Ministry of Industries and Production (MoI&P) is unlikely to support Pakistan Steel Mills (PSM) proposal regarding a further increase in Regulatory Duty (RD) to 30 per cent from Rs 12.5 per cent on HR Steel, well informed sources told Business Recorder. The request of PSM, sources said, regarding the imposition of a 30% Regulatory duty on Boron mixed alloy steel (72.25 & 72.26) with 0.0008% and increase in RD to 30% on HR steel (72.08), pipes/tubes (73.05 & 73.06) has been examined in detail by the Engineering Development Board (EDB).
However, EDB considered that the flat rolled products (HR coils/sheets) and pipes/tubes are being used as input materials by many down-stream industries including heavy engineering, home appliances, automotive sector, etc and argued therefore that any further increase in regulatory duty on HR coils/ sheets (72.08) and pipes/tubes (73.05 & 73.06) to 30% will adversely affect the local user industry since PSM cannot produce entire range of materials in varying sizes/ grades/ specifications.
The sources said, after imposition of 12.5% RD on HRC down-stream user industries including automotive parts manufacturers approached EDB with strong reservations and they requested EDB for the withdrawal of 12.5% RD on HRC. The sources further stated that due to imposition of 12.5% RD on HR Sheets/coils in certain cases, duty on finished products is the lowest viz-a-viz raw materials resulting in reverse cascading. Keeping in view the entire steel sector's position, the Mo&IP has decided not to support any further increase in RD on HR coils/ sheets (72.08) and pipes/tubes (73.05 & 73.06) to 30% and is therefore not supported.
With reference to imposition of 30% RD on Boron mixed alloy steel (72.25 & 72.26) having 0.0008%, MoI&P argues that imposition of RD on Boron mixed alloy steel (72.25 & 72.26) should be equivalent to RD levied on HR coils/sheets. However, import of silicon electrical sheet (grain as well as non-grain oriented), falling under HS codes 7225.1100, 7225.1900, 7226.1100 & 7226.1900 being used by the manufacturers of Electric Fans, Transformers and electric Motors should not be subject to imposition of RD.
Insiders in the Ministry maintain that PSM management failed to achieve any (production, sales and reduction in losses) target by end December 2014 and April 2015 as promised with government.
Statements of the CEO and spokesman pertaining to performance proved incorrect and the PSM proposed production (58% CAPU and Rs 44 billion) and sales revenue targets for the year 2014-15's attainment from July to May 2015 production. These remained unmet with 20% CAPU and sales Rs 7.3billion.
Hot rolled coils unsold (due poor quality) inventory is approx 33,000 MT and slabs 69000 MT for rolling. Raw material iron ore (lumps) stock has been depleted and (fine) is approx 14,500 MT. Coal is approx 80,000 MT. PSM thermal power plant is facing a total breakdown from May 31 and the plant is dependent on K-Electric supply. Blast furnaces are not functioning properly due to use of poor quality ores and production. PSM management had sought additional Rs 6. 5 billion from the federal government to run its operational and administrative affairs; however, Finance Ministry refused to support the proposal before the announcement of federal budget. IMF's Resident Director also visited PSM last week to inspect it physically.
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