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March 31, 2020

Cement offtakes fall 80 percent; Rs450mln tax revenue lost

Business

March 31, 2020

LAHORE: Cement makers saw their offtakes sharply slide approximately 80 percent over the last couple of days, as coronavirus lockdown brought construction activities and transportation to almost a grinding halt, industry officials said on Monday.

The officials said cement dispatches registered a drastic decline during the last 10 days after the COVID-19 lockdown in the country halted construction activities and caused an estimated revenue loss of more than Rs450 million to the national exchequer.

Cement factories located in Sindh – categorised as south-based mills – saw their total dispatches plummet to average 3,500 tons a day from 20,000 to 22,000 tons of daily average in the recent past. That showed that south-based cement manufacturing plants witnessed 85 percent reduction in daily dispatches.

Industry officials anticipated ‘zero’ offtake to ensue the Sindh administration enforcing strict lockdown to reduce physical interaction.

Likewise, north-based cement manufacturing plants, located in the Punjab, registered an almost 75 percent decrease in dispatches. The provincial administration announced the lockdown in the province four days after Sindh. Daily average cement offtake from the northern region came down to 30,000 to 35,000 tones, compared to 135,000 to 140,000 tons sold as daily average previously.

Cement exports underwent the worst situation after transporters showed inability to carry on logistics operation amid the lockdown. Daily average exports plunged to 1,000 to 1,500 tons, in a wide contrast to 20,000 to 22,000 tons, depicting a whopping 93 percent slump.

The officials estimated that the slowdown hurt the government’s revenue collection efforts as much as the industry. Usually, the government collects Rs3,800 per ton of cement in shape of various taxes, including Rs2,000 excise duty and Rs1,800 sales tax.

“There would have been Rs450 million in tax revenue loss incurred by the government since the lockdown started across the country,” an official said. “If the situation persists for another 10 or 15 days then the total loss to the national exchequer could surpass one billion rupees.”

Slow construction activities were already frustrating the investment plans of cement industry and it previously expected only 47 million tons of sales and exports during the current fiscal year compared to the installed capacity of 60 million tons.

However, cement sales continued to show upward trend due to revival of exports in the past eight months. They rose 10 percent to 33.3 million tons during the July-February period of the current fiscal year. The tally stood at 30.2 million tons in the corresponding period a year earlier.

The industry officials said cement factories are still operating with minimal staff while following complete standard of procedures to put off coronavirus spread. Transporters stopped lifting of the cement from the plants after the mobility ban imposed by the provincial governments, they said.