Pakistan Association of Large Steel Producers (PALSP) has urged the government to take remedial measures to improve the system of ailing steel industry by tackling the confronted issues of smuggling, misdeclaration and under invoicing of steel.
In a letter written to finance minister, PALSP urged that smuggling, misdeclaration and under-invoicing hurt the local steel industry, which is being perpetrated in most organized manner, said a press release issued here Wednesday.
Our steel industry is fighting for survival due to massive PKR depreciation, highest financial costs, and highest power rates coupled with significant increase in input costs. As a result, many steel mills have shut down their operation and the remaining are working at a small fraction, a release said.
PALSP is the leading Association working for the revival of the local steel industry by engaging government as well as leading players of local steel industry. Adding, the steel melting industry is the back-bone of steel industry which is facing multiple challenges, a release said.
To find an alternative to survive in these difficult circumstances, key players of long steel industry are diversifying into exports of nonferrous products (copper ingots) to China, and this segment emerged as the 5th largest exporting sector with exports touching USD 1.350 billion in 2023-24.
One of the members of the PALSP is the largest exporter of copper and many more are pursuing similar targets.
According to press release, PALSP fears that in case unchecked smuggling continues by organized mafias, this would damage the exporting ability of copper products and at the same time would endanger their survival.
PALSP warned that due to the economic downturn, construction activity is at a grinding halt, and the steel demand is at the lowest possible level. In this situation, the resumption of smuggling of steel with full might is an alarming development, which is going to create further devastation for the steel sector as well as our economy.
PALSP raised concerns and stated that perpetuation of smuggling and misdeclaration at such a massive scale is a question mark for those authorities who are deputed at the Customs Check Posts/borders and are mandated to stop any kind of wrong doings.
PALSP stated that approximately 500,000 MT of steel was being smuggled primarily from neighbouring countries to Pakistan, which is approximately 10% of the total steel being produced in the country.
On the other hand, during the last over10- 15 years, annually, 0.5 (half million) mln MT to 1 mln MT of new (re-usable without melting), steel (as per verifiable evidence/ declared by exporting countries) is annually being brought into Pakistan by mis-declaring it as scrap by then Customs authorities.
According to Iran Govt’s rules, export of scrap to any other country is strictly not allowed.
According to an estimate, smuggling and mis-declaration of steel from different countries of the world results in colossal revenue loss of around 40 billion rupees to the exchequer annually. This could create implications for our country as Pakistan and Iran do not have any formal banking channels for this purpose.
Due to menace of steel smuggling, the local steel industry in Quetta and other parts of Baluchistan has been declining at alarming level. Over 80% of the steel that is sold in Baluchistan comes from a neighbouring country through smuggling, mis-declaration, under-invoicing, and other deviant tactics.
PALSP stated that smuggling/mis-declaration is an organized crime that is pushing Pakistan towards deindustrialization. Due to poor monitoring/controls and connivance of the concerned, the reach of smuggled Steel is not confined to Baluchistan; it is reaching out to large parts of the country like Lahore, Karachi as well as other cities.
To address this issue, PALSP appealed to the concerned quarters to restrict the import of steel only through sea routes. This measure would help in countering the scourge of smuggling at least from a neighbouring country via Afghanistan.
In 60s, when there was no melting industry, at that time government allowed import of re-rollable scrap and the menace of rerollable was added in the Import Policy Order. Afterwards, Pakistan’s largest public sector steel mill was established in the country and at the same time large number of steel melting industry was established here.
After passage of over seven decades, lacunas in the definition of re-rollable scrap in IPO is being abused for import of large-scale steel products – steel plates in different shapes, sizes and forms – products that are the closest substitutes of billets, mis-declared and are brought here in the garb of re-rollable scrap. In Feb 2024, official scrap import data shows that over 20,000 MT of steel plates that are re-usable without melting were imported by fraudulently mis-declaring the same as re-rollable scrap through different border points in Baluchistan.
