Cement sector seeks relief to offset losses

Claims foreign exchange lost in importing machinery for track, trace system

LAHORE:

Cement manufacturers have welcomed a recent statement of Prime Minister Shehbaz Sharif on the implementation of track and trace system by the Federal Board of Revenue (FBR) and the initiation of an investigation into its mismanagement.

“APCMA in various meetings and correspondences with the FBR has maintained from day one that the track and trace system cannot function within the cement industry and will not achieve the desired results,” remarked a spokesperson for the All Pakistan Cement Manufacturers’ Association (APCMA).

Such views, however, were not taken seriously and the cement industry was coerced into purchasing equipment worth billions of rupees for the track and trace system, he claimed.

Various trial runs of the system, according to the spokesperson, have failed and instead of addressing the shortcomings, cement dispatches were stopped by the FBR to forcefully apply the tracking system.

The association was of the view that a collective approach would have saved the foreign exchange lost in importing machinery and may have yielded better results. “The cement industry has supported this initiative and instead of challenging it, as was the case with some other industries, engaged with the FBR, as a successful implementation would have prevented tax fraud.”

The industry pointed out that it was amongst the highest contributors to the national exchequer and deposited around Rs240 billion in taxes in fiscal year 2022-23. Furthermore, the industry also earns foreign exchange by exporting cement and made shipments valuing at $210 million in FY23. The association urged the government to compensate the industry through tax relief for the heavy investment made in implementing the track and trace system.

It said the industry was in crisis due to decreasing economic activities, the limited development work and the increase in production cost. Separately, research house Topline Securities, in its report, said local cement dispatches may have gone down by 36% month-on-month (MoM) to 2.13 million tons in April 2024. Dispatches are likely to have dropped by 16% year-on-year (YoY).

According to the research house, the MoM decrease in local dispatches came primarily due to lower working days in April 2024 in light of Eid holidays. Sales in March were also higher due to the post-winter seasonal demand. Sales in the month stood at 3.34 million tons as compared to the 8MFY24 monthly average of 3.26 million tons.

It attributed the YoY decline in local cement sales to the slowdown in construction activities due to a higher cost of construction inputs, a high base effect from last year as dispatches were up due to post-flood construction activities and 12% and 6% YoY rise in cement prices in the north and south, respectively.

Published in The Express Tribune, April 30^th, 2024.

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