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Cost increases for Pakistani cement producers with captive power plants

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World Cement,

In September 2013 we reported that Pakistani cement producers were up in arms over electricity tariff hikes affecting those producers who take their power off the national grid and forcing them to either increase selling prices or absorb additional costs. Producers with captive power plants, meanwhile, saw a much lower tariff increase, putting them in a more competitive position. Now, however, it is being reported that the Gas Infrastructure Development Cess (GIDC) has been revised from Rs.50 per mmbtu to Rs.100. This will push up costs for those producers with gas-fed captive power plants, such as Lucky Cement, DG Khan Cement and Maple Leaf Cement Company.

In terms of sales, 2013 was a good year for the Pakistani cement industry, which achieved record local sales in the second half of the year. However, the energy tariff increases and rising coal prices are a cause for concern for producers, who are also having to deal with an increased tax burden since the industry was brought within the purview of ‘3rd schedule’ of Sales Tax Act 1990 in the 2013-2014 Budget. Prices are likely to go up and the All Pakistan Cement Manufacturers Association is already anticipating that customers will be unhappy, taking the opportunity to point out that all sectors increase prices in line with rising costs and that the cement industry must do the same.

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