KARACHI: The Competition Commission of Pakistan (CCP) has called for the establishment of a dedicated steel ministry and the formulation of a national policy to address long-standing distortions in the country’s steel industry, which it says faces weak regulation, unfair tax exemptions and heavy import dependence.

The steel sector remains central to Pakistan’s manufacturing base, contributing significantly to exports and employment but struggling with fragmentation and policy neglect. Large Scale Manufacturing accounts for more than 69 percent of total manufacturing and 8.2 percent of GDP, yet per capita steel consumption is only 47 kilograms, far below regional averages. The industry depends heavily on imported scrap, faces chronic energy shortages and produces nearly 60 percent of its output below standard due to weak enforcement and regulatory oversight.

In light of these challenges, the Competition Commission of Pakistan on Sunday released a report titled “Competition Assessment Study of the Steel Sector in Pakistan,” identifying competition-related bottlenecks and recommending reforms to promote fair market conditions and long-term sustainability.

“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,” the CCP said in the statement.

According to the report, Pakistan’s manufacturing sector contributes 71 percent of total exports and employs around 15 percent of the workforce. In FY24, local steel production reached 8.4 million metric tons (MT), including 4.9 million MT of long steel and 3.5 million MT of flat steel, while imports of steel scrap totaled 2.7 million MT, underscoring the sector’s reliance on imported raw material.

The report said Pakistan Steel Mills (PSM), once a strategic national asset with a 1.1 million-ton annual capacity, has been non-operational since 2015 due to mounting losses and outdated technology, leaving liabilities of Rs400 billion ($1.4 billion). In contrast, countries such as China, India, and Russia advanced through targeted state support, investment in technology, and efficient resource management.

The CCP cited multiple institutional weaknesses, including an Ease of Doing Business Committee that lacks industry expertise and frequent changes in SROs that create policy uncertainty. It noted that tax exemptions in ex-FATA/PATA regions allow 1.5 million tons of untaxed steel to enter settled markets annually, resulting in revenue losses of about Rs40 billion ($144 million).

The commission proposed developing a comprehensive national steel policy, rationalizing taxes and ensuring stable regulatory frameworks. It also recommended expanding the Ease of Doing Business Committee to include industry experts and CCP representation, strengthening the Ministries of Industries and Commerce, and accelerating National Tariff Commission (NTC) processes.

The CCP urged enforcement of quality standards, formalization of undocumented producers, removal of tax distortions, and incentives for Direct Reduced Iron (DRI) technology, green production methods and local iron ore mining.

“The CCP will continue working with all the stakeholders to develop pro-competition reforms to promote competition and long-term sustainability in the steel sector, much in line with the international best practices,” the statement added.