Despite disappointing June, cement sales grow by 3.71% year-on-year

Experts blame increased taxation for diminished growth

LAHORE: The cement industry closed fiscal year 2016-17 on a sour note as domestic demand during June declined by 19.62%, twice the decline in exports, which dropped by 10.95%.

Despite customary reduced construction activities during Ramazan, industry representatives claim that the decline is unprecedented and has partly been caused by flawed policymaking.

High excise duty on coal, which is a major raw material for producing cement, along with unchecked import of under-invoiced cement from Iran are mainly to blame, an industry representative said.

Regrettably, the government has slapped additional taxes on the cement industry in the 2017-18 federal budget, rather than slashing them. Insiders claim that the move will lead to higher prices of locally produced cement which in turn would lead to consumers preferring imported cement.

If the prediction holds true then the government will also be deprived of the additional revenue it expected to generate through higher taxation.

During the year 2016-2017 domestic cement despatches by north zone mills were 29.141 million tons while export despatches were 3.150 million tons depicting a growth of 7.72% and negative growth of 18.22% respectively.

Domestic and export despatches for south zone mills were 6.511 million tons (up 9.47%) and 1.514 million tons (down 25.1%), respectively. Moreover, the overall growth in cement despatches during the year 2016-2017 was a mere 3.71%. The capacity utilisation, however, for the year 2016-2017 was an impressive 86.90%.

Meanwhile, statistics released by the All Pakistan Cement Manufacturers Association (APCMA) revealed that the industry despatched 2.727 million tons of cement in June 2017 against 3.351 million tons in June 2016. For the first time in 11 months cement despatches dropped below 3 million tons. The steep decline in domestic demand eroded the excellent growth that the cement sector registered in the past 11 months. It was on the strength of that demand in the domestic market that the industry was able to despatch a record 40.315 million tons of cement during fiscal year 2016-17, 3.71% higher than 38.873 million tons cement despatched during year 2015-16.

Experts seem anxious with the trend since the entire industry is depending on domestic uptake of cement as exports have been on constant decline for the last two years. They urged the government to withdraw the tax imposed on cement this year besides withdrawing duty on import of coal to ensure sustained growth of the sector.

They also warned that imposition of taxes on other construction related materials would result in regression of the entire construction sector as well.

Published in The Express Tribune, July 9^th, 2017.

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