April 27, 2009

No need of Govt. support

Sarwat Nasim, Company Secretary of Al-Ghazi Tractors Limited contradicts the contents of a report by Engineer I.H.T. Farooqui published in March 2009 issue. His letter & the response by Mr. Farooqui is given below.

Your report “Tractor Industry needs Government Support”, clearly written as a lobbyist suffers from serious factual errors. These need to be corrected to sift the truth from wishful demands on the government:

1.         There are more than twenty approved projects for assembly-cum-manufacture of tractors on the list of the Ministry of Industries. Most of them have gone dormant because they could not conform to the mandatory requirement of indigenization that is localization of components and for reasons of sheer inefficiency. The level of indigenization by the lead tractor manufacturers is 92 percent, with over 300 local vendor associates supplying parts for manufacture of tractors in the country.

2.         There is no supply-demand gap in the industry at the moment. To the contrary customers are not taking delivery of the tractors for various reasons.

3.         Loaning from ZTBL and other banks is just about 22 percent, of the total bookings of the industry.

4.         It is incorrect to state that tractors are booked “on 100 percent advance payment and the farmers would have to wait for a minimum of 8 to 16 months to get their tractors”. The waiting time on tractors today is almost zero. Payments from ZTBL and banks are NOT made in advance BUT AFTER the tractors have been delivered. Sometimes payments get delayed for weeks after the tractor has already been delivered.

5.         There is no duty or sales tax on import of built-up tractors. What further concessions can the government give to “support” the “industry”? To plead that components should be allowed to be imported duty free means to kill the whole of the local vending industry which has so painfully developed the components over a period of 20 years with huge amounts invested on transfer of technology.

6.         Previous schemes to allow import of tractors ended up in huge national and international scandals. These were quashed by the High Court as well as the Supreme Court. The proposed “Benazir Tractor Scheme” should not end up in a scandal and should be limited to tractors being manufactured locally. Tractor manufacturers delivered 10,000 tractors under the Green Tractor Scheme in just two months and have assured the government to meet the demand under the proposed Benazir Tractor Scheme on immediate basis. Local tractor manufacturers guarantee after-sale-service and availability of spare parts.

7.         Forecasts given in the graphs are entirely misleading. Tractor manufacturers are operating below their installed capacity which is 60,000 per annum in a single shift.

8.         Fly-by-night operators accelerate their process of putting up obnoxious demands prior to budget to seek concessions in disregard to operating in a fair and free competition.

9.         With 92 percent local content, supporting thousands of local businesses and employing hundreds of thousands of work force it would be naive if the government were to give support to fly-by-night operators, thus inflicting damage to the local industry.

– Sarwat Nasim, Company Secretary, Al-Ghazi Tractors Limited

Investing huge amount for a new tractor is not feasible

Engr. I. H. T. Farooqui

The article was written in a national spirit and not by a FLY BY NIGHT operators, the suggestions given in the article supports development of local assembly of tractors and not for the import. Rather it is already pinpointed that a huge amount incurred on import of duty-free tractors can be saved immediately but the government should encourage more tractor plants in the country and should not allow limited manufacturers to enjoy the situation.

First of all it should be made clear that the article does not belong to any lobby but from a nationalist, bringing Government Notice to the facts.

Now without going into further deliberations and arguments, Para-wise reply to their letter is as under;

1.         This is very interesting and an eye opening fact that more than twenty approved projects for assembly -cum-manufacture of tractors are on the list of EDB, but none of the project is materialized because of the mandatory localization in this segment.

The reason is very clear that the tractor industry achieved this target in 20 years span of time, phase-wise, they have invested the money and their resources in 20 years. How can you expect that from the start of the project a new comer can invest a huge amount in achieving this high mount target which the industry achieved in last 20 years. Investing this amount for a new tractor is not feasible because of the low volumes in the initial stage.

We are not denying the importance of the localization that’s why a reasonable time frame is requested till a new comer catches the present level of indiginization, which the industry achieved in the last 20 years…

2.         There is a supply demand gap in this segment that’s why the Government is compelled to allow duty free import of tractors. Poor farmers are not getting their tractors on the promises time, the quality of the locally assembled tractors is also a silent question.

Yes, at present the farmers are not taking delivery of their long awaited booked tractors because of various schemes announced by the Government, but the queue is still there… (Refer MTL annual report 2008 page 17 and 18 (Marketing operations), please also refer to Al Ghazi Annual report 2007, Graphs (Production) page No. 9, the total supply demand gap during the start of financial year 2008-09 was about 30,000 tractors.

In year 2004-05 the industry booked 57,915 units and delivered 44,231 units (pending 13,684 units,) in 2005-06 the industry booked 77,261 units and delivered 49,462 units (accumulated pending orders (41,483), in 2006-07 industry booked 39,386 units and delivered 54,325 units (accumulated pending order 26,542), in 2007-08 the industry booked 56,097 units and delivered 53,470 units (the present pending orders is 29,169 units).   (Refer Annual reports of both assemblers for the stated years).

3.         Very interesting fact that the loaning is only 22% of the total bookings of the industry, whereas the remaining 78% booking is Cash booking with the manufacturers.

4.         Yes, it’s true that ZTBL and other banks not paid the payment in advance but after the tractor delivery is made, but what about those 78% tractors which are booked on Cash with the manufacturers in 100% advance and for which the waiting time is almost 8~16 months.

5.         The reply to this is same as of 1.

6.         No comments

7.         The installed capacity of both the manufacturers is 30,000 units per annum in the single shift basis and not 60,000 units in single shift basis. (Refer MTL 2008 annual report page No.116 Capacity and Production and Al Ghazi Tractors Annual Report 2007 page 54 Graphs showing plant capacity 15,000 units.

8.         No comments.

9.         No comments.

-Published on pages # 10 & 11 April-2009 issue of MOBILE WORLD Magazine

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