ISLAMABAD: Pakistan’s steel industry has asked the caretaker prime minister to rationalise turnover tax and incorporate export facilitation scheme (EFS) rules to boost the sector.
A delegation of the Pakistan Association of Large Steel Producers (PALSP) met with caretaker Prime Minister Anwarul Haq Kakar.
The delegation included leading members of long steel manufacturers, such as Senator Nauman Wazir Khattak, Abbas Akberali, Javaid Mughal, Saqib Riaz, Hussain Agha, Zarak Khan Khattak, Hassan Farid, and Wajid Iqbal Bukhari, Secretary-General of PALSP. The meeting was also attended by senior officials of fFinance, the FBR, SBP, and NHA.
The PALSP delegation briefed the prime minister on the challenges and most pressing issues of the steel sector. The members of the delegation expressed their concerns over the current difficult period for industries amid exorbitant interest rates, skyrocketing costs of inputs, especially electricity prices, etc.
To bring the steel industry out of its current situation, the PALSP delegation urged the PM that the government must take effective measures to facilitate the steel sector.
Kakar keenly heard all the issues of the industry and assured the government’s full cooperation and support. He recognised the pivotal role that the steel sector can play in fortifying the country’s economy and directed the relevant authorities to formulate policies aimed at supporting the steel industry to contribute more to the economy.
The PM advised the industry to develop a consortium and come up with proposals for steel industry transformation, especially the extraction of iron ores and Pakistan Steel Mills privatisation. He said SIFC is the best platform for the industry to suggest transformative measures and innovative ideas that can boost the industry.
The PALSP highlighted that the current unprecedentedly tough situation has forced companies to either halt or shut down their operations or to operate at minimum capacities. As a result, many companies declared heavy losses, and others have meagre profit margins of 1% to 2% for the current year. In such a grim situation where companies are facing losses, the high rate of 1.25% turnover tax (on manufacturing) is regressive and extremely unjustifiable. To ease the situation and stabilise the local steel industry, there is a need to rationalise the turnover tax rate and increase its adjustment period to five years.
The members informed the PM that an inordinate delay in the incorporation of required enabling provisions in the export facilitation scheme rules is hindering the steel industry’s copper export potential. During the meeting, the PM was apprised that some of the key players in the steel industry are fast diversifying in the exports of non-ferrous products and copper, and in the last few years, the steel industry has emerged as the fastest-growing exporting sector, securing the fifth place in the top exporting sectors.
In FY 2023, the value of exports of copper had touched the $1,350 million mark, exhibiting a year-on-year increase of around 20%. With Chinese annual copper imports of around $200 billion and the FTA with China providing a competitive advantage, copper exports could easily cross the $5 billion mark within two to three years.
The PALSP members also highlighted that the menace of flying GST invoices is the biggest threat for documented players.
The PALSP was apprised that the flying sales tax invoices are being circulated for the sale or purchase of local steel scrap by unorganised or small players in the industry, and approximately 80% of the local scrap sales are routed via flying sales tax invoices. This deprives the national exchequer in the form of a huge revenue loss of billions of rupees.
The association suggested disallowing sales tax input on the purchase of local steel scrap. The association also asked for curbing the menace of smuggling.
The PALSP appreciated that the government has taken all preventive measures to stop the menace of smuggling, but in the last couple of months, smuggling activity has again started picking up.
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