Steel industry slams price distortion

ISLAMABAD: Criticising the policy makers and government functionaries for inefficiencies, iron and steel sector stakeholders on Thursday said that after failing to run Pakistan Steel Mills (PSM), the officials were bent on destroying steel units in private sector.

Addressing a press conference, major players in the iron and steel sector said that ill-planning and lack of regulatory oversight was creating distortions in the industry. They further said that investment and growth in the steel sector would be contained if price distortions continued.

“The capacity of Pakistan Steel was only 1.2 million tonnes per annum and the government could not run it,” FPCCI Vice President Mian Akram Fareed said. “[Compared to this], the production of only Mughal and Amreli Steel is more than 2m tonnes annually. Instead of respecting the private sector, officials are creating disturbances for investors,” he added.

The steel industry leaders said the decision to abolish Federal Excise Duty (FED) to around 40 units in former Federally Administered Tribal Areas (Fata) will damage the entire industry.

“Just because tax exempted goods are sold in major markets across the country, the main industry is making losses,” said Abbas Akberali, the patron-in-chief of Pakistan Association of Large Steel Producers.

He informed that his own company operated at full capacity and made record sales but still suffered a loss of around Rs1.7 billion in the last financial year.

“We are forced to lower the rates or opt for a shutdown due to price distortions and the availability of cheap products in the markets,” he said.

Mr Akberali highlighted that after abolishing FED for steel units in former Fata, the products from that part will be cheaper by up to Rs27,000 per tonne.

Meanwhile, Javed Mughal of Mughal Steel Mills, Lahore said that in the last fiscal year, around 0.5 million tonnes of duty free scrap was imported for the units in Fata while the electricity bills showed that only 100,000 tonnes steel products were made.

“Where did the remaining scrap go? Most importantly how much of iron and steel products were consumed in Fata areas? The officials are promoting tax fraud culture this way,” Mr Mughal said.