Cement industry joins the chorus for reduction in taxes

LAHORE: The cement manufacturers on Sunday asked the government to reconsider the hike in Federal Excise Duty (FED) on cement in the federal budget 2019-20, which was increased by 25%.

All Pakistan Cement Manufacturers Association (APCMA) in a statement released to the press said that Pakistan’s consumer price inflation rose to its highest level since Nov 2013 to 9.41%, lifted by sharp rises in food, fuel and transport costs that might be further fuelled by the huge rise in prices of building materials including cement rates.

They said that the central bank has been trying to control the rising inflation by lifting its key policy rate, instead of suggesting to the government to cut duties to reduce the cost of production in view of continuing inflationary pressures as well as high fiscal and current account deficits. It is to be noted that consumer price inflation has jumped sharply over the past year, climbing from under 4 percent at the start of 2018. Energy costs, in particular, have risen sharply, hit by a series of devaluations of the rupee. Experts said that the inflation rate is also expected to rise up to as much as 13 percent, which will mean faithlessness with the targets that the National Economic Council (NEC) had set only a few weeks ago, the cement manufacturers argued. The government has approved a sustained economic growth rate of 4%, with only 8.5 percent set as an inflation rate target, which is not a fact, claimed APCMA,

The cement industry has been under pressure in this fiscal year as development expenditure has been slashed. Moreover, in 2019 Pakistan’s cement industry continued to show poor performance. Cement consumption is usually at its height in third quarter as construction activities peak with the pleasant weather and urgency in completing government development works within the financial year. However, total dispatches in this period continued to decline, read the statement.

According to APCMA, industry experts say that like other things, construction material is also going to get costlier after July when budgetary measures will be implemented and new duties will be imposed. They say that the budget imposed 17 per cent sales tax on marble industry, besides increasing federal excise duty on cement from Rs1.5 per kg to Rs2 per kg, leading to overall increase of at least Rs.25 per 50kg bag of cement, besides effect of hike in fuel prices and higher customs duty on the import of coal.

Cement industry claimed that the tough times will get tougher due to new taxes and duties in the budget. They said another increase in FED and changes, particularly the duty on coal, would wreck cement manufacturers and as a consequence consumers, which would in turn further shrink demand.