Govt reveals reason behind cement prices hike in Pakistan

LAHORE: According to a recent report by the Competition Commission of Pakistan, the increase in cement prices in the country is not only the result of supply and demand but also a combination of several structural and policy issues.

The report states that the share of taxes and duties in the price of cement has reached about 38 percent, while the overall price paid by consumers consists of various taxes.

This is why cement remained expensive despite the decline in general inflation. In a few years, the price of a 50-kilogram bag has increased from Rs 822 to Rs 1,091.

Interestingly, production capacity increased from 45.6 million tons to 84.6 million tons, but its utilization decreased to about 53 percent, which indicates weak demand, although per capita cement consumption in Pakistan is below the global average, and there is room for growth.

The report also points out that the cement sector is vulnerable to centralization because products are similar, entry is difficult for new investors, and a few large companies have a strong influence on the market, with competition further limited, especially in the southern regions.

Furthermore, the monopoly of a single terminal for coal imports, different transport laws between provinces, and an inconsistent system of mineral royalties create cost differences, while smuggled and counterfeit cement—especially from Iran—is posing a threat to both the local industry and consumers.

The commission has also put forward comprehensive proposals for reforms, including ending the monopoly on coal imports, stabilizing tax policy, realistic determination of energy prices, uniformity in the royalty system, strict action against smuggling and counterfeit products, and the establishment of new factories along with a modern transport system.

According to the report, if immediate measures are not taken, construction costs will increase further, residential projects will slow down, and industrial development may also be affected, even though the cement sector is the backbone of Pakistan’s economy.