Pakistan's cement sector posts hefty losses in third quarter

Transport costs rise 50% after implementation of axle load policy

LAHORE: The cement industry is paying Rs195 worth tax per bag - highest in the region, along with a 50% increase in transportation cost after the implementation of the axle load policy that resulted in huge losses for the industry during the last nine month.

The cement manufacturing units started incurring losses after the implementation of new taxes as the government extended the duty taxes by 33% in the sector from the budget 2019-20.

Moreover, the freight cost was increased to Rs75 per bag from Rs50 per bag from cement manufacturing units to the end-user after implementation of axle load policy introduced in November 2019. However, due to economic contraction, the industry did not pass on the added cost for the revival of economic activity in the country.

According to data, seven cement companies; Attock Cement, Bestway Cement, DG Khan Cement, Fauji Cement, Kohat Cement, Lucky Cement and Maple Leaf Cement have declared losses in the third quarter of the ongoing fiscal year. The five north-based plants incurred gross loss in the third quarter and were unable to recover the production cost.

In the third quarter, the sector’s average profitability after taxation has declined by 123% from a profit of Rs8.50 billion to a loss of Rs1.97 billion, meanwhile, in the nine months, the profitability has declined by 106% from a profit of Rs27.6 billion to a loss of Rs1.56 billion due to unfavourable economic policies by the government and the economic recession.

Moreover, suspension of trade with India had adversely affected the cement sector as the exports to India ended since the Pulwama attack in February 2019. Further, in August 2019, Pakistan also suspended bilateral trade with India.

During this period cement exported to India was suspended which also added to the losses of the industry. Earlier, Pakistan was exporting an average 75,000 tons of cement to India on a monthly basis. In the backdrop of construction activities started after CPEC projects, the cement industry had increased its production capacity in the country anticipating growing demands.

Published in The Express Tribune, April 28^th, 2020.

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