Soaring material cost likely to hit NPHP

Following the announcement of a package of incentives for the construction sector by Prime Minister Imran Khan, the prices of almost all the material used in the sector have increased because of disruption of supplies from China owing to Covid-19 restrictions, strict implementation taxation and import policies and a rise in the energy tariffs.

Stakeholders fear that the rising costs may also affect the government’s lowcost housing initiative. Speaking to The Express Tribune, a former chairman of the Pakistan Re-Rolling Mills Association, Asmat Pervaiz disclosed that almost Rs15,000 to Rs20,000 per tonne increase has been witnessed in steel products’ prices. “Increase in demand following announcement of the construction sector package is one of the main reasons of this increase besides inflationary trend in steel scrap prices in international markets. In addition, the government has tightened the import policy and linked steel price valuation with the London metal exchange rates.

All these factors have contributed in increase in steel products prices, including iron bars, angles and girders.” he maintained. Responding to a question, he indicated that steel products, prices had touched Rs137,000 per tonne, which was around Rs115,000 for graded items a couple of months ago. Local steel products are reportedly being offered for about Rs130,000 per tonne. “Multiple factors are responsible for the change, including scrap rate in international market, which has increased from $350 per tonne to $500. The local scrap rate has also increased by Rs7,000 per tonne.” A former president of Cement Manufacturers Association, Mansoor Ijaz, also highlighted that substantial increase is being witnessed in cement off-take owing to high demand in the market.

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Establishment of new cement plants is also under way to meet the soaring demand amid the conducive environment created by the government. Responding a question, he said increase in cement prices is the result of overall inflation in the country and increasing costs of fuel and energy, which are major components in the manufacturing process. A glass dealer, Muhammad Ali highlighted that the manufacturers of the material have jacked up the prices in a phased manner. Almost Rs25 per foot increase has been made in glass rates following the announcement of the construction package. Similarly, an inflationary trend is being witnessed in wood and engineered wood sheet rates.

An MDF sheets and wood dealer, Bilal Butt, revealed that on average Rs200 to Rs600 increase has been made in the prices of different kinds of sheets during the past five months. Sheet manufacturers are blaming disruption of the supply chain and increase in production and transport cost for the increase. A government contractor highlighted that besides other construction activities in public and private sectors, a lot of work was being done on transmission lines to improve electricity supply in urban centres. “Large quantities of steel and cement are being used in these projects,” he disclosed. In July last year, Prime Minister Imran Khan had announced a big incentive package for the construction sector to boost economic activity and address shortage of housing units in the country.

The package includes a subsidy of Rs30 billion for the Naya Pakistan Housing Programme (NPHP) to promote affordable housing in the country. The government has also eased approval procedures for construction of new housing and commercial projects. Taxes have also been reduced in the provinces to encourage investors to take advantage of the package.