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Rod prices may rise for gas price hike, tax measures

Jagaran Chakma
The retail price of mild steel (MS) rod will likely see an average increase of Tk 9,000per tonne for the recent gas price hike and new VAT and tax measures, apprehend industry insiders.
This means, each tonne will cost Tk 70,000 to Tk 72,000 whereas currently the price hovers around Ik 63,000 to Tk 65,000, said Md Alamgir Kabir, chairman ofGPHIspat.
With the energy regulator deciding to increase gas prices for all users by 32.8 percent from July 1, manufacturers' gas bills will go up by around 17.5 percent.
"Every tonne of rod will require around Tk 8,250-worth gas whereas now it takes some Tk 6,500 to Tk 7,000," said Tapan Sengupta, executive director of Bangladesh Steel ReRolling Mills (BSRM).
Consumers will ultimately have to shoulder the impact as it is directly related with construction, industry insiders said. "Rod sales may come down and growth of the construction sector slow down," added the official of BSRM, a leading steel manufacturer in the country.
Some manufacturers might even have to fold business, unable to absorb this big jolt of additional investment for the gas price hike alongside introduction of the new VAT system, apprehended Sengupta.
Manwar Hossain, group managing director of Anwar Group, told The Daily Star that the sector would need an additional Tk 3,000 crore due to the imposition of a 5 percent advance tax on raw materials at the import stage.
The government imposed VAT on MS products at the rate of Tk 1,200 per tonne on those made from imported/locally re-rollable scrap and Tk 1,000 on those from billet or ingot.
The rate will be Tk 1,000 on billet and ingot made from imported/locally collected meltable scrap.
The MS products made from meltable scrap and billet at the retail will carry VAT
ofTk 2,000.
At present manufacturers pay Tk 1,400 in VAT for every tonne of MS rod and those at retail level Tk 200.
Hossain said the new VAT and tax measures would increase operational costs of mills and by itself raise the retail price of rod per tonne by around Tk 7,830.
"We have already postponed rod sales from mills since July 1 as we have to take a decision about the price," he said.
Kabir of GPH Ispat said all manufacturers would need an additional 5 percent working capital for the imposition of the 5 percent advance tax.
This money will have to be borrowed from the banking system, which will worsen the liquidity crisis in the financial sector, he said.
Expressing concern over the need of this additional capital, Hossain of Anwar Group said bad loans in the banking system may rise further.
He said the price was yet to increase at retail but once the decision was taken, the effect would be immediate in the markets.