During the first quarter of current fiscal year, the cement industry has posted a growth of 9.85 per cent in local sales compared with sales during first quarter of the last fiscal year. Exports, however, recorded a decline by 8.13 per cent compared with exports during the first quarter of last year. The overall situation during first quarter of current fiscal year showed 4.68 per cent growth compared to the same period of last fiscal year.
Cement despatches to domestic markets during the month of September 14 were 2.42 million tons compared with 2.12 million tons during same month last year showing an increase of 13.86 per cent. Exports during September 14 were 730,000 tons against 816,000 tons during September 13 showing decline of 10.6 per cent. Total despatches during September, 14 were 3.15 million tons compared to 2.94 million tons during same month last year showing increase of 7.08 per cent.
The cement industry that is already facing a lot of issues due to high duty/tax structure, impractical imposition of MRP-based sales tax, increasing import duties on coal, increasing power tariffs and axel load restrictions is now facing another grave issue related to smuggling of the commodity from Iran.
Domestic cement uptake in southern region is being seriously affected due to unregulated smuggling of cement from Iran. Statistics showed that against 10.8 per cent increase in domestic sales in northern region during the first quarter of current year, the domestic sales in southern region showed an increase of only 5.4 per cent.
A spokesman of APCMA pointed out that the despatches in the South should have been higher because the exports from this region during the first quarter of current fiscal year increased by a healthy 12.2 per cent to 782,000 tons against 697,000 tons during same period last year. On the contrary, exports from north declined by massive 17.3 per cent to 1.277 million tons during the first quarter against 1.545 million tons during same period last year. The spokesmen said such lopsided sales look puzzling at a time when the economic activities in the south have picked up appreciably. He said a deep analysis of the situation revealed that the consumption most probably had increased at par or higher than the northern region but the cheap Iranian cement smuggled without paying the duties and sales tax had penetrated into the southern market that is nearer to the Iranian border.
Still, he added, the local despatches growth in North was double than South because the Iranian cement factor had not impacted Northern region as much as the Southern region.
The spokesman of APCMA further mentioned that the association had drawn the attention of FBR towards the illegal import of cement from Iran. In a letter sent to the FBR, the APCMA has indicated that a serious irregularity is being committed by some importers who are importing Iranian cement under the brand names of Sistan, Khash, Mumtazan, Kirman, Ghain and selling it in the local market at much lower rates than the Pakistani brands by means of tax evasion. It has also been pointed out that the importers of Iranian cement are paying duties/taxes to the extent of 30 tons against the consignment of 60 tons, thus evading the duties/taxes by 50 per cent. This tax evasion is not only affecting the domestic market but also affecting the much needed government revenue.
The spokesman showed his apprehension that the local cement industry which was contributing Rs 2,000 per ton to the national exchequer in shape of indirect taxes would face severe issues if the threat of this illegal import of Iranian cement was not countered effectively by the government or relevant authorities.
“The local cement industry has been made to bear the burden of increase in the excise duty, high rates of electricity, continuous surge in the input costs, recent imposition of customs duty on coal import, and restrictions on trucks to load cement and coal according to the approved axle weight,” the spokesman added. This new threat of smuggling along with the above-mentioned issues would completely destroy the cement sector of the country in the near future; hence it is the responsibility of the government to save its local industries from such threats and curb smuggling.