Copyright pakobserver
ISLAMABAD – The Competition Commission of Pakistan (CCP) has released a report titled “Competition Assessment Study of the Steel Sector in Pakistan,” highlighting key competition-related challenges faced by the industry. The study underscores the absence of a national steel policy and recommends the establishment of a dedicated Steel Ministry, citing successful models from China and India. Pakistan’s manufacturing sector has remained a cornerstone of economic expansion, contributing 71 per cent of total exports and employing about 15 per cent of the workforce. Within this sector, the steel industry plays a vital role. The report explores it from a competition perspective. Large Scale Manufacturing (LSM) dominates the sector, accounting for more than 69 per cent of manufacturing and 8.2 per cent of GDP. In FY24, local steel production was 8.4 million MT, including 4.9 million MT of long steel (billets and ingots) and 3.5 million MT of flat steel (coil and plates). Steel scrap imports stood at 2.7 million MT, underscoring the industry’s reliance on imported raw material. Despite this, per capita steel consumption remains low at 47 kgs, reflecting limited industrial activity and slower infrastructure development. Demand is driven by infrastructure development, urbanisation, industrial growth, and major projects like CPEC, with construction and real estate as key consumers. On the supply side, the industry faces heavy import dependence, energy constraints, and limited local raw material availability. Pakistan Steel Mills (PSM), once a strategic asset with 1.1 million tons annual capacity, has been non-operational since 2015 due to financial losses and outdated technology, leaving liabilities of Rs400 billion. By contrast, international peers like China, India, and Russia advanced through government support, innovation, and strategic investment. Lessons from global players highlight the need for Pakistan to develop local coal and iron ore, modernise infrastructure, and adopt sustainable, energy-efficient technologies. Regulatory and institutional inefficiencies exacerbate challenges. The Ease of Doing Business Committee lacks industry-specific expertise, while frequent changes in SROs create uncertainty for businesses. Substandard steel accounts for 50–60% of domestic production due to weak enforcement by the authorities, disadvantaging compliant producers. Tax exemptions in ex-FATA/PATA distort competition, with 1.5 million tons of untaxed steel entering settled areas annually, causing Rs40 billion in revenue losses. The sector also suffers from market concentration, policy biases, and limited diversification into high-value-added products. High entry barriers, the dominance of undocumented units, and minimal R&D investment constrain competitiveness. Import dependency on scrap further exposes the industry to global shocks, while weak compliance erodes consumer trust and compromises safety. The report recommends a comprehensive framework: Develop a national steel policy, rationalise taxes, ensure stable SROs, and support anti-dumping protections. Expand CoEDB to include industry experts and CCP representation, strengthen Ministries of Industries and Commerce, and accelerate NTC processes. Enforce quality standards, formalise undocumented units, and eliminate distortions from ex-FATA/PATA exemptions. Encourage Direct Reduced Iron (DRI) technology, incentivise iron ore mining and value addition, and promote green technologies.
