Pakistan’s steel industry has raised concerns over the government’s economic and tax policies, warning that steep increases in indirect taxes, particularly sales tax, have sharply reduced demand for steel products.
According to the Pakistan Association of Large Steel Producers (PALSP), sales tax on steel has risen from PKR 10,300 (USD 36.5) per ton in 2019 to PKR 42,000 (USD 149) in 2024 and stands at PKR 37,000 (USD 131) in 2025, placing significant pressure on domestic producers.
Industry officials argue that while higher taxes may appear beneficial for government revenue, the policy is ultimately counterproductive, slowing economic activity and limiting growth. They note that domestic steelmakers are also burdened by high energy costs, even as the government pays hundreds of blns of rupees annually in capacity payments to independent power producers (IPPs). This combination has contributed to severe demand destruction and an estimated 50pct loss in government revenue over the past three years.
A recent industry report highlights that Pakistan’s steel sector currently consumes around 3 bln units of electricity but has the potential to use up to 7 bln units. An additional 4 bln units of consumption, it argues, could save the government significant amount in annual IPP capacity payments. Power remains the second-largest input cost in steelmaking.
1 USD/ 282.3 PKR
