Pakistan's Federal budget 2021/22 has benefits for cement industry

Pakistan’s Finance Minister, Shaukat Tarin, presented the PKR8.48trn (US$54bn) federal budget for 2021-22 in the National Assembly last week. The government had set the GDP growth target at 4.8 per cent against the expected 3.9 per cent for the outgoing financial year. In addition, Islamabad allocated a considerable fund for Public Sector Development Programme (PSDP). These indirect incentives are conducive for the cement industry in Pakistan. Research experts believe and unanimously termed the budget neutral to positive for the cement industry. 

The government allocated PSDP at PKR2,135bn (highest ever; federal PSDP at PKR900bn against PKR650bn last year with PKR1235bn set aside for provinces) should encourage development in the country and hence, propel cement demand, analysts remarked. 

Additionally, the National Highway Authority allocated PKR114bn vs PKR118bn in FY21 (actual expenditure in 10MFY21 set at PKR79bn as per Planning Commission suggests augmented allocation by 44 per cent this year). Furthermore, a subsidy of PKR30bn has been earmarked for the Naya Pakistan Housing Authority alongside PKR3bn for the Naya Pakistan mark-up subsidy, which should trigger construction demand.

Moreover, PKR57bn, PKR23bn, PKR6bn and PKR14bn has been set aside for Dasu, Diamir-Bhasha, Mohmand and Neelum Jhelum dams, and work on their colonies should materially pick up cement demand.

The All Pakistan Cement Manufacturers Association (APCMA) is yet to comment on the merits of fiscal measures. However, it had appealed to the government to abolish the FED, and reduce other duties and taxes to provide an opportunity for the manufacturers to control their cost of production and further optimise/expand their plants, which will help generate more employment and revenues for the government. Similarly, the AHCML Research raised the question that corporate income tax, fuel, and duty on coal should have been slashed to support the cement industry.