Steel set to become expensive as budgetary measures kick in

Industry official says price could be increased by Rs2,500-3,000 per ton

KARACHI: Construction cost is set to go higher as the steel industry announced its plan to increase prices by Rs2,500-3,000 per ton from July 1, 2017, citing measures the government has taken in Budget 2017-18.

“We have no choice but to increase steel prices. Steel companies will not be able to bear the burden for more than one or two weeks,” a top official of a steel company commented.



Finance Minister Ishaq Dar, in his budget speech, said that the government has decided to increase sales tax rates for the steel industry from the current Rs9 per unit to Rs10.5 per unit. The government collects General Sales Tax (GST) from the steel industry through electricity bills.

Dar said that the government took this decision after “consulting the industry and that the corresponding increase shall be made in ship-breaking and other allied industries”.

However, the industry official said there is more to the story.

“It was like forcing someone to accept something at gun point,” he said when asked about the government ‘consultations’ with the steel industry.

“It is true that the steel industry and the government had lengthy discussions on budgetary measures, but the government actually forced us to accept the increase of Rs1.5 per unit. Otherwise, they were raising it to Rs12 per unit,” he informed.

The increase of Rs1.5 per unit looks small, but it is a 17% increase in current rates. Moreover, the government has also raised turnover tax from Rs1 per unit to Rs1.25 per unit through which the government will collect higher income tax from the steel industry, the official continued.

The government’s understanding is that the industry can easily pass this burden to the consumers due to strong demand of steel. Steel industry is witnessing rising demand due to the increase in Public Sector Development Programme (PSDP), China-Pakistan Economic Corridor (CPEC) projects and higher conduction activities in the last few years.

Analysts agree that the steel demand is rising and it will continue to remain strong in the next year. Therefore, an increase of Rs2,500-3,000 will not massively dent the demand of steel in the country.



Steel industry in Pakistan has remained in the limelight on the Pakistan Stock Exchange in recent years. Moreover, a number of steel companies have also expanded, raising money through Initial Public Offerings (IPO).

Published in The Express Tribune, May 30^th, 2017.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.