Large steel sector’s value chain: EDB to furnish report on energy costs in coordination with ministries

ISLAMABAD: The country’s steel industry has backed out from its demand of creation of “distinct category” regarding provision of concessional electricity tariff to it, saying that now its demand is equal tariff for the entire industry, well informed sources told Business Recorder.

However, inter-ministerial body has decided the EDB will get relevant data from PALSP and furnish a report in coordination with MoI&P and Ministry of Finance on energy costs of the large steel sector’s value chain.

Sharing the details, sources said, in follow-up of decisions made during the meeting on the subject held in the Ministry of Industries and Production on February 6, 2024, a sub-group was constitute

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d to deliberate the matter relating to creation of a distinct category for the large steel sector. A meeting was held in the Ministry of Commerce on February 15, 2024 under the chairmanship of joint secretary (Policy Tariff).

At the very outset, the chair highlighted concerns of the large steel producers raised by Pakistan Association of Large Steel Producers (PALSP) and invited comments of the participants. According to sources, representative of PALSP noted that the Association was no more pursuing the specific request for creation of “distinct category” of concessionary energy tariffs for the large steel sector. Instead, their demand now was to have an equal/non-discriminatory treatment for all the industry.

He claimed that the large steel manufacturing sector could become more efficient and competitive in case this incentive of concessionary energy tariffs was provided by the government. He also explained that this would encourage upgradation of manufacturing plants enabling the producers to export more.

Representative of Power Division said that since the PALSP was no more pursuing the request for a distinct category on concessionary energy tariffs any further proposal for changes in the existing energy tariff would require to be shared with Nepra for their input.

Representative of Ministry of Finance said that any proposal having revenue implications might be of concern as there was not enough fiscal space to cater for such concessions. Moreover, input of External Finance Wing and Budget Wing of the Ministry would be needed in case of any request for concessionary energy tariff is considered.

The chair stated that creation of a distinct category for large steel sector seemed a difficult proposition in view of the fact that the sector was highly energy intensive compared to other industries.

Moreover, the current export of the sector was mostly that from the small industries and not the large steel companies. He further inquired if the industry and EDB had done any working on analysing the energy costs per unit of production as this would be useful in determining the quantum of energy tariffs on input costs and exports.

After discussion by the stakeholders, it was decided that EDB will get relevant data from PALSP and furnish a report in coordination with MoI&P and Ministry of Finance on energy costs of the large steel sector’s value chain.

Copyright Business Recorder, 2024