Bangladesh’s steel industry has warned that the proposed national budget for FY2026�"27 could push the sector towards a severe financial crunch, as higher VAT, duties and taxes threaten to inflate production costs, erode competitiveness and deter fresh investment.
At a press conference at the National Press Club in Dhaka on Wednesday, Bangladesh Steel Manufacturers Association (BSMA) President Mohammad Jahangir Alam urged the government to withdraw the proposed additional levies, restore the turnover tax to 0.6 per cent from 1 per cent and review duties on key industrial raw materials to protect the industry’s growth prospects.
He cautioned that the combined impact of rising electricity tariffs and the new tax measures could increase steel production costs by an additional Tk 11,000�"12,000 per tonne, placing an unprecedented burden on manufacturers already grappling with shrinking margins and weak demand.
“The additional costs will inevitably affect the entire value chain, from manufacturers to consumers, and could undermine the sustainability of the sector,” he said.
Leading industry figures, including Rani Steel Chairman Suman Chowdhury, Sonargaon Steels Ltd Managing Director Maruf Mohsin, CSRM Director Zakaria and senior executives from other major steel companies, attended the briefing.
While acknowledging a number of business-friendly provisions in the proposed budget, Jahangir Alam said the positive measures risk being overshadowed by the increased tax burden on the steel industry.
He welcomed the withdrawal of certain minimum tax provisions, the reduction in advance tax requirements for appeals and High Court references, the cut in withholding tax on interest payments for foreign loans from 20 per cent to 10 per cent and the reduction in withholding tax on electricity sales bills.
However, he warned that the cumulative impact of additional VAT, duties and taxes could weaken an industry that serves as a cornerstone of Bangladesh’s construction, infrastructure and industrial sectors.
According to BSMA, Bangladesh’s annual steel demand is around 5 million tonnes, while the industry's installed production capacity exceeds 10 million tonnes. As a result, most mills are operating at less than half of their capacity, significantly increasing per-unit production costs and intensifying financial pressure on manufacturers.
The association noted that recent electricity tariff hikes have already added Tk 1,800�"2,000 per tonne to production costs. Rising port charges, river dues, landing fees, transportation expenses and other operational costs are expected to add a further Tk 3,000�"3,500 per tonne.
In addition, higher VAT at the sales stage and increased taxes and duties on local scrap, ferro-alloys, refractory materials and spare parts could raise costs by another Tk 2,000�"2,500 per tonne, further squeezing an industry already operating well below capacity.
Describing the situation as a growing threat to industrial competitiveness, BSMA urged the government to withdraw the proposed tax increases, restore the previous turnover tax rate and rationalise duties on industrial inputs.
The association also called for the accelerated implementation of public infrastructure and development projects to stimulate steel demand, arguing that stronger construction activity is essential to sustaining industrial growth, protecting employment and supporting Bangladesh’s long-term economic ambitions.
