N
o, it’s not just you. Several Pakistanis last year thought exactly the same. Perhaps in another era they would have protested, written to a newspaper, or even (why not) tweeted their thoughts. Not these days - apparently a bunch of people complained about tractors to the Pakistan Citizen Portal, a government owned and operated app designed as a grievance redressal system. And the volume of messages was enough that the one institution definitely noticed: the Competition Commission of Pakistan. They began an inquiry on April 21, 2021 (after preliminary investigation in 2020), and just published their report on September 13. Based on their findings, the Commission wants to fine two tractor manufacturers: Millat Tractor and Al-Ghazi Tractor, under Section 30 of the Competition Act. The alleged crime? Colluding to intentionally raise prices of tractors for more profit. To understand how we got here, it helps to have some context on the tractor
12
industry in Pakistan. Tractors account for 7% of large-scale manufacturing in Pakistan. Tractor sales jumped 55% in fiscal year 2021 - and around 96% of that is manufactured in Pakistan. The actual structure of the tractor market, accounting to the Commissions, is oligopolistic. Millat Tractors has a 70% market share, while Al Ghazi Tractors have a 29% market share. The former has a production capacity of 40,000, while the latter has a production capacity of 30,000. The complaints on the Pakistan Citizen Portal mentioned a drastic increase in the prices of tractors at different points in time - despite subsidy relief given by the government on sales tax. So the commission first asked for price increase information. Turns
out the two companies had in fact increased their prices at various intervals: Millat Tractors had increased prices in October 2018 (1 – 5%), July 2019 (7 – 13%), March 2020 (2 – 3%) and July 2020 (5 – 7%); while Al Ghazi had increase prices in October-November 2018 (3 – 5%), July- August 2019 (5 – 10%), March 2020 (1 – 4%) and July 2020 (5 – 7%). When asked about the prices, the two companies cited increases in the price of steel, prices of gas, mounting inflation, increase in import duties on certain raw materials, and the devaluation of the rupee against the dollar. There was only one problem: some of that information did not hold up. For instance, the whole increased costs of good
Will the fine prove anything? Let’s see. But it is nonetheless disheartening. Competition is what allows innovation to happen, but the lack of quality tractors at affordable prices to farmers affects the rate of mechanization in Pakistan
