Major Tractor Company Shuts Down After Struggling for Years

A serious liquidity shortage led Pakistan’s major agricultural machinery maker, Millat Tractors Limited (MTL), to cease operations on Friday.

The entire tractor manufacturing industry is currently undergoing a drastic liquidity crunch according to MTL which has informed the Pakistan Stock Exchange (PSX) and all the concerned federal ministries of the same. It added that the industry’s sales tax refunds of over Rs. 8 billion haven’t been released by the Federal Board of Revenue (FBR) for the last two years.

An industry leader said,

The industry is now making a loss on each unit it sells due to accumulating sales tax refunds, which is increasing at the rate of Rs. 150,000 — more than its profits — for each tractor it sells.

He elaborated that the business pays a 17 percent sales tax to its supplier from whom it obtains components, and only five percent of sales tax can be passed on to consumers, with the government compensating the remaining 12 percent.

This imbalance of about Rs. 150,000 per item is growing and has now reached Rs. 6 billion for Millat Tractors Ltd. Essentially, the plant is losing money on every unit it sells, which leaves the company with no option but to shut down operations, or at least prevent further losses, the industry leader added.

Malik Aftab, a vendor, and dealer of used tractors revealed that when FBR had attempted to delay the payment on the basis of agriculture and non-agricultural sales, the industry had fought back and won its cases in tax appeal courts, with the federal Ombudsman, high courts, and the Supreme Court.

MTL had sold 35,000 tractors last year and planned to sell 44,000 in 2022. However, its decision to abandon the market will result in a monthly reduction of 3,000 machines. This will cause the prices of tractors to soar as the psychological loss to the market always outweighs the statistical loss.

Aftab also warned that the problem must be resolved immediately as it could have a ripple effect to affect other companies and the entire market.

Via Dawn


  • Years of non improvement and innovation and practically selling the same model for 50 years, its a shame that MTL is crying foul. Its true that outstanding reimbursements should never been delayed, but they saying that they are selling every unit at a loss is a not less than a big laugh.

  • Actually, it’s a policy of company for refund their money. But it’s a lay that they are selling at 150,000 loss at every unit. Shame for MTL with a bad quality of tractors.

  • Have Millat Tractors paid their vendors? Do they delay their payments for extended times, order unsustainably low quantities for each lot and not increasing part prices when they increase their tractor prices?

  • Its a great loss to Pakistani economy. Why government is not supporting the LMCs? 😞

  • MTL’s foul play to raise prices is evident. Losses claimed are bogus as reason for shutdown. This shows how monopolistic players in the automobile industry manipulate governments to dominate their say in the market.

  • 1. MTL should take case for Refund of GST with FBR and should meet with Finance Minister to resolve the issue at the earliest…
    2. Moreover selling each Unit on lose is against the business principles which cannot be accepted here..
    3. Submitted for valuable Views comments
    Thanks
    Regards:
    ZAHID KHATTAK
    IIR (Aspirant)

  • MTL owners should have to solve it by the alternate options like with modification in products, adding new and diff, models which used in other countries’ various purposes in agriculture. they have built the grand setup in industry which is plus point and they have passionate employees which will also be jobless after the company decision. instead of that company should introduce the new technology or new products’ if no more interested in tractors there are other option too which they can utilize and will be in good profit.

  • This is Hell of a government which is totally destroying Pakistan’s industry…shame on current government


  • close
    >