Pakistan’s Ministry of Commerce has finalized a comprehensive reform plan targeting the country’s iron and steel sector, proposing sweeping tariff reductions to cut production costs and unlock export potential.
The plan, based on a detailed study by the National Tariff Commission (NTC), comes after the Economic Coordination Committee (ECC) extended regulatory duties on finished flat steel products until March 31, 2025. The report outlines critical structural challenges, including underutilized production capacity, high imports, and a distorted tariff regime.
Sector Performance: High Capacity, Low Output
Despite installed capacity growing—long steel production capacity rose from 7 million mt (FY 2022–23) to 8 million mt (FY 2024–25)—actual output fell to 3.5 million mt in FY 2023–24, before partially rebounding to 5.4 million mt this fiscal year. Flat steel producers also continue to operate far below capacity, indicating inefficiencies across the value chain.
The report criticizes the excessive tariff protection on semi-finished products like billets and steel bars, which have effective protection rates as high as 123.11%. These duties have driven up costs for downstream industries and reduced competitiveness in sectors such as construction, manufacturing, and infrastructure.
Key Tariff Reforms Proposed
To address these inefficiencies, the Ministry recommends:
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Eliminating import duties on basic raw materials such as iron ore, steel scrap, and direct reduced iron (DRI).
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Reducing Additional Customs Duties and Regulatory Duties on finished long steel products (rebars, wire rods) from current rates of 23–56% to a maximum of 10% over three years.
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Maintaining the current tariff regime on flat steel products, which the report says is already competitive.
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Setting zero duty on hot rolled coils, which are not produced locally, to support downstream users and exporters.
Export Outlook Shows Promise
The study highlights encouraging export trends, especially in flat steel. In the past fiscal year, Pakistan exported $363 million worth of cold rolled coils, galvanized, and coated sheets, primarily to the United States and Canada. This suggests strong export potential if policy reforms are effectively implemented.
The proposed tariff overhaul reflects a broader effort by the government to revitalize domestic manufacturing, improve efficiency, and position Pakistan as a competitive player in the global steel market.
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