LAHORE
Cement manufacturers have decided to increase cement prices by Rupees 20 to 25 per bag across northern region, following the increase in Federal Excise Duty (FED), it is learnt here Tuesday.
Industry sources told Pakistan Today that increase in 25 per cent of FED created an impact of Rs 15 per bag including general sales tax (GST) which increased by Rs.1.25 per kg in budget of fiscal year 2017-18. These sources said that new price range would stand at Rs. 525 to 535 per 50 kg bag. They said that price level has been decided during the 1st half of the current FY as compared to prevailing price ranging from Rs 473-517 per bag. They said that the prices had been reduced in the wake of slow demand.
The sources believe that demand-supply balance posted pick-up in construction activity after Ramzan and eid holidays. It would provide stability to the market prices. They assumed that there would be possibility of further alleviating of any further downward pressure.
However, the industry sources highlighted that the recovery in prices were unlikely to pick up margins in fourth quarter of fiscal 2017-18. They pointed out that the retention price levels remained towards the lower end compared to 3rd quarter of fiscal 2017 as the increase in prices was due to FED that did not fall in manufacturers’ pocket while excluding taxes the price level still remains Rs 10-15 per bag below the levels witnessed in 3rd quarter of fiscal 2017.
Talking about the cost of production, they said, it had been increased for gas-based Captive Power Plants (CPP) as the gas prices have now been linked with RLNG prices. The sources said that CPPs are now being charged a price of Rs 950-990/mbtu compared to Rs 800/mbtu previously.
Moreover, they hinted that a similar announcement may be witnessed by South region as well in the near-term to pass-on the FED impact where current prices hovering at a range of Rs. 570 to 585 per bag.
They believe north-based players are likely to witness some pressure on margins in 4th quarter of fiscal 2017; however, price stability in Southern region is likely to keep margins. That means that benefiting the South-based players, the sources added.
Previously, they recalled that changes in the structure of FED on cement resulted in over 100 per cent increase in FED on local sales of cement, which cement makers previously were paying Rs 24 to 28 per bag or 5 percent per bag as retail price of cement. However, cement manufacturers required to pay about Rs 50 per 50-kg bag FED instead of approximately Rs 25 per bag. While, Rs 1,000 FED is being charged on per ton cement.
Earlier, sources said that government had raised duty on import of coal from five percent to eleven percent for fiscal 2016-17, creating impact of Rs 7 per bag to the cement industry. Industry sources said that overall budget impact on cement was Rs 32 per 50-kg bag, which helped cement prices to reach at Rs 540 to Rs 550 per bag from previous rate of Rs 508 to Rs 518 per bag.
