The Pakistan Steel Melters Association (PSMA) informed Federal Finance Minister Asad Umar through a letter about en-bloc closure of the steel melting furnaces and steel re-rolling units not only in Gujranwala but also in Balochistan. The letter says that the rate of Rs13 per unit of electricity consumption has forced the industry to shut down their operation.
The closure of entire industry would result in huge loss to the national exchequer besides depriving thousands of workers of their jobs. The government may lose revenue amounting to Rs1 billion per month from steel melting industry in Gujranwala district only.
Presently the steel melting industry is the largest revenue generating sector in Pakistan but steel melting furnaces and re-rolling mills are being closed en-bloc.
The Association further pointed out that the furnace unit having 10 tons production capacity established in settled areas have to pay Rs20-25 million on account of electricity bill. On the contrary, the steel melting units industry located in Federally Administrated Tribal Area (FATA) and provincially Administrated Tribal Area (PATA) has been exempted from sales tax up to 30th June 2023 vide FATA/PATA Sales Tax SRO 1212(1) 2018.
The exemption in sales tax provided to the steel melting industry in FATA and PATA is encouraging the steel melting furnaces to relocate in non-taxable areas. Moreover, a number of steel melting furnaces are being established near the streams and canals utilizing hydel power.
The Association further pointed out that cheap billets transported from the non-tax areas are being dumped in taxable areas like Islamabad, Gujranwala, and Lahore. As a result, the tax-paying units have to bear the brunt of losses that must be stopped forthwith.
The PSMA said a number of sugar mills have installed steel melting furnaces on their premises to use cheap electricity and alleged that some of them are involved in huge tax evasion that has made the steel melting units non-competitive. The accounts of such steel melting units established on the premises of the sugar mills are all muddled up with the sugar industry accounts as separate accounts of steel melting furnaces are not maintained, the Association claimed in its letter.
A mushroom growth of these furnaces has been witnessed in Lahore. With the increase in sales tax to Rs13 per electricity unit consumed, small steel melting furnaces are on the increase and are having a field day. More than 98 percent of these furnaces are unregistered with the Federal Board of Revenue.