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Cement sales plunge; steel bar prices rise

KARACHI: The average daily cement supplies into the market plunged by 73 per cent to 40,000 tonnes from 150,000 during the first three days of this fiscal year.

The decline came after government introduced amendments to the Sales Tax Act in the budget 2019-20 mandating sellers to include buyers’ CNIC on the tax invoices.

In addition to that, citing persistent fall in the rupee’s value, the steel bar manufacturers on Thursday also raised prices by up to Rs7,000 to Rs116,000 per tonne.

Cement industry officials said that “dealers have stopped their work and this will lead to cement crisis in the country,” they added.

The officials said that if the documentation issue lingers on, the cement sector’s contribution to the national exchequer — Rs110bn in the last fiscal year — will decrease in the ongoing fiscal year.

The officials warned that there are going to be massive layoffs in the cement sector if the Federal Board of Revenue (FBR) and cement dealers fail to sort out the issue.

Surprisingly, All Pakistan Cement Manufacturers Association has not released sales figures for April but a manufacturer said that despatches are expected to clock in at 35m tonnes.

On the other hand, All Pakistan Cement Distributors Association Chairman Chaudhry Munir said the cement distributors in Punjab and Northern areas — who used to lift 100,000-125,000 tonnes per day — have stopped procuring cement since July 1 due to the cumbersome rules introduced in the budget.

He said that most retailers in rural areas are illiterate and with the introduction of new restrictions, they need to hire services of tax experts which is not possible.

Munir said that some builders and contractors, who need to meet their timely construction commitments with the parties, are also lifting very low volumes.

He said he had discussed the situation with Punjab Government’s Minister for Industries and Commerce Mian Aslam Iqbal on Wednesday who agreed to take up the issue with the federal government.

Association of Builders and Developers Chairman Mohammad Hassan Bakhshi said that middle men — who usually operate without proper identification — are facing problems after the government mandated CNIC-based invoices as most of the organised builders lift cement directly from manufacturers while some lift from market dealers.

He added that the “construction sector has already been facing a lull as no new projects are coming up while work at over 50 projects in Karachi alone have already stopped due to escalating costs after increase in steel bar and cement prices [affecting] our project costing.”

He said that builders are now waiting for prices to stabilise before resuming construction.

Bhakshi added that steel bar prices have also soared to Rs115,000-116,000 per tonne from Rs108,000-110,000 per tonne compared to Rs96,000-97,000 two and a half months ago.

Rupee devaluation against the dollar and imposition of 17pc federal excise duty (FED) in the budget 2019-20 were responsible for the increase in steel bar prices, he claimed.

He added that the government has already imposed Rs25 per bag FED in budget 2019-20 followed by an increase in sales tax to Rs2,000 per tonne from Rs1,500.

Steel bar and cement make up for around 35-40pc and 10-12pc share in total high-rise project cost while in houses, steel bar’s share is around 20-25pc.

He also warned that the prices of sanitary, ceramics, paints, wood, etc are also expected to increase in the next 15-20 days.

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