The domestic steel industry is seeking increase in regulatory duty and sales tax on the import of finished steel products for creating a level playing field. "Regulatory duty on finished steel products must be increased to at least 30 percent from 15 percent and sales tax to 30 percent from 17 percent on imported finished steel products to protect the domestic industry," they maintained.
Industry sources claimed that due to ineffective policies under current economic conditions, the Federal Board of Revenue (FBR) may lose approximately Rs 17 billion in revenue. "The FBR can easily mop up an additional Rs 5.5 billion if the recommendation of the industry takes effect, besides providing a level playing field to local manufacturers. In addition, the federal government will retain Rs 11 billion being earned from domestic steel industry," they added. The ship breaking industry, one of the largest formalised industries of Balochistan, contributed Rs 12.6 billion in total tax collection for the year 2014-15. However, a massive decline has been witnessed during this fiscal year as it contributed Rs 400 million in taxes and revenue in the first quarter of 2015-16.
"We are continually approaching the government to create a level playing field by increasing import duties and taxes on finished products so our industry could survive since we are virtually on the brink of shutdown," said Shoaib Sultan, member executive committee Pakistan Shipbreakers Association (PSBA). Ship breaking industry is providing jobs to thousands of people of Balochistan and if prompt action is not taken, the government will lose taxes amounting to Rs 11 billion from this industry alone, he added. Pakistan Steel Melters Association (PSMA) has also been aggressively approaching the government to take immediate measures including increase in regulatory duty and sales tax as inferior quality imported products are polluting the local industry and will lead to shutdown.
Hussain Agha, Executive Director of Agha Steel Industries and member of PSMA said that another alarming fact is the quality of the finished steel products that is being imported. "Quality of the imported products is a serious concern for the country's national infrastructure as lot of imported material is substandard. Unfortunately, our major cities lie on seismic fault lines and any inferior grade finished goods pose a direct threat to infrastructure," he added.
He demanded of the government to take immediate measures to provide a level playing field for domestic steel sector, which has focused on providing quality products to ensure a strong infrastructure. Evidently, if the government does not take immediate action, not only the domestic industry will suffer huge losses but the government will lose around Rs 17 billion in collections from the steel industry.
Many new investments within the industry will come to a halt resulting in irrecoverable job losses if remedial measures are not taken, Agha added. Under the IMF programme, the government has been mandated to increase the revenue collection and this is the perfect opportunity to provide a level playing field for the nascent steel industry of Pakistan and increase revenue collection by increasing regulatory duty and sales tax at import stage, he added.
As international steel prices of finished products have crashed, all local steel sectors are feeling the pinch. In October, 20,000 tons of finished products have arrived. Pakistan Steel Re-rolling Mills Association has also approached the FBR saying the local steel sector is under threat. They demanded an immediate ban on the import of steel bar, angle, channel, and girder beams (finished products). The association said after raise in taxes at the import stage the government will fetch Rs 22,000 per ton additional revenue on the import of finished products.