KARACHI: Due to ineffective steel policies under current economic conditions, the FBR lost approximately Rs 17 billion in revenue generation. The shipbreaking industry, which is the largest formalized industry of Balochistan, contributed Rs 12.6 billion in total tax contribution for the year 2014-2015.
Currently, in the first quarter of 2015-2016, the pillar industry of Balochistan only contributed Rs 400 million in taxes and revenue generation with a yearly outlook only of only Rs 1 billion for the current financial year. Shoaib Sultan, owner of Horizon Ship Recycling and executive committee member of PSBA (Pakistan Shipbreakers Association), noted: “We are continually approaching the government to create a level playing field by increasing import duties and taxes on finished products so our industry can survive since we are virtually on the brink of shutdown. We have created thousands of jobs and if prompt action will not be taken, then the government will lose at least Rs 11.6 billion from our industry alone.”
Pakistan Steel Re-rolling Mills Association also approached FBR as the complete local steel sector is under strife.
According to their statement “Destruction of local industry through import of steel bar, angle, channel, girder beams (finished products) must be stopped.” The association further noted that the federal government collects more than 30 billion rupees revenue from the industry and has a steel re-rolling capacity of more than 6 million tons is shutting down. The association has recommended that regulatory duty on finished steel products must be increased to atleast 30 percent and sales tax must be enhanced to 30 percent from 17 percent on imported finished steel products in order to provide a level playing field, resulting in an increased revenue collection of 22,000rps/ton on finished products.
As international steel prices of finished products crashed, all local steel sectors are feeling the pinch. In the month of October, 20,000 tons of finished products has arrived and if the trend persists then FBR can easily mop up an additional 5.5 billion rupees in revenue generation if the recommendation of PSRMA is effected upon, resulting in a levelized playing field for local manufacturers.
PSMA (Pakistan Steel Melters Association) has also been aggressively approaching the government to take immediate measures as inferior quality imported products are polluting the local industry and will cause them to shut down. Another alarming fact is the quality of the finished steel products that is being imported. Hussain Agha, executive director of Agha Steel Industries and member of PSMA states, “the quality of the imported products are a serious concern for our national infrastructure since a lot of the material coming in our country is substandard.
Unfortunately, our major cities lie on Seismic fault lines and any inferior grade finished goods pose a direct threat to our national infrastructure. The government must take immediate measures to provide a level playing field for our domestic Industries. We are focused on providing quality products to ensure that our national infrastructure integrity is upheld and there must not be any compromise in that respect.”
Evidently, if the government does not take immediate action, it 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 action is not implemented. Under the IMF program, 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 at least Rs 17 billion for FBR.
