The Competition Commission of Pakistan (CCP) has issued a policy note to the federal government recommending it to amend the Statutory Regulatory Order (SRO) pertaining to15 percent regulatory duty on imported steel billets thus suitably reducing the regulatory duty on the steel billets to create a level playing field in the market for the end steel products, particularly high quality steel bars used in infrastructure development projects.
In the steel industry, there are large scale integrated steel manufacturing units that produce their own steel billets and convert them into steel bars, and the non-integrated re-rolling mills that rely on the local and imported steel billets to make the steel bars.
The imposition of the existing regulatory duty on the import of steel billets disturbed the cascading nature of tariff structure previously introduced by the federal government, effectually putting non-integrated re-rolling mills at a competitive disadvantage vis-a-vis the integrated steel manufacturing units. The disproportionate duty structure in the steel industry is creating barriers to expansion for the existing re-rolling mills and barriers to entry for potential aspirants in this growing market.
The CCP noted that the existing regulatory duty structure raises the prices of imported steel billets which impacts only the non-integrated re-rolling mills and forces the latter to purchase billets from the integrated players. Being downstream competitors of the non-integrated re-rolling, integrated manufacturing units are unlikely to provide steel billets at competitive prices to the former, thereby placing them at a competitive disadvantage. It follows that the regulatory duty structure creates an unlevel playing field in the steel industry.
As the disproportionate regulatory duty can have serious ramifications on competition in the steel industry and particularly in the market for high quality steel bars, the policy note recommends that the federal government may amend the subject SRO to suitably reduce the regulatory duty on the steel billets so that the previous cascading nature of tariff structure is maintained in the steel industry. Through the policy note, the federal government has been further advised not to raise the regulatory duty on imported steel billets any further as it would seriously distort competition in the relevant market.
