The Pakistani steel industry has urged the government to avoid reducing tariffs on finished and semi-finished steel products, warning that such a move could lead to widespread closures of local steel units, massive job losses, and a spike in imports.
In a pre-budget meeting with Finance Minister Muhammad Aurangzeb, the Pakistan Association of Large Steel Producers (PALSP) emphasized that the proposed tariff rationalisation would be especially harmful amid the ongoing slowdown in construction activity. They warned that a tariff cut could result in the loss of up to USD 1 bln due to increased imports, alongside declining government revenue and accelerated deindustrialisation.
PALSP highlighted that over 60pct of steel units have already shut down, and those still operating are doing so at minimal capacity. The association urged the government to postpone any tariff changes by at least a year, allowing time for the industry to stabilise.
They proposed linking future tariff rationalisation to improvements in the cost of doing business and measures to boost international competitiveness. According to PALSP, the sector currently requires a 35pct tariff to remain competitive with imports, along with an additional 15pct buffer due to underutilised capacity and high production costs, arguing the total level of protection should not fall below 50pct.
PALSP noted that the industry has invested significantly in advanced technologies from Italy, Germany, China, and Turkey over the past 7-10 years, making production highly efficient. However, rising electricity and gas prices, combined with high interest rates, have eroded its competitiveness, particularly as electricity accounts for nearly 65pct of production costs.
PALSP also urged the government to maintain the current sales tax regime, including exemptions on local steel scrap supplies, to prevent a resurgence of tax fraud through fake and flying invoices.