CCP proposes creation of separate steel ministry

Report highlights raw material shortages, import dependency, policy uncertainty among challenges facing industry

The Competition Commission of Pakistan (CCP) has recommended the establishment of a separate Ministry of Steel along with the formulation of a National Steel Policy.

These measures aim to help address competition-related issues, barriers to market entry for new investors, and other challenges faced by the steel industry.

A report on the state of competition in Pakistan’s steel sector has also been issued by the CCP, showing that the country’s manufacturing sector accounts for 71% of total exports, employing nearly 15% of the workforce.

Further, it highlights that the large-scale manufacturing industry contributes to 69% of the manufacturing sector’s output, and 8.2% to the national GDP.

The report states that in the 2024 fiscal year, domestic steel production stood at 8.4 million metric tons, including 4.9 million metric tons of long steel and 3.5 million metric tons of flat steel.

Imports of steel scrap amounted to 2.7 million metric tons, reflecting heavy reliance on external sources of raw materials. However, the country’s per capita steel consumption stood at only 47 kilograms, indicating sluggish industrial and construction activity.

Moreover, the report revealed that up to 50% of steel available in the market is of substandard quality.

Steel demand in Pakistan is primarily driven by infrastructure development, urban population growth, industrial expansion, and major projects such as the China-Pakistan Economic Corridor (CPEC).

On the supply side, the industry faces challenges including raw material shortages, dependence on imports, and the energy crisis.

Pakistan Steel Mills, once a vital national asset with an annual production capacity of 1.1 million tons, has remained non-operational since 2015, with liabilities exceeding Rs400 billion.

In contrast, countries like China, India, and Russia have achieved significant progress in the steel sector through government support, technological innovation, and large-scale investment.

Furthermore, tax exemptions in regions of the former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA), have resulted in about 1.5 million tons of untaxed steel being transported back into settled areas, causing an estimated loss of Rs40 billion to the national exchequer.

CCP’s recommendations

The report recommends the exploration and mining of local coal and iron ore reserves, using modern technology. It also urges the adoption of energy-efficient production methods.

Highlighting regulatory weaknesses, the CCP observed that new investors face hurdles in ease of doing business, while frequent changes through Statutory Regulatory Orders (SROs) create uncertainty in the sector.

For the improvement of the sector, the report recommends revising and stabilising the National Steel Policy, rationalising tax rates, and taking measures against dumping practices.

It calls for strengthening the Ministry of Industries and Production, ensuring the implementation of quality standards for steel production, and registering unlisted small steel units.

The CCP further suggests ending tax exemptions in the former FATA/PATA areas, promoting the use of technology to enhance production quality and reduce costs, encouraging iron ore mining, expanding value addition and green technologies.