Lahore, March 25, 2025 – The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has voiced serious concerns regarding the Green Tractor Scheme, highlighting its negative impact on the country’s tractor parts industry. Instead of fostering growth, the scheme has disrupted market stability, affected cash flows, and put thousands of jobs at risk.
PAAPAM Chairman Usman Aslam Malik, following a recent meeting at PSIC House, underscored the significance of the tractor parts sector, which consists of over 250 small and medium engineering units in Punjab, employing more than 35,000 skilled workers directly and over 300,000 indirectly. This industry plays a crucial role in supporting Pakistan’s agro-economy, with local manufacturers producing over 900 of the 1,000+ components required for tractor assembly. However, the current subsidy model has led to a drastic reduction in industry volumes, with sales hitting a decade-low.
The scheme, originally announced in May and launched in October, failed to align with the natural sales cycle of tractors. Farmers, enticed by the promise of a PKR 1 million subsidy per unit, postponed purchases, severely affecting sales during the Kharif season. The government’s decision to reduce the scheme’s scale from 30,000 to 10,000 tractors further destabilized the market, while delays in disbursing funds to assemblers exacerbated cash flow challenges. The lack of clarity on future subsidy programs has left farmers hesitant to make purchases, impacting the ongoing sales season.
Malik emphasized that short-term, politically driven subsidy schemes disrupt the industry rather than strengthening it. He pointed out that Pakistan’s per-hectare horsepower remains low, and inconsistent interventions prevent sustainable mechanization. Instead of sporadic subsidies, a structured, long-term approach is required to stabilize the market and encourage growth. PAAPAM has proposed a five-year plan with a PKR 10 billion annual budget to subsidize 20,000 tractors per year, with individual subsidies capped at PKR 500,000. This model would ensure stable sales of over 50,000 tractors annually while preparing the sector for future mechanization with higher-horsepower tractors.
To address the immediate crisis, PAAPAM has urged the government to clear outstanding payments for tractors supplied before Eid, announce that no new subsidy schemes will be introduced in the current financial year, and ensure that future subsidies are planned with a multi-year budget to avoid artificial demand surges and subsequent market crashes. Additionally, PAAPAM has recommended launching subsidy programs ahead of the Rabi and Kharif seasons, reducing the subsidy per tractor to below PKR 400,000 to increase accessibility, and introducing a low-markup tractor financing scheme to provide farmers with more sustainable purchasing options.
Given the severity of the situation, PAAPAM is calling for an urgent joint meeting with representatives from the Ministries of Finance, Agriculture, and Industries, alongside tractor manufacturers and PAAPAM members. Malik warned that without immediate intervention, many industry players will struggle to sustain operations, leading to widespread job losses and economic setbacks.
