ISLAMABAD: M/s Arif Habib Corporation has called for concessions for the local steel industry on par with those granted to FATA/PATA regions and for the reinstatement and strict enforcement of the FBR’s previous Pay Order regulation to protect the local industry.
In a letter to Abdul Aleem Khan, Minister for Privatization and Investment, Arif Habib, Chairman of Arif Habib Corporation, highlighted a recent notice from Century Steel Group, a prominent Chinese steel producer, which indicated their intention to withdraw from Pakistan due to the severe challenges facing the steel sector. This alarming development has prompted the formation of a committee, headed by the Minister for Privatization and Investment, to address the critical issues affecting the industry.
Among these challenges, the misuse of sales tax exemptions for imports through the FATA/PATA regions has emerged as a major threat to the survival of the steel sector. The detrimental impact of these exemptions has severely affected local industries, particularly the flat steel sector, while also causing massive revenue losses and driving foreign investors away.
Arif Habib emphasized the critical challenges arising from the misuse of these exemptions, which have caused significant harm to local industries, particularly the flat steel sector. The government is losing an estimated Rs 70 billion annually in revenue due to these exemptions. The substantial tax differential—over Rs 40,000 per ton—resulting from the 18% sales tax has led to a decline in capacity utilization, which has fallen below 25%, making local operations unsustainable and potentially leading to the closure of steel mills.
He also pointed out that the situation has deterred foreign investment, with the Chinese steel giant Century Steel Group expressing concerns and threatening to pull out of Pakistan.
“We commend the Federal Board of Revenue (FBR) for implementing the Pay Order regulation earlier this fiscal year, which effectively curbed imports under the guise of FATA/PATA exemptions. The sharp decline in such imports during this period confirmed that these materials were not intended for legitimate use in FATA/PATA but were instead being sold unlawfully in other markets,” said Arif Habib. He noted that this regulation demonstrated the positive effect of stricter oversight. However, the recent ruling by the Peshawar High Court (PHC), which allows the use of Post-Dated Cheques (PDCs) instead of Pay Orders, has reversed this progress, reopening avenues for exploitation and undermining local producers.
To address this pressing issue, Arif Habib Corporation has made the following recommendations:
- Equal Concessions for Domestic Producers: Flat steel producers should receive equivalent tax relief on raw material imports when supplying to the FATA/PATA regions, regulated via the IOC.
- Increase in Regulatory Duty: The regulatory duty (RD) on CRC and GI imports (HS Codes 7209 and 7210) should be raised from 10% to 20% to curb the influx of imports that undermine local production, until FATA/PATA exemptions are fully withdrawn.
“We strongly urge the government to reinstate and implement the FBR’s earlier Pay Order regulation in the strictest possible manner to protect the local industry from further harm,” said Arif Habib, Chairman of Aisha Steel Mills.
He emphasized that the issues facing the steel sector require immediate and decisive action to ensure its survival and growth. By addressing the misuse of FATA/PATA exemptions and implementing the proposed measures, the government can protect local industries, preserve jobs, and restore investor confidence. The steel sector is a cornerstone of Pakistan’s industrial framework, and its stability is essential for broader economic progress. The committee will prioritize these recommendations and take the necessary steps to safeguard this vital industry from further harm.
Ends
