Steel industry assures government increased but conditional contribution

The steel industry has assured the government of contributing Rs15 billion revenue in 2007-08, about 90 percent more than the outgoing fiscal, if import duty on scrap is removed and 5 percent sale tax withdrawn, sources told Business Recorder on Thursday.
They said that both the melters and re-rollers have assured the Minister for Industries, Production and Chairman Central Board of Revenue (CBR) of contributing Rs12.5 billion revenue on 3.5 million tonnes ignots and billets by melters and 2.5 billion by the re-roller against 4.5 million tonnes long steel products.
The CBR only agreed to withdraw budgetary measures and abolished import duty on scrap after receiving a Rs15 billion verbal commitment by the re-rollers and melters.
It was learnt that all the stakeholders have agreed that sale tax would be collected through electricity bills. The industry would pay Rs5.20 as sales tax on each unit of power it utilises, they added.
The industry sources said that a meeting with CBR is likely to be held on Friday to finalise rules and procedures saying that it would have been better if other stakeholders were involved.
A stakeholder on condition of anonymity said that the collection of Rs15 billion revenue would be an uphill task for the CBR if it did not ask Wapda and KESC to be extra vigilant. He believes power theft, even today was 30 to 40 percent in melting and re-rolling units.
The government already facilitates the industry by setting a benchmark of 800 units consumption against per tonne production, which factually is only 600 units, he added.
Sources in the Ministry of Industries said that CBR will establish a separate collectrate in Lahore to analyse revenue collection against what has been assured by the industry on monthly basis to take a final decision whether to continue with the agreed system or not. The decision would be taken on the basis of revenue collection by the collectorate, they added.
They said that the industry was of the view that the elimination of import duty on scrap would discourage smuggling and close door for the undocumented sector. About 1.5 to 2 million tonnes scrap of low quality is being smuggled into Pakistan.
To ensue equitable distribution of billets of Pakistan Steel Mill (PSM), the Engineering Development Board (EDB) suggested to do away with the role of middlemen and the distribution should be made on capacity basis after a survey to be conducted by the PSM.
All the stakeholders hoped that withdrawal of sales tax and zero-rate import duty would reduce steel products prices substantially. These meetings were held at the EDB and CBR and as a result the government has issued SRO to abolish duty on scrap, and withdrawn duty on import.