Power ministry suggests exempting key input from duties

Govt collects 10% customs duty, 17.5% regulatory duty on electrical steel sheets

ISLAMABAD: The government is likely to withdraw customs duty from the import of electrical steel sheets in the upcoming budget for fiscal year 2016-17 in an effort to promote the use of energy-efficient electrical products, officials say.

The Ministry of Water and Power has strongly advocated the removal of customs duty and regulatory duty from electrical steel sheets as it wants people to use energy-efficient fans and motors, which will save energy and reduce the shortfall that reaches its peak in summer every year.



The government had imposed 10% customs duty on electrical steel sheets in the budget for 2014-15 and 17.5% regulatory duty on imports from countries with which Pakistan had signed a free trade agreement.



These duties forced the small manufacturers of electric fans and motors to use cheaper raw material and scrap to keep their production cost low, which led to the supply of inefficient fans in large volumes to the market.

According to officials familiar with the development, the proposal for the withdrawal of duties was floated in a meeting of the Economic Coordination Committee (ECC) earlier this month.

The Ministry of Water and Power suggested that the fan manufacturing industry should be provided incentives and encouraged to use high-quality raw material and avoid substandard inputs. For that purpose, it said, the customs duty and regulatory duty imposed on the import of electrical steel sheets should be removed in the upcoming budget.

The ECC was told that ceiling fan had been targeted as the first appliance for saving energy because it was being extensively used by domestic consumers in the country. Estimates suggest that about seven million fans are supplied to the local market annually.



An essential raw material for high-efficiency electric fans and motors is the imported cold-rolled non-grain oriented electrical steel sheet. Its use in fans and motors can help save a huge volume of electricity and lead to a fall in energy consumption in motor-driven appliances such as water pumps and washing machines.

The Ministry of Commerce and the Ministry of Industries and Production backed the proposal, but sought an assurance that cold-rolled coil (CRC) steel would not be imported in the garb of silicon electrical steel sheet.

However, the Federal Board of Revenue opposed the withdrawal of duties, arguing a significant tariff protection was already in place for both the electric fan and motor manufacturers.

Countering the argument, the Ministry of Water and Power said smaller fan manufacturers, who had a major share in the industry, had not been able to take benefit of the prevailing tariff protection.

During the discussion, it was pointed out that the ECC was no longer in a position to grant exemption from the customs duty.

The ministry was asked to initiate and complete the process of re-classification of the HS (Harmonised System) Code for the energy-saving products in consultation with all the stakeholders and submit the proposal for duty exemption through the upcoming Finance Bill.

Published in The Express Tribune, May 21^st, 2016.

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