Steel sector is seeking up to 25 percent customs duty on import of Mild Steel (MS) products to offset higher cost of production of domestic industry. Sources told Business Recorder on Wednesday that a delegation of steel melters will negotiate with the ministry of finance officials the imposition of heavy duty on import of MS products, in Islamabad today. Presently, there is some 10 percent duty on import of prime quality MS products while in the case of FTA it has been reduced by 50 percent to 5 percent.
The delegation will be headed by Mian Saeed, Chairman, Pakistan Steel Melters Association, while the office-bearers from Lahore, Karachi and Peshawar will also be the part of this talk. Sources said steel melters will brief the officials about the domestic steel industry and will suggest levy of up to 25 percent import duty for all mild steel products, including rebars, wire rods and billets to offset higher cost of production of domestic industry. The Federal Board of Revenue (FBR), in recent budget, has enhanced sales tax for steel sector by 75 percent to Rs 7 per unit as compared to Rs 4.
They said followed by increase in sales tax, import of MS products will be feasible from China, Ukraine and Russia and the rising import will lead to massive dumping of imported MS products into the country. Local steel industry is not competitive with imports because electricity prices rose more than double over the past two years and sales tax increased by 75 percent in the budget 2015. “We strongly believe that if customs duty is not increased, many units in the steel sector will start closing down and revenue from the sector will decrease dramatically,” they added.
The increase in customs duty will not only protect the domestic industry, it will also help the government gain an additional revenue of at least Rs 1 billion per year as the base level of approximately 80,000 tons per year is more unrealistic in nature. The documented steel sector which pays majority of the industry’s taxes is in grave danger of being wiped out by virtue of cheap imports from neighbouring countries unless import duties are increased on the mild steel products.
They said prices of domestically produces MS products, including the bar have already been increased by some Rs 5,000 to Rs 6,000 per ton in the wake of some Rs 3 per unit increase in sales tax and after this surge, locally produced MS products are much costlier than imported products.
There is some Rs 10,000 per ton price difference between the imported and locally-manufactured wire rods as imported item is available at Rs 74,000 per ton, while domestically produced item costs Rs 84,000 per ton. Meanwhile, according to a statement, the domestic steel melting industry has urged Customs Evaluation Authorities to check the import of deformed construction quality steel bars under PCT code 72.28 misdeclared as alloy steel bars.
They demanded of the customs authorities to value all alloy steel bars imported under PCT code 72.28 at $1,500 to $2,000 per metric ton. The only manufacturer of alloy steel namely Peoples Steel Mills has also recommended in a letter to the Director Valuation Customs that alloy steel bars be valued at minimum $1,500 per metric ton. Steel melters claimed that unchecked import of misdeclared alloy steel bar is damaging the local steel melting industry which is already running below capacity. The customs authorities should take immediate notice of this violation in the light of potential import.
Under the Free Trade Agreement (FTA) with China the alloy steel bars are plain bars and are cold drawn used in automotive and engineering industry that gets zero rate of duty. Alloy steel bars are never indented or deformed however, bringing in construction quality steel bars under the guise of alloy steel bars is causing a huge loss of revenue on account of ST and IT due to low valuation to the exchequer. It is also damaging the domestic steel industry.
Source – Business Recorder