Steel sector decries concessions to foreign firms

Updated 07 Dec 2019

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The local steel industry has expressed concerns over proposed grant of special concessions to establish Directly Reduced Iron (DRI) technology in the country, claiming that the initiative was being taken without consultations with local sector. — Reuters/File
The local steel industry has expressed concerns over proposed grant of special concessions to establish Directly Reduced Iron (DRI) technology in the country, claiming that the initiative was being taken without consultations with local sector. — Reuters/File

ISLAMABAD: The local steel industry has expressed concerns over proposed grant of special concessions to establish Directly Reduced Iron (DRI) technology in the country, claiming that the initiative was being taken without consultations with local sector.

In a letter to several government functionaries, the Pakistan Association of Large Steel Producers (PALSP) said that none of the representative bodies of steel industry including the PALSP, the Pakistan Steel Melters Association and the National Steel Advisory Council was consulted before making such proposals at the highest forum of Economic Coordination Committee.

The letter, written by Secretary General PALSP Syed Wajid Bukhari said that the steel making is mostly undertaken by using imported re-meltable scrap, the substitute for re-meltable scrap is DRI which is not available locally and import is also not viable due to duty structure.

It said the DRI can be produced in following two methods: through gas- and coal-based process.

“Due to shortage of natural gas, the DRI production using natural gas is not viable as we are importing re-gasified liquefied natural gas (RLNG) to augment our shortage of natural gas. RLNG is expensive and DRI produced by using RLNG is not commercially viable in comparison with re-meltable scrap for making steel,” the letter explained.

The steel producers have said that it was the reason that coal-based process was viable. Pakistan has ample reserves of iron ore and coal that can be utilised for production of DRI, which is more cost effective than gas.

Referring to minimum threshold FDI condition, the association said in order to encourage investment in DRI plants by existing steel units or other local and foreign investors there should be no limit of minimum investment of $500 million as coal-based DRI plants can be established at lower investment.

The PALSP said that in order to encourage investment, the import of basic raw material including coal and iron ore should be allowed duty free, and initially the new plants will be dependent on imported iron ore and coal.

The association has asked the government to abolish concession given to the foreign investors while ignoring local investors and the criteria that only investment over $500m would be eligible for subsidy etc are being introduced to benefit a particular company.

“This seems like a policy suited to reviving Tuwairqi Steel because they will be the first to apply, the quickest to commission, in which case nobody else will enter and such a large threshold of investment will anyway deter most of the local investors, and will make Tuwairqi steel a monopoly,” the association deplored.

The PALSP urged the government that any such scheme should benefit the local industry at large which has been serving this country in every circumstance.

Published in Dawn, December 7th, 2019