Cement royalty hike in Khyber-Pakhtunkhwa: a price shock and legal deadlock await

The government of Khyber-Pakhtunkhwa is pushing forward with a plan to revamp its royalty structure on cement manufacturing, shifting from an ore-based calculation to a bag-based formula. The move, which would bring the province in line with Punjab, is poised to significantly increase costs – the effective tax rate is going up six times the current rate – for cement manufacturers operating in Khyber-Pakhtunkhwa. However, as seen in Punjab, where cement firms successfully obtained a stay order against a similar policy, the legal fate of this proposal appears to be a foregone conclusion.

If implemented, the new royalty structure would have two major consequences: an inevitable increase in cement prices—driving up construction costs in the province—and a likely court battle that could delay or nullify the measure. The precedent set by Punjab’s manufacturers suggests that the latter is the more probable outcome.