ISLAMABAD: The Competition Commission of Pakistan (CCP) has warned that Pakistan’s steel industry is riddled with systemic inefficiencies, widespread tax evasion, cartel-like market behavior, and weak regulatory oversight, calling for urgent policy reforms and the creation of a dedicated Ministry of Steel to address structural distortions.
In its newly released “Competition Assessment Study of the Steel Sector in Pakistan”, the CCP painted a troubling picture of one of the country’s most critical industrial sectors, which contributes nearly 1.4% to GDP and employs over half a million people but remains heavily undocumented, import-dependent, and policy-fragmented.
The report underlined that despite Pakistan’s total steel production reaching 8.4 million metric tons (MT) in FY24, including 4.9 million MT of long steel and 3.5 million MT of flat steel, the country’s per capita steel consumption is just 47 kilograms far below regional peers, indicating sluggish industrial and infrastructure growth.
According to the report, the manufacturing sector contributes about 71% of total exports and employs roughly 15% of the national workforce, with steel forming a vital component of the value chain. However, years of inconsistent regulation, weak enforcement, and fragmented policymaking have stunted the sector’s growth. The CCP observed that substandard steel constitutes nearly 60% of domestic output, largely due to weak implementation by relevant authorities and an ineffective standards regime.
The report noted that Pakistan Steel Mills (PSM), once a strategic national asset with an annual capacity of 1.1 million tons, has been non-operational since 2015, burdened with Rs 400 billion in liabilities. Its collapse has left the market reliant on private units and steel scrap imports, which stood at 2.7 million MT in FY24 — exposing local prices to global fluctuations and foreign exchange shocks.
A major source of distortion, according to CCP, is the misuse of tax exemptions granted to industrial units in the former FATA/PATA regions, which has resulted in nearly 1.5 million tons of untaxed steel entering settled markets annually, causing an estimated Rs 40 billion loss to the national exchequer. These units, meant to serve local areas, are supplying steel across the country without paying sales tax or income tax, putting compliant manufacturers in Punjab and Sindh at a severe cost disadvantage.
The commission further noted price synchronization among major rebar producers, with retail steel prices rising by over 200% between 2018 and 2024, far exceeding international trends. Such patterns, the CCP said, “raise serious concerns of possible collusive conduct and market coordination.”
The CCP also criticised the Pakistan Standards and Quality Control Authority (PSQCA) for failing to curb the production of substandard and uncertified steel. The absence of digital monitoring, lack of testing capacity, and overlapping jurisdictions among regulatory agencies have allowed unsafe products to flood the market, undermining consumer safety and fair competition.
Institutional inefficiencies and frequent changes in Statutory Regulatory Orders (SROs) have further complicated the business environment. The CCP said that the Ease of Doing Business Committee lacks industry-specific expertise, while bureaucratic red tape and high import duties on equipment deter new investment.
The study highlighted that globally, countries such as China, India, and Russia advanced their steel industries through targeted government support, policy stability, and innovation, whereas Pakistan continues to lag due to fragmented governance and absence of a unified national steel policy.
Calling for comprehensive reforms, the CCP recommended that the government should formulate a National Steel Policy and consider establishing a dedicated Steel Ministry to coordinate policy, regulation, and industrial development. It also urged the rationalisation of taxes, stabilisation of SROs, stricter enforcement of quality standards, and integration of undocumented units into the formal economy. The report further advised phasing out regional tax exemptions and introducing real-time digital monitoring of production to prevent under-reporting and tax evasion.
The CCP also proposed incentivising Direct Reduced Iron (DRI) technology, developing local iron ore reserves, and promoting green, energy-efficient production technologies to enhance sustainability and competitiveness. It recommended expanding the Committee on Ease of Doing Business (CoEDB) to include industry experts and CCP representation, alongside strengthening the National Tariff Commission (NTC) to ensure timely responses to dumping and import surges.
The report concluded that unless the government acts swiftly to address structural flaws, Pakistan’s steel industry will continue to face high construction costs, uneven competition, and limited export potential. The commission reaffirmed its commitment to collaborate with stakeholders to promote fair competition and long-term sustainability in line with global best practices.
