has cost the jobs of numerous daily-wage workers in the vending industry, whereas, though assemblers have maintained their existing workforce despite slump in sales.

Former chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Mumshad Ali said that “I have fired 125 people, mostly daily-wage workers, contractual and permanent employees in January from my two plants,” adding that “I have not been providing parts to tractor assemblers from last week of November last year.”

He said that assemblers are not buying parts from vendors since they still have unused inventories at their plants and dealership networks. He added that, in addition to the rupee devaluation pushing up the prices, tractor sales have also been affected by the delay in cash disbursement to sugarcane growers by millers on account of late start of crushing season.

“I think tractor market will shrink to Rs30 billion in the ongoing fiscal year from Rs60bn owing to depressed sales during first six months of the current fiscal year,” he said hoping that arrival of wheat crop at the beginning of second quarter of 2019 may encourage growers to lift locally assembled tractors.

Moreover, the wait-and-see approach of growers over the government’s plan to allow imports of five-year old tractors has also affected tractor sales.

Co-Convenor Tractor Committee Paapam, Maqsood Rana said, “I have removed 15 out of 40 semi-skilled workers and machine operators from the service since sales halted from Nov 2018 onwards.”

Former chairman Paapam Tariq Nazir said, “I have kept my 200 workers intact at my plant despite no sale of parts to tractor assemblers from Nov 15, 2018.”

But he said, “I may remove half of my workforce in case our sales remain suspended from Jan 15 onwards,” claiming that 80 per cent of Paapam members have retrenched more than 50pc of their workers in the last two months.

President Pakistan Kissan Itehad (PTI), Khalid Mahmood Khokar said growers are not purchasing tractors due to cash crunch. “I have asked the federal government to remove 5pc general sales tax on tractors and provide subsidy which can bring down prices and enable growers to purchase tractors,” he said.

Hussain noted that, “farmers and growers do not have surplus funds to buy tractors.” Water scarcity, rising input cost of crop, late crushing of sugarcane and cotton crop crisis have adversely affected farmers and growers he claimed.

He said that the industry has been pleading with the government to address the anomaly between input tax and output tax that leads to completely imbalanced and massive accumulation of refund claims which stand at around Rs2bn for AGL alone.

Millat Tractors Limited (MTL) has also shut down its manufacturing plant from December 10-31 last year while the restart state had been extended to January. The company issued parts’ procurement schedule from vendors for Oct-Dec 2018 and January but cancelled it in Nov 2018 due to huge inventory of tractor parts as well as completely built up tractors in the company.

An MTL official said that so far, no employees have lost their jobs but overall trading activities have stopped due to liquidity crunch in the market. Besides, suspension in China-Pakistan Economic Corridor and government infrastructure projects — in which tractors were used for hauling construction material and debris — had also adversely affected sales.

Published in Dawn, January 6th, 2019