ISLAMABAD: Pakistan Association of Large Steel Producers has raised alarms over the resumption of large-scale smuggling, mis-declaration & under invoicing of steel from Iran. In an SOS letter to finance minister, PALSP urged that smuggling, mis-declaration and under-invoicing are destroying the local steel industry, which is being perpetrated in most organized manner.
‘Our steel industry is fighting for sheer survival due to massive PKR depreciation, highest financial costs, highest power rates coupled with significant increase in input costs. As a result, many steel mills have shut down their operations and the remaining are working at a small fraction of their capacities and many more are on the verge of closure.’
PALSP is the leading Association working for the revival of the local steel industry by engaging government as well as leading players of local steel industry. Adding, the steel melting industry is the back-bone of steel industry which is facing multiple challenges. To find an alternative to survive in these difficult times, key players of long steel industry are diversifying into exports of non-ferrous products (copper ingots) to China, and this segment emerged as the 5th largest exporting sector with exports touching $1.350 billion in 2023-24. One of the members of the PALSP is the largest exporter of copper and many more are pursuing similar targets. PALSP fears that in case unchecked smuggling continues by organized mafias, this would severely damage the exporting ability of copper products and at the same time would endanger their survival.
PALSP warned that due to the economic downturn construction activity is at a grinding halt, and the steel demand is at the lowest possible level. In this situation, the resumption of smuggling of steel with full might is an alarming development, which is going to create further devastation for the steel sector as well as our economy. PALSP raised concerns and stated that perpetuation of smuggling & misdeclaration at such a massive scale is a question mark for those authorities who are deputed at the Customs Check Posts / borders and are mandated to stop any kind of wrongdoings.
PALSP stated that approximately 500,000 MT of steel was being smuggled primarily from Iran (also via Afghanistan) annually to Pakistan, which is approx. 10 percent of the total steel being produced in the country. On the other hand, during the last over 10-15 years, annually, 0.5 (half million) mln MT to 1 mln MT of new (re-usable without melting)/ steel (as per verifiable evidence/ declared by exporting countries) is annually being brought into Pakistan by mis-declaring it as scrap by the Customs authorities. According to Iran Govt’s rules, export of scrap to any other country is strictly dis-allowed.
According to an estimate, smuggling & mis-declaration of steel from Iran & rest of the world results in colossal revenue loss of around 40 billion rupees to the exchequer annually. This could create implications for our country in money laundering-related issues, as Pakistan and Iran do not have any formal banking channels for this purpose. This raises another question as to how foreign exchange is being arranged for bringing smuggled/ mis-declared steel from Iran?
Due to menace of steel smuggling, the local steel industry in Quetta and other parts of Balochistan has been wiped out. Over 80% of the steel that is sold in Baluohistan comes from Iran through smuggling, mis-declaration, under-invoicing, and other deviant tactics. PALSP stated that smuggling/mis-declaration is an organized crime that is pushing Pakistan towards de-industrialization. Due to poor monitoring/controls & connivance of the concerned, the reach of smuggled Steel is not confined to Balochistan; it is reaching out to large parts of the country like Lahore, Karachi as well as other cities.
To address this issue, PALSP appealed to the Ministry to restrict the import of steel only through sea routes. This measure would help in effectively countering the scourge of smuggling at least from Iran (and also smuggling of Iranian steel via Afghanistan).
‘In 60s, when there was no melting industry, at that time Govt allowed import of re-rollable scrap and the menace of re-rollable was added in the Import Policy Order. Afterwards, Pakistan’s largest public sector steel mill was established in the country and at the same time large number of steel melting industry was established here. After passage of over 7 decades, lacunas in the definition of re-rollable scrap in IPO is being abused for import of large-scale steel products – steel plates in different shapes, sizes and forms – products that are the closest substitutes of billets, mis-declared and are brought here in the garb of re-rollable scrap.
In Feb 2024, official scrap import data shows that over 20,000 MT of steel plates that are re-usable without melting were imported by fraudulently mis-declaring the same as re-rollable scrap through different border points in Balochistan, especially Taftan. Since a lot under-invoicing is done, so that actual quantity could be much higher than the officially declared quantities. This activity is being perpetrated due to negligence & inertia on the part of Commerce Ministry by not making necessary correction in the definition of re-rollable scrap in IPO and on the other due to connivance of all those departments in this activity, who are mandated to stop smuggling, mis-declaration and under-invoicing.
Copyright Business Recorder, 2024
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