KARACHI: Domestic sales decreased by 11.41 percent to 2.463 million tonnes in July from 2.78 million tonnes in the same month previous year, largely due to concerns about a potential further increase in cement prices following the Punjab government’s increase in royalty rates on raw materials.
Following a 20 percent increase in cement bag prices due to the budget’s imposition of a Rs 100 Federal Excise Duty (FED) per 50 kilogram bag, construction costs have already increased. Customers will also be negatively impacted by increased cement costs following the Punjab government’s hike in raw material royalty rates.
The All Pakistan Cement Manufacturers Association (APCMA) revealed figures showing that in July 2023, export volumes increased by 22% to 547,162 tonnes from 449,792 tonnes.
But overall cement dispatches (including domestic and export) decreased by 7% to 3.010 million tonnes from 3.230 million tonnes in July 2023.
Exports increase by 22% in FY24.
An APCMA spokesperson emphasized that the success of the industry was being hampered by rising levies and rising input costs. Domestic sales have decreased for the eleventh consecutive month, which is indicative of weak economic activity.
To lessen the burden of high taxes on the cement industry, the government was encouraged to reconsider its taxation policy by the business.
He said that although he supported the government’s documentation drive, forcing small retailers to install point-of-sale systems and register for a convoluted sales tax system is unlikely to bring in any additional revenue because, as a 3rd Schedule item, the manufacturers already pay the full amount of sales tax on consumer price.
Fear of price hikes
For factories located in Punjab, the price impact of the increased royalty rates will be between Rs. 30 and Rs. 50 per 50 kg bag of cement. The announcement went into effect on July 1.
On August 1, 2024, the Punjab government released a notice stating that the royalty rates on raw materials for cement manufacturers will be 6 percent of the cement or clinker’s ex-factory sale price.
The names of the argillaceous clay and limestone that are used to make cement are included in the notification.
Prior to the release of this announcement, royalty for manufacturers situated in Punjab is anticipated to rise from Rs20 per bag to Rs70 (6 percent of the ex-factory price), according to Nasheed Malik of Topline Securities.
According to him, businesses are now assessing the notification and will raise retail prices as a result, resulting in pricing differences between provinces.
He stated that the governments of Punjab and Khyber Pakhtunkhwa have already raised the royalty on limestone from Rs120 to Rs250 per tonne in the FY25 budget. That Rs 250 per tonne news is probably going to be surpassed by this announcement of 6% of ex-factory pricing. According to him, Punjab is home to 48% of the installed capacity in the north.
