KARACHI: The cement industry will invest $700 million to $1 billion for increasing capacity utilisation in the next three years following increase in local demand as multiple public and private development projects are launched and the China-Pakistan Economic Corridor (CPEC) moves ahead.

Talking to journalists on Tuesday, All Pakistan Cement Manufacturers (APCMA) Chairman, Mohammad Ali Tabba said Cherat Cement, Attock Cement, DG Khan Cement and Lucky Cement have already announced their investment plans.

“The companies are investing at a time when the government is not particularly supportive. Fertiliser and other industries grew in an environment of relaxation and relief from the government. However the cement sector did not get any relief even on liquefied natural gas (LNG) from the government,” he said.

The industry paid Rs40bn in excise, sales, and income tax during the first six months of this financial year and the figure would touch Rs90bn mark at the close of the fiscal.

“The GIDC was imposed last year while industrial tax is now five per cent which was 4pc two years ago. Besides, a one-time super tax was imposed and duty on coal import increased from 1pc to 6pc,” he said.

Mr Tabba opined that all these moves and taxes increased the minimum retail price of cement bags and the cost of doing business. He went on to add: “During last few years, the profitability of the industry has increased mainly due to increase in local despatches as export market is more competitive and profit margin was lower in the exports.”

Talking about cement smuggling from Iran, he said Pakistan Business Council’s report stated that out of the total inflows from Iran, only 25pc import was properly documented while the rest was under invoiced or smuggled.

It is said that 0.5-0.7m tonnes cement is being smuggled into Pakistan from Iran annually and the government is losing around Rs 10-20bn in terms of taxes.

“The government should plug this hole as it is not only hurting the industry but causing revenue loss to the government,” he said. On reports that an Iranian cement plant was being set up in Quetta, he opposed the move saying the government must consider its negative impact on the local industry.

To keep up with the increasing demand, the industry continued to add production capacity on regular basis, increasing from 8.89m tonnes in 1990-91 to 45.62m tonnes in 2015-16.

The industry starts planning to add more capacity whenever utilisation touches 80-85pc mark so it can cater to increasing demand, he said.

He claimed the prices of cement bags went down in past few years. The comparison of average maximum retail price per bag in 2013 against 2016 clearly shows reduction in prices.

Mr Tabba said much is talked about the drop in coal prices and the cement prices should have decreased accordingly.

Coal price was $80 per tonne in 2013-14 which has now decreased to $57 per tonne now. However, it is just a portion of the cost while many other factors have been increased in recent years. The government needs to cut down duties and taxes on raw materials and cement to make it cheaper as these duties and taxes are around one fifth of the total cost of a cement bag, he said.

Published in Dawn, April 13th, 2016