Rising steel smuggling from Iran, Afghanistan: PALSP issues ‘stern warning’ to FBR

ISLAMABAD: The Pakistan Association of Large Steel Producers (PALSP) has issued a stern warning to the Federal Board of Revenue (FBR) about the increased smuggling of steel bars from neighboring Iran and Afghanistan.

According to a letter of the PALSP to the Federal Board of Revenue (FBR) on Monday, the relentless smuggling of steel bars from Iran and Afghanistan has reached alarming proportions, posing a significant threat to Pakistan’s steel industry. The PALSP estimates that approximately 500,000 metric tons of steel is smuggled annually, resulting in a staggering tax collection revenue loss of Rs25 billion.

The scale of smuggling we are witnessing is unprecedented and has reached a critical level, warns Wajid Bukhari, Secretary General of PALSP. If immediate action is not taken, irreparable damage will occur to our industry, he added.

‘Steel sector not making windfall profits’ FBR should avoid ‘targeted taxation’: PALSP

The PALSP, representing the interests of large steel producers across the nation, has persistently appealed to the government to take decisive action against the smuggling menace. However, authorities were frequently resorting to temporary raids and cosmetic operations that fail to address the root causes of the problem. This critical situation prompted the personal intervention of the Prime Minister, who formed an inter-agency committee tasked with devising a comprehensive strategy to tackle smuggling.

Additionally, the Federal Board of Revenue (FBR) launched a massive crackdown, targeting smuggling operations in various locations. Regrettably, these actions have proven short-lived, providing only temporary relief and failing to deliver a lasting solution.

During a recent meeting of the Senate Standing Committee on Finance and Revenue, Senators revealed that smuggling activities were occurring under official patronage; highlighting the scale of corruption involved.

Shockingly, fixed rates for smuggled goods were exposed, with exorbitant fees charged for truckloads of illicit steel ranging from Rs500,000 to Rs600,000. Moreover, each checkpoint was reportedly accepting bribes ranging from Rs100,000 to Rs300,000 for smooth clearance. The illicitly obtained steel flooded the market, with dealers openly offering non-tax-paid smuggled steel at significantly lower rates.

The PALSP revealed that smuggled steel accounts for approximately 15% of the country’s long steel domestic manufacturing capacity. This illicit inflow of steel not only undermines the local market but also threatens the viability of steel producers, leading to severe job losses and widespread unemployment.

The consequences of this rampant smuggling are dire, as the closure of the domestic steel industry would have far-reaching ramifications for Pakistan’s economy as a whole. With billions of rupees in investments at stake, the livelihoods of countless workers hang in the balance, and irrecoverable damage looms over the industry.

The PALSP, deeply concerned about the industry’s fate, has put forth a series of recommendations to combat the smuggling crisis.

To protect our steel industry, immediate measures are required, emphasizes Bukhari. They propose that the import of steel be restricted exclusively to sea routes, ensuring tighter control and supervision. The installation of additional check posts equipped with state-of-the-art scanning devices and equipment is also advised to bolster security measures.

The PALSP advocated for the adoption of digitalization, replacing manual processes to enhance efficiency and reduce opportunities for corruption. Additionally, the association emphasizes the urgent need to deploy more personnel from the Frontier Corps (FC), Police, and Army at check posts to strengthen enforcement efforts. To discourage smuggling, PALSP calls for strict penalties not only for those directly involved in the illegal trade but also for those complicit in turning a blind eye to these activities.

If immediate and comprehensive action is not taken, the consequences for Pakistan steel industry will be catastrophic. The government must act swiftly to save this vital sector, protect billions of rupees in investments, and secure the livelihoods of thousands of workers, it added.

Copyright Business Recorder, 2023