KARACHI, March 20: The steel industry is seeking a 10-year tax holiday to enable it to face the growing competition by setting up modern and efficient plants to ensure its viability for meeting the growing demand of steel by various infrastructure projects, including dams, bridges, high-rise buildings and housing projects.
The industry is also asking the government to allow gas connections for power-generation and set up special and dedicated jetty, as well as Steel City in Port Qasim area where large and medium-sized steel units could be set up.
The Steel City should have all sorts of infrastructure facilities, including power, gas and water to produce quality products.
It has been cited that steel-makers in Turkey have dedicated a jetty to receive scrap and export finished (value-added) products.
Without providing such facilities, the industry believes that no modern and efficient plants could be set up with a capacity of 70 to 100 tons per day capacity.
Presently in Pakistan most of the plants have a capacity of around five to 10 tons which makes them unviable.
The industry wants the government to allocate around 2,000 to 2,500 acres for the Steel City and also develop a special jetty which could cater to the needs of steel industry only.
For providing a level playing field, the industry feels that the sales tax on entire value chain of long-rolled products, including billets, should be zero-rated for a period of seven years.
As a result of this, the industry would automatically get itself documented at each stage of its production because manufacturers would prefer claiming zero-rating on registration. It will also provide an opportunity to the rent-seeking class of perennial sick and inefficient steel units to re-structure for their own survival.
This will also provide opportunity to the industry to set up automatic units which are highly energy-efficient and ensure their viability in the competitive market. It would also help bring down prices of steel products and give a boost to construction industry to meet the housing demand of masses.
According to a study carried out by industry, the revenue loss in the first seven years would be ultimately recovered in the next three years as the entire steel sector would become documented.
The tax holiday for the industry should not be taken as revenue loss but a sort of deferment measure because foregone loss would be received when the industry would have been revamped and equipped with modern and efficient plants.
The industry has also demanded that customs duty on import of long steel products be increased from current 10 to 15 per cent to provide bare minimum protection to the local re-rolling industry. This will also help offset the export rebate of eight per cent being given by China to its exporters.
The industry has demanded that there should be a 10-year tax holiday, by giving exemption in income tax, and zero-rating of sales tax. However, there should be a two per cent withholding tax at the import stage for commercial import of steel which could be adjustable as per wishes of importers.
They strongly felt if the government does not take immediate measures and instead waits for the budget 2007-08, it may cause harm to the industry which is already passing through a critical phase.