Pakistan increases duty on imported cement

Pakistan's Finance Minister, Ishaq Dar, has proposed a number of measures under Budget FY15-16 that will have a direct and indirect impact on the cement industry and which are likely to help increase demand in the country.

The proposals include an increase in the duty on imported cement, rationalisation of the tax structure for the cement industry and housing development, a significant rise in spending under the government's Public Sector Development Programme (PSDP), a five-year tax holiday for establishing new manufacturing facilities in the Northern province, plus a one per cent reduction in corporate tax. However, the government has also proposed that the duty on imported coal be increased.

Duty on imported cement
Stressing the importance of protecting the local industry, Mr Dar, he labeled the duty on cement imports as "preemptive action" to promote the local industry and avoid cement dumping.

Currently, there is a one per cent duty on OPC, whereas other cement types are subject to a customs duty of 20 per cent. To protect the local industry against rising imports, the government has proposed that duty on imported OPC be increased to 20 per cent.  Industry sources believe the move will help boost local sales and deter imports, most notably from Iran.

Increased PSDP spending
Spending under the government's PSDP initiative will be increased by 27 per cent compared to the previous year which is expected to have a positive impact on cement sector as the demand of cement will increase.

Incentives to construction industry
The government has proposed suspension of minimum tax on builders and the supply of bricks and crushed stone will be exempted from sales tax for three years. The government also announced a reduction in the import duty on construction machinery to 10 per cent.

Pro-housing sector measures include housing credit and increased deduction allowed on house loan mark-up etc. All these measures will bring down construction costs, leading to an expected rise in construction activity.

Duty on coal
The government has proposed that customs duty on coal  be increased from one to five per cent. Industry sources say that local cement manufacturers will be able to comfortably pass on the increase of PKR2-PKR3.5/bag to customers.