The steel melting furnaces, which contribute 80 percent of the total steel production in the country, have become uncompetitive and now inching towards collapse due to a number of reasons including discrimination in electricity tariff and withholding tax on local purchase.
The industry sources told Business Recorder on Wednesday that Pakistan Steel Melters Association has written a letter to the Federal Minister for Finance seeking his intervention to save one of the highest revenue generating industry. The installed capacity of steel melting industry is over four million tons but hardly producing 2 to 2.5 million tons in a year. Production is directly proportionate to the amount and tariff of electricity while with following increase in electricity tariff, a major upset has taken place, the sources said, adding “new electricity tariff rates are being enforced across the country except Khyber Pakhtunkhwa.”
The steel melting furnaces which consume hundred thousands of units per month are most affected. With a cursory glance immediate difference shall be of Rs 6,000 per ton. Billets all over the country would be Rs 6,000 per ton costlier as compared to billets production in KP, the sources added.
Moreover, an imbalance of more than Rs 10,200 per ton has been witnessed with the ship plates as compared to billets, they said and urged the government to impose duty on ship plates to save the indigenous steel melting industry. Electricity is used as a raw material and as such consumed on large scale. The steel melting industry is ready to pay fuel adjustment price. Presently, the industry is almost sick due to a number of reasons besides the recent floods that have played havoc.
The industry is facing liquidity crunch while return from the market is negligible, the sources said, adding that fuel price need to be spread over a period one year. “Under these circumstances, it is proposed that fuel price may be adjusted in 11 instalments, which could provide relief to the industry,” they maintained. The sources further said that certain taxes, which were not applicable to this industry, have been levied. Four percent withholding tax on local supplies is one of them that was levied in the federal budget 2008, the sources said and pointed out that Sher Shah (Karachi), and Misri Shah (Lahore), are the biggest scrap markets in Asia. Unfortunately, FBR has not yet registered a single dealer from these markets. The local supplies are not adjustable either. However, after a very hectic exercise, WHT on local supplies was reduced to 1-percent vide SRO 787(1)2011. But surprisingly, under SRO 550 (1) 2012 para (24B) (b) it has been quashed. The sources said the Association has urged the Finance Minister to reduce withholding tax from 4 to 1 percent on local purchase.
