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Private steel-melters in deep-ever crisis.

Private Steel-Melters in Deep-Ever Crisis

The Steel-melters Association has said that the private sector steel-melting industry is in a deep-ever worsening crisis for the last two years due to the serious anomalies in the duty structure for steel. These conditions were deliberately created by the previous government as part of the overall plan to cripple financially and gain political ascendancy over their ace political rivals who were in steel business without realising the adverse consequences on rest of the small steel-melting units with no political interests whatsoever. Actually, the small units inadvertently became the main victims of the political attacks and counter attacks and suffered immensely.

The private sector steel-melting industry comprising our 140 steel-melting furnaces spread all over Pakistan had been fighting against all odds during the past two years and barely managed to survive. The entire country is aware of the plight of the steel-melting industry. With stepping in of the caretaker government it was hoped that immediate steps would be taken to do justice to the industry and end its sufferings, but problems of industries appear to have been relegated to a lower priority.

Some very glaring anomalies in the duty structure which require immediate attention and decision by the government are:

A-Duties and Taxes on Raw Material: High rate of duties on raw material used by private sector steel-melting furnaces i.e. Rs. 1500 per ton Customs Duty and 12.5 per cent Sales Tax on import of steel scrap, and exemption of the same on raw material used by Pakistan Steel, on hand has shot, the prices of private sector products beyond a common man's reach and on the other hand put the private sector in relation to Pakistan Steel at a serious disadvantage right from the input stage.

Unfair, unjust and clearly against the government's declared policy of treating the private and public sectors equally. The Central Board of Revenue carried out a study of the anomaly and submitted to the government a summary recommending reduction in duties on imported scrap. The summary is lying with the government pending decision.

B-Excise Duty and Sales Tax on Billets: Billets and ingots are similar semi-finished products manufactured form iron ore/scrap having identical end use i.e. rerolling. Both were treated equally for levy of taxes/duties before 1988. In 1989-90 budget makers created a discrimination between the two. The duty structure was distorted, Rs. 600 Excise Duty combined with 12.5 per cent Sales Tax was levied on billets, Rs. 375 per ton Sales Tax with exemption of Excise Duty on ingots. The vast difference in duties made manufacture of billets economically enviable. The discrimination was challenged in Lahore High Court which passed judgement that levy, charging and collection of Excise Duty and Sales Tax on billets at the rate indicated was illegal and without lawful authority.

C-Exemption/Concessions in Gadoon Amazal: The overall exemption of duties/taxes on raw material, machinery arts, 50 per cent concessionary rate of electricity tariff and other facilities, give an overall advantage of Rs. 4,500 to 5,000 per ton on manufacture of steel products in Gadoon as compared to manufacture of similar products in other parts of the country. The steel-melting furnaces in other part of the country have thus been put a serious disadvantage.

D-Import of Re-rollable Scrap/items and Billets: Import of re-rollable scrap/items and billets does not contribute towards manufacturing process, at the same time renders steel-melting furnaces redundant. Due to low rate of duties on re-rollable items and loopholes in import policy of remeltable scrap and billets, large quantities of re-rollable scrap is finding it way in the country and causing colossal national loss. Central Board of Revenue carried out a study of the problem and submitted to the government a summary and recommendations which is pending decision.

The Association has urged the Prime Minister to personally intervene and save the industry from further damage/victimisation. The Association has suggested following immediate measures. - Duties on scrap be brought at the level

prevailing before budget 1988-89. - Private and public sectors be treated

equally for levy of duties/taxes on

their raw material. - Discrimination in duties between ingots

and billets be removed and uniform

rate of Rs. 375 per ton be levied on

both. - Exemption `of` duties/taxes on raw-material

and 50 per cent electricity tarif

for furnaces in Gadoon be withdraw. - Import of billets be banned. - Loopholes in import policy of remel

table scrap be removed so thatimport

of re-rollable scrap in the garb of remel

table scrap is stopped. - Import of re-rollable items/scrap be discouraged

by increasing the current rate

of duties.
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Title Annotation:Business Opinion; Pakistan steel-melters in deep-ever crisis
Publication:Economic Review
Date:Sep 1, 1990
Previous Article:Leasing firms suffer for lack of facilities.
Next Article:Mr. I.A. Hanfi reappointed governor, State Bank of Pakistan.

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