ISLAMABAD, April 7: A public hearing on the issue of zero-rated customs duty on the import of raw materials requested by the seamless industry was held at the National Tariff Commission here on Wednesday.

The hearing, presided over by NTC chairman Dr Faizullah Khilji, was attended by representatives of industries concerned to present their point of view. Justifying the request, Huffaz Seamless Pipes Industry managing director Hafiz Abdul Maajid said the plant using high-tech processes was initially established in 1987 as a downstream industry of Pakistan Steel, which were to supply round steel bars of certain special specifications.

As, however, PS could not provide these, the government was approached to allow import of these bars and other raw materials at concessional rates on the basis of a no-objection certificate (NOC) issued by PS.

Subsequently, these materials were included among the goods exempt from duty by SRO 601 of 1989. These materials were indeed imported but blocked by the customs department on the plea that these materials were being produced by the Ittefaq industries and that anything produced locally was debarred from the import under a government policy.

This hurdle too was removed after it was proved that Ittefaq was not producing round steel bars of the variety used by Huffaz, and the government allowed zero-rated import of these as part of the exercise then undertaken by the Central Board of Revenue to revise all the SROs.

This facility was availed of by the industry for five years. Subsequently, the government levied a customs duty of 10 per cent on the raw materials of seamless pipelines.

Heavy Mechanical Complex (HMC) deputy general manager Idrees Jamal said that he had no objection to the requested exemption from duty. But he wanted to draw the NTC's attention to the fact that the pipes supplied by the industry had been found to be defective and that they had stopped purchasing them locally.

This matter, he said, had been reported to the industry itself as well as to the Engineering Board. People's Steel Mills general manager Afzaal Ahmed opposed the grant of concession because the materials required by the industry producing seamless pipes were already being manufactured by Pakistan Steel.

The demand for seamless pipes has recently increased by 50 per cent to 18,000 tons per annum. In reply to a question by the NTC chairman, the Huffaz MD said that these pipes were being sold to OGDCL, gas pipelines industries, British Petroleum, Pakistan Petroleum, besides being exported to a number of countries, including the US, Australia, Saudi Arabia, etc.

Summing up the discussion, Dr Khilji told the applicant industry that the tariffs were not meant to resolve the issues of energy cost and the cost of large inventory, which statedly had to be maintained by the industry. These were mainly management issues, he added.

As regards the concession in tariff, he noted that the industry had enjoyed zero-rated tariffs for a number of years. Tariff protection was meant for a limited period and not indefinitely.

In the case of seamless pipes, there was already a big difference between the tax rate on finished product (25 per cent) and that on raw materials, which remained zero for a number of years and since been changed to 10pc. It was a sufficiently large difference to make the industry viable.

As the industry's representative had stated that they intended to produce some of the inputs themselves, the NTC chairman said he would take a decision on the request for tax concession after looking at their plans.