Steps aimed at reducing steel prices under study, Senate panel told

ISLAMABAD: The government is considering removal of duties on iron scrap, reducing sales tax up to 14 percent as well as importing steel to reduce steel prices in the country, which shot from Rs90,000 per ton to Rs178,000 per ton in one 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 Sabzwari in the chair, here Thursday.

A reduction of 10 percent in taxes and duties may reduce steel prices by up to Rs23,000 per ton.

Dr Hamid Atiq Sarwar, additional secretary, Ministry of Industries and Production said that steel sector is not regulated but after prices shocks, government can intervene to fix prices.

Steel prices are cheaper in India and Iran due to availability of raw material domestically.

The Committee discussing issues pertaining to steel price rise and its impact on circular debt and unemployment.

Members were of the view that this would affect the Prime Minister Housing Scheme and other residential projects benefiting the common man.

The chairman Committee directed the ministry to share details of price reduction possibilities along with its financial impact with the committee.

The committee was informed that there are four different types of players (ship breakers, large steel units, melters, re-rollable mills) with different raw materials with volatile international prices and it is not a guarantee that tax interventions will definitely reduce the price.

The committee was informed that reasons behind increase in steel prices include; (i) worldwide increase in steel raw material prices (scrap) i.e. from $290 to $540 per ton in the last one year; (ii) increase in ship freight from $35 to $70-80 per ton; (iii) increase power tariff from Rs13 per unit to Rs20 per unit; (iv) 100 percent increase in gas/coal/RLNG prices in last one year; (v) overall increase in 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, ie, @ zero percent custom duty, two percent additional customs duty, five percent regulatory duty, and 17 percent general sales tax.

Dr Sarwar said that 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 further informed that decline in iron ore production due to closure of Pakistan Steel Mills and increase of ships’ transportation charges from $35 to $80 also contributed in steel prices increase.

The meeting was informed that a 10 per cent reduction in taxes and duties is proposed to reduce steel prices, which is likely to reduce the rate by Rs22,000 to Rs23,000 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 been closed since 2015, are planned to retire voluntarily.

In this regard, Rs10 billion will be spent in the current financial year.

Last financial year, 55 percent of the employees were paid Rs11 billion under the voluntary retirement scheme.

A total of Rs24 billion will be spent on payment of arrears.

An Expression of Interest (EoI) has been invited for rehabilitation of 1,228 acres of Steel Mill plant with the help of private sector by invest one billion dollars.

The additional secretary said that issues pertaining liabilities with the National Bank of Pakistan and the SSGCL are near resolution, after which, they would issue NOC and pave way for moving forward for the PSM transactions.

Members who attended were senators, Falak Naz, Fida Muhammad, Faisal Saleem Rehman, Muhammad Abdul Qadir, Saifullah Sarwar Khan Nyazee, Hidayatullah, and Imamuddin Shouqeen, and senior officers from the Ministry of Industries and Production along with all concerned.

Copyright Business Recorder, 2021