The government is considering removal of duties on iron scrap, reducing the sales tax up to 14 percent as well as the steel import in order to decrease the steel prices in the country which have shot from Rs. 90000 per ton to Rs. 178,000 during the last single year.
This was revealed by senior officials of the Ministry of Industries and Production while briefing the Senate Standing Committee which met with Syed Faisal Ali Subzwari in the chair on Thursday. A reduction of 10 percent in taxes and duties may reduce steel prices by up to Rs. 23,000 per ton.
Dr. Hamid Atiq Sarwar, Additional Secretary, Ministry of Industries and Production, said that the steel sector was not regulated, but after the ‘prices shocks’, the government could intervene to fix them. Steel prices are cheaper in India and Iran than Pakistan due to the availability of raw materials domestically, he added.
The Committee discussed issues pertaining to steel price rise and its impact on circular debt and unemployment. The members were of the view that this would affect the Prime Minister Housing Scheme and other residential projects benefitting the common man. The Committee Chairman directed the Ministry to share details of price reduction possibilities along with its financial impact with the Committee.
The Committee was informed that there were four different types of players (shipbreakers, large steel units, melters, rerollable mills) with different raw materials with volatile international prices and it was not guaranteed that tax interventions would definitely reduce the price.
The Committee was informed that the reasons behind the increase in steel prices include:
i. A worldwide increase in steel raw material prices (scrap) i.e. from $290/- to $540/- per ton in the last year
ii. An increase in ship freight from 430-35/- to $70-80/- per ton
iii. Increased power tariff from Rs. 13 per unit to Rs 20 per unit
iv. 100 percent increase in gas /coal/ RLNG prices in last one year;
v. An overall increase in the cost of doing business due to price escalation due to dollar appreciation
vi. Impact of duties and taxes (which goes into the government’s kitty) of 24 percent, i.e., @ 0 percent customs duty, two percent additional customs duty, five percent regulatory duty and 17 percent general sales tax
Dr. Sarwar said the main reason for the rise in steel prices was the high cost of scrap in the global market, which increased from $250 to $510.
The Committee was informed that the decline in iron ore production due to the closure of Pakistan Steel Mills and the increase of ships’ transportation charges from $35 to $80 also contributed toward an increase in steel prices. It was further informed that a 10 percent reduction in taxes and duties is proposed to reduce steel prices, which was likely to reduce the rate by Rs. 22,000 to Rs. 23,000 per ton. The second option is to import steel products, but this could affect the local industry and lead to unemployment. Shutting down the steel unit will waste extra power and increase circular debt. The Committee called for a comprehensive plan to reduce steel prices.
The Committee was informed that the remaining employees of Pakistan Steel Mills, which has remained closed since 2015, are planned to retire voluntarily. In this regard, Rs. 10 billion will be spent in the current financial year. In the last financial year, 55 percent of the employees were paid Rs. 11 billion under the voluntary retirement scheme. A total of Rs. 24 billion will be spent on payment of arrears. Expression of Interest (EOI) has been invited for rehabilitation of 1,228 acres of the Steel Mill plant with the help of the private sector by investing one billion dollars.
The Additional Secretary said that issues pertaining to liabilities with the National Bank of Pakistan and SSGCL are near resolution, after which they would issue NOC and pave way for moving forward for PSM transactions.
The Additional Secretary said that issues pertaining to liabilities with the National Bank of Pakistan and SSGCL are near resolution, after which they would issue NOC and pave way for moving forward for PSM transactions.
Source: Pro Pakistani