Millat Tractors Limited : A successful case of privatisation
KARACHI: Millat Tractors Limited (MTL) is one of the successful cases of privatisation in Pakistan, which remained its leadership in the tractor sector while expanded production capacity and brought high technology in the local market to establish a self-sufficient engineering base in Pakistan.
In a programme of Business Plus Tv, Livewire in Focus-Privatization Series-Host Khalil Ahmed with experts and industrialists shed light over the MTL pre-privatisation, post-privatisation, issues and challenges and future role in the industry.
MTL Pre-Privatisation: Millat Tractors Limited was established in 1964 for the marketing of tractors brand “Massey Ferguson”. The company first established its assembly plants in 1966, which produced tractors through imports of Semi Knocked Down (SKD) kits.
Meanwhile, the government established Pakistan Tractors Corporation (PTC) having a mandate to make sure SKD kits and assembly production of tractors through its marketing arms MTL.
PTCL with different projects, including imports of spare parts and Research and Development, shifted production task completely to MTL.
MTL Privatisation: MTL continued to work till it was nationalised in 1970. In the next year, it established a big production unit for assembling of tractors.
In 1992, the Employees Management Group bought out 51 ownership shares of the corporation through highest bidding price of Rs 107 per share with an overall value of Rs 306 million.
After privatisation, 230 employees were offered golden handshake, which cost the company Rs 27.1 million.
1984, the company set up a generating unit for fast production and made handsome investment in the assembly line, which generated employment and enhanced its contribution to national exchequer.
The company gradually set up its large engineering base and attained self-sufficiency in the production of tractors.
The production of tractor units continued to replaced imports of foreign brand and promoted locally made tractors across the country.
MTL Post- Privatisation: Pakistan Businessman and Intellectual Forum’s Mian Zahid said MTL has been a market leader in the sector but its performance, including local sales and exports, improved markedly after privatisation of the company.
The company witnessed a period of innovation in its technology, production of equipment and machineries and modernisation in design and spare parts.
Professionalism was seen at best without bureaucratic rift. Later, the investment was seen and issues with trade union were as resolved amicably. As a result, production of tractors increased to 24,000 units per year from 18,000 units per year.
Excelerate Private Limited CEO Zafar Aziz Usmani said the experience of setting up tractors assembling plant in the form of MTL was an exceptionally successfully case because of the prevailing demand in the local market to cater a vast agriculture sector with its farm mechanisation.
MTL was performing well as a nationalised organisation but it witnessed exceptionally results after privatisation, as the board of directors were independent to take measures such as expansion and innovation in technology. This gave boost to the whole organisation.
MTL Unabated Progress: The increase in local production has reduced a major expense in the import bill whereas it attracted foreign exchange through exporting tractors unit to the national kitty.
In 1992, before privatisation, the annual production of tractors stood at 17,000 per units, which increased to 71,000 in 2009. In the same year, MTL sales were recorded at 45,000 with eight different models of tractors.
The year 2009 was declared as the year of records with production exceeding to 30,000 and made a record in the industry. The overall revenue increased to Rs 16 billion per annum.
Challenges faced by MTL: After privatisation in 1992, the government introduced Awami Tractor Scheme, which cost MTL badly as imported tractors were subsidised heavily with minimised level playing field for the local players.
The government provided Rs 2 billion subsidy though it lost a foreign exchange amount to Rs 2.8 billion from the scheme.
Forman NIT chairman Tariq Iqbal Khan said the government did not support the industries and private sector but it introduced a political scheme to secure its vote bank that hurt local industries grossly.
Different experts, on the other hand, opined that the open import policy of tractors was the demand of growers to have tractors on the rising demand that paved the way towards fast mechanisation of the farms, hence improving the yield of corps.
The imports of tractors were carried out to meet the shortfall of local tractors, while on the other hand, the local demand was met on time to achieve the target of agriculture produce.
Moreover, it brought competition in the market and consumers could get tractors on comparatively lower cost than brand manufactured by the local company. Besides, the local producers brought innovation and quality in their products.
MTL in Future: Mian Zahid said MTL started new trends and introduced in-house spare parts and generators. It enjoyed good relationship in the local and international market having a foreign franchise and proven expertise, that will benefit the local industry.
The government should protect local industry, which would help indigenous corporation for generating employment and vendors base in the country, he said.