After one of the worst years in recent memory, the tractor industry is now on a turnaround. For the four months ended FY17, tractor production has gone up 17 percent year-on-year whereas sales have increased by over 27 percent. A number of factors have contributed to the recent rejuvenation of this struggling industry.

Firstly, the federal government reduced the sales tax on tractor sales from 10 percent to just five percent as of July 2017. BR Research has already written about the haphazard change in tractor sales tax over the past several years, and how it has historically corresponded with the boom-and-bust cycle of sales (Read: “Travails of the tractor manufacturers,” published August 05, 2015). According to an industry source, the smallest change in price can deter a potential buyer completely.

Secondly, this time around, neither the Punjab nor the Sindh government introduced their blundering tractor schemes, which kept getting delayed, remained in the dark, and eventually quietly disappeared. The damage these schemes caused to the industry last year was quite significant.

Thirdly, an industry source told BR Research that tractor exports are on the rise, with African countries as one of the main destinations. Moreover, Millat Tractors, the country’s leading tractor manufacturer, has recently entered a deal to export certain products launched under its MF-300 series (Read: “Millat reaps a win,” published October 27, 2016).

Finally, the agriculture sector has seen some positive developments, at least compared to last year; although farmers are not out of the woods yet – commodity prices remain low, cotton outlook once again is poor, and there’s an ongoing dry spell – some good news over last year has been in the form of the fertilizer subsidy, cheaper electricity, and schemes such as the centre’s Kissan Package, and the more recent Rs100 billion interest-free loan scheme by Punjab.

All this has lately encouraged the much-needed mechanization of our agricultural lands.