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Pakistan’s steel industry raises concerns about escalating smuggling activities from Iran

Pakistan's steel industry raises concerns about escalating smuggling activities from Iran
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March 28, 2024 (MLN): The Pakistan Association of Large Steel Producers has raised alarms over the resumption of large-scale smuggling, misdeclaration, and under-invoicing of steel from Iran.

In an SOS letter to the finance minister, PALSP urged that smuggling, mis-declaration and under-invoicing are destroying the local steel industry, which is being perpetrated in the most organized manner.

The steel industry is fighting for sheer survival due to massive PKR depreciation, the highest financial costs, and the highest power rates coupled with the significant increase in input costs.

As a result, many steel mills have shut down their operations and the remaining are working at a small fraction of their capacities and many more are on the verge of closure.

PALSP is the leading Association working for the revival of the local steel industry by engaging the Government as well as leading players of the local steel industry.

The steel melting industry is the back-bone of steel industry which is facing multiple challenges, being further worsened due to menace of smuggling.

To find an alternative to survive in these difficult times, leading players of the long steel industry are diversifying into exports of non-ferrous products (copper ingots) to China, and this segment emerged as the 5th largest exporting sector with exports touching $1.350 billion in 2023-24.

One of the members of the PALSP is the largest exporter of copper and many more are pursuing similar targets.

PALSP fears that in case unchecked smuggling by organized mafias, it would severely damage the exporting ability of copper products to China by the steel industry’s players.

It is expected that with some facilitation on the part of the Govt, copper exporting could become the second-biggest exporting sector in a short period.

PALSP warned that due to the economic downturn construction activity is at a grinding halt, and the steel demand is at the lowest possible level.

In this situation, the resumption of smuggling of steel with full might is an alarming development, which is going to create further devastation for the steel sector as well as our economy.

PALSP raised concerns and stated that the continuation of smuggling & misdeclaration at such a massive scale is a question mark for those departments & agencies who are deputed to oversee imports at the Customs Check Posts at borders and are mandated to stop any kind of wrongdoings.

PALSP stated that approximately 500,000 MT of steel was being smuggled primarily from Iran (also via Afghanistan) annually to Pakistan, which is approximately 10% of the total steel being produced in the country.

On the other hand, during the last over10-15 years, annually, 0.5m MT to 1m MT of new (re-usable without melting)/ steel (as per verifiable evidence/ declared by exporting countries) is being brought into Pakistan by mis-declaring it as scrap by the Customs authorities.

According to an estimate, smuggling & mis-declaration of steel from Iran & rest of the world results in a colossal revenue loss of around Rs40 billion to the exchequer annually.

This could create implications for our country in money laundering-related issues, as Pakistan and Iran do not have any formal banking channels for this purpose.

Due to the menace of Steel Smuggling, the local steel industry in Quetta and other parts of Baluchistan has been wiped out.

Over 80% of the steel that is sold in Baluchistan comes from Iran through smuggling, mis-declaration, under-invoicing, and other deviant tactics.

PALSP stated that smuggling/mis-declaration is an organized crime that is pushing Pakistan towards de-industrialization.

Due to poor monitoring/controls & connivance of the concerned, the reach of smuggled Steel is not confined to Baluchistan; it is reaching out to large parts of the country like Lahore, Karachi as well as other cities.

To address this issue, PALSP appealed to the Ministry to restrict the import of steel only through sea routes. This measure would help in effectively countering the scourge of smuggling at least from Iran (and also smuggling of Iranian steel via Afghanistan).

In Feb 2024, official scrap import data shows that over 20,000 MT of steel plates that are reusable without melting were imported by fraudulently mis-declaring the same as re-rollable scrap through different border points in Baluchistan, especially Taftan.

Since a lot of under-invoicing is done, so the actual quantity could be much higher than the officially declared quantities.

This activity is being perpetrated due to negligence & inertia on the part of the Commerce Ministry by not making necessary corrections in the definition of re-rollable scrap in IPO and on the other due to connivance of all those departments in this activity, who are mandated to stop smuggling, mis-declaration and under-invoicing.

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Posted on: 2024-03-28T14:05:25+05:00