GUJRAT: A 20 per cent regulatory duty on the costly electrical steel sheet, a key raw material used in the making of energy-efficient fans, has compelled the manufacturers to enhance prices of their products ahead of the next season.
The price of the electrical sheet has almost doubled to $800 per tonne from $425 last year which is a major cause of concern for the manufacturers who usually enter into contracts for purchasing the raw material in December.
A local manufacturer told Dawn that the Federal Board of Revenue (FBR) keeping in view the low prices of steel sheet last year levied a 20pc regulatory duty on the sheet’s import and the fan manufacturers were asked to have their quotas approved to get rid of the duty.
But, he said, only a dozen manufacturers out of 150 had the ability and financial resources to directly import such raw material; the rest of them would rely on the commercial importers who also charged taxes as well as their own margin of profit. This had increased the cost of business for an ordinary manufacturer since the size of the industry was small.
High production cost to hurt exports
Chaudhry Ali Usman, an executive committee member of Gujrat Chamber of Commerce and Industry (GTCCI) and a former chairman of Pakistan Electric Fan Manufacturers Association (PEFMA), said that due to the unprecedented price of the electrical steel sheet, the small manufacturers would suffer and could be forced to utilise low-quality raw material instead that would result in poor quality fans consuming high amount of energy.
“The federal ministries of finance, industry, commerce, science and technology as well as power production should take serious notice of the situation and adopt a joint policy of rescuing the small- and medium-scale engineering industry otherwise it would have an adverse affect on the national economic growth,” Mr Usman said.
Haji Muhammad Ilyas, another former president of PEFMA and GTCCI, said the industry had made several attempts at convincing the federal government to withdraw the regulatory duty, but to no avail. As the price of electrical steel sheet had now doubled in the global market, local manufacturers would find it difficult to compete with their rivals that would negatively impact export of fans.
He said export of local fans had already declined in the previous fiscal year due to unrest in Middle Eastern countries such as Yemen, Iraq, Syria that were major markets for Pakistani fans. “Now the exports could decline further due to the exorbitant price of raw material as well as excessive taxation and levy of duties on the sector.”
Published in Dawn, December 25th, 2016