Another policy draft is circulating in government offices these days. And this time it is the long awaited steel policy, eagerly eyed by the steel, engineering and allied industries alike.
Pakistans steel industry lags far behind its regional counterparts and relies heavily on imports to bridge the shortfall of around 1.5 million tons per annum. In part, this is because steel production capacity in the country grew just marginally during the past decade.
At present, the countrys poor infrastructural setup is mirrored by an alarmingly low per capita usage of steel, which is a mere 18kg compared to the global average of 214kg, according to a recent report published by World Steel Association. Although, this low steel demand has been one of the major reasons behind a lackluster domestic steel production capacity, the times are changing and they must.
The Organisation for Economic Co-operation and Development states that almost half of the world steel production is absorbed by the construction industry - primarily water & energy sector - and the same is the case for Pakistan.
So, considering the current state of Pakistans economy, which needs heavy infrastructural investment in water and power in particular, the demand for steel and allied products should be on the rise.
Steel demand is also likely to increase because of growing urbanization which is gaining pace all round the globe, spurring the demand of steel-dependant industries including machineries, automobile and many consumer goods items such as electronics and electrical products. It is no surprise, therefore, that all these industries in Pakistan lack proper infrastructure, partly explained by the machinery imports that account for 17 percent of the total import bill.
To sum up, the policy should focus on the exploration of domestic resources, such as iron ore, and emphasize on research, development and training. There is also a dire need to incentivise foreign players in order to catch up with modern technology requirements, as FDIs can pave way for capacity additions to reduce the import bill and lower the cost of production. Producing good quality, cost effective steel can go a long way to help boost the domestic industries.
The policy should also be holistic in nature to ease the concerns of steel users who complain against the monopolistic nature of Pakistan Steel Mills. Industry sources say that the mill does not produce the desired quality in many cases and lacks product variety, such as in the case of automobiles and industrial construction, and on top of it, its over priced. Of course, in the meanwhile, an urgent step must be taken to turnaround the ailing state owned mill, which is facing allegations of bribery and corruption.
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