Loss-making Millat Tractors shuts down production operations

Millat Tractors

Millat Tractors Limited (MTL), Pakistan’s largest agricultural machinery manufacturer, has closed due to a severe funding crisis.

According to MTL, the whole tractor manufacturing business is currently experiencing a severe cash shortage, which it has notified the Pakistan Stock Exchange (PSX) and other relevant federal ministries about. The Federal Board of Revenue (FBR) has not released nearly Rs. 8 billion in sales tax refunds to the business in the last two years, according to the report. 

Due to accumulated sales tax refunds, the industry is now losing money on each unit it sells, which is growing at a rate of Rs. 150,000 — more than its earnings — for each tractor it sells.

Read more: FBR unearthed Rs 500 million sales tax fraud by Metro Shoes

He went on to say that the company pays a 17 percent sales tax to its key supplier, and that only 5% of the tax can be passed on to consumers, with the government covering the remaining 12 percent.

This Rs. 150,000 per item gap is developing, with Millat Tractors Ltd currently owing Rs. 6 billion. In essence, the facility is losing money on every unit it sells, leaving the company little choice but to closed down activities, or at the very least avoid more losses, according to the industry leader.

When the FBR tried to postpone payment on the basis of agricultural and non-agricultural sales, the industry fought back and won their cases in tax appeal courts, the federal Ombudsman, high courts, and the Supreme Court, according to Malik Aftab, a vendor and dealer of used tractors.

Last year, MTL sold 35,000 tractors, with plans to sell 44,000 in 2022. However, its move to exit the market will result in the loss of 3,000 machines every month. Tractor prices will rise as a result of this because the psychological loss to the market always overcomes the statistical loss.

Aftab also cautioned that the problem must be rectified as soon as possible, as it could have ramifications for other businesses and the wider market.

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