KARACHI: The price of cement would go up by Rs34 on a 50-kilogram bag in the wake of a change in the federal excise duty (FED) regime for the commodity, the industry says.

Cement is currently chargeable at the rate of 5 per cent of the retail price. In the latest budget, the government has proposed to replace the current regime with a fixed rate of Rs1 per kg.

The industry believes the measure bodes ill for the economy as it would suppress the demand and consumption of cement.

Moreover, a rise in the price of local cement would encourage dumping of Iranian cement in Pakistan through under-invoicing and smuggling, limiting the scope of the growth of the local cement industry.

Urging the government to review the decision, a spokesman for All-Pakistan Cement Manufacturers Association (APCMA) said the hike in FED clashed with the industry’s demand for reduction in taxes to further boost domestic sales.

Besides, constantly falling exports are adding to the industry woes. Apart from the exports to India, which increased 33pc year-on-year, exports to Afghanistan fell 10.34pc in the first eleven months (July-May) of this fiscal year.

Exports to other destinations plunged by a whopping 32pc due to economic slowdown in countries where Pakistan exports the commodity.

The government should provide incentives to the industry to win back the Afghan market, the spokesman added.

Overall exports dropped 17pc year-on-year to 5.48m tonnes during the 11-month period.

In contrast, total domestic sales rose to 30.03m tonnes during July-May FY16 from 25.49m tonnes during the same period of the last fiscal year.

Therefore, the overall cement despatches rose 10pc year-on-year to 35.5 million tonnes during the period.

Domestic despatches of the north-based mills increased 16.7pc to 24.6m tonnes and of south-based mills by 24pc to 5.37m tonnes.

Hanif Gohar, the chairman of the Association of Builders and Developers of Pakistan (ABAD) and Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), described the federal budget proposal against expectations of people.

He said that imposition of new taxes on cement and steel hurt not only the construction sector, but also affected the well-being of the general public.

He lamented that cement companies kept prices up despite cheap coal and crude oil prices. Now the government has provided them an excuse to raise prices further.

Mr Gohar said ABAD would shortly announce a comprehensive strategy against cement cartel and rise in steel prices. He said the government was pressurising builders for low-cost houses but not taking concrete steps to provide cheaper raw materials or to curb price hikes by cement makers.

He said that it has been established that there was no gas infrastructure development cess on cement manufacturing and the impact of 6pc customs duty of coal import has also nullified in the light reduction in its price from $142 per tonne to $45, he added.

Published in Dawn, June 8th, 2016