Govt likely to set supply limit on tax-free products from tribal areas

ISLAMABAD: The government is mulling a limit on tax-exempted products coming out of merged tribal districts into other parts of the country as a way to allay concerns of steel and edible oil industry under normal taxation regime, sources said on Thursday.

Sources said the Minister for Finance Shaukat Tarin has been tasked to resolve the issues following withdrawal of federal excise duty (FED) on steel and oil/ghee industries operating in ex-federally and provincially administered tribal areas (FATA/PATA) proposed in the budget 2021/22. The decision caused opposition from industrial associations outside the tribal areas that are fearing loss of competitive advantage.

Tarin chaired a ‘high-level special meeting’ with a delegation of representatives of industries from ex-FATA areas on Thursday. Minister for Defence Pervez Khattak, Minister for Industries and Production Khusro Bakhtyar, Adviser to PM on Commerce Razak Dawood, Federal Board of Revenue (FBR) officials and representatives of industries from ex-FATA districts attended the meeting.

Finance minister said the present government is committed to peace, progress and prosperity in ex-FATA districts.

“Peace and prosperity in ex-FATA districts is imperative for the rest of the country. After merger of ex-FATA into Khyber Pakhtunkhwa province, the process for fast- track development of ex-FATA districts is in full swing,” he said in a statement.

The peaceful region is all important in the wake of withdrawal of US military forces from neighbouring Afghanistan, according to experts.

“Industries are vital for the development of any area. The Prime Minister has expressly directed to resolve all issues confronting industries in Ex-FATA districts. As per directions of the Prime Minister, heads and relevant officials of all concerned ministries have joined the meeting for prompt solution to issues of industries in ex-FATA districts.”

Tarin further said he would hold more meetings with representatives of industries from ex-FATA on a regular basis till all issues are settled. He directed all the concerned departments including FBR chairman to hold follow-up meetings with the representatives of industries from ex-FATA districts to solve all their issues and present a report during the next meeting.

Meanwhile, steel sector, opposing the government decision of removal of FED on erstwhile FATA, would be most damaging for the entire industry of the country.

“The decision will encourage unfair competition by totally disturbing the level playing field within the steel sector. The steel sector works on thin profit margins and removal of FED will give huge advantage amounting to over PKR23,000 per ton to the steel industry of FATA PATA in comparison to the steel industry in the rest of the country. Unfortunately, this would be an anti-competition measure on the part of the government,” Pakistan Association of Large Steel Producers said. “The decision was taken just 2/3 days before the budget under pressure from political lobbies of the country mostly from KP and FATA, PATA, who by remaining behind the scenes are the real beneficiaries of the decision.”

The association chairman Javed Iqbal and patron-in-chief Abbas Akberali said the local steel industry only recently started coming out of the crisis. Apart from creating a crisis for the local industry, the decision has also upset the Chinese investors, who are establishing the first steel unit in a Rashakai special economic zone with the sole investment from a Chinese group. As a result of the government's abrupt policy shift, the local as well as Chinese investors are worried about the future prospects of their investments in the country.

Pakistan’s long steel sector has been providing steel for mega projects. Currently, prices of bars in Pakistan are lower than China, Turkey, UK, USA, south and central Asian economies.