- In a recent meeting, the Minerals Development Department of Khyber Pakhtunkhwa (KPK) proposed to increase the royalty on cement.
- Currently, the royalty is ore-based at PKR 250/ton. The proposal aims to shift it to a bag-based structure at 6% of the ex-factory price, ~PKR 1,560/ton or PKR 78/bag.
- After this, the royalty on cement in KPK will increase from currently PKR 12.5/bag (PKR 250/ton) to ~PKR 78/bag (PKR 1,560/ton).
- In Aug’24, the Punjab government imposed a 6% royalty on the ex-factory sale price of cement and clinker. However, cement manufacturers based in Punjab have obtained a stay order from the court against this decision.
- In KPK, the following cement manufacturers are located along with their installed capacities: LUCK (10.3mn tons/ annum), BWCL (6.6mn tons/annum), KOHC (5.0mn tons/ annum), CHCC (4.5mn tons/ annum), FCCL (3.7mn tons/ annum), and DCL (1.1mn tons/ annum).
- To recall, cement manufacturers in the North region recently raised prices by ~PKR 60/bag to PKR 1,380/bag.
- While the proposed increase in royalty will negatively impact LUCK, BWCL, KOHC, CHCC, FCCL, and DCL; to fully offset this impact, cement manufacturers would need to raise cement prices by ~PKR 66/bag.
- The proposed increase in cement royalty in KPK is expected to dent the earnings of LUCK by (PKR 14.0/share), BWCL (PKR 4.4/share), KOHC (PKR 10.2/share), CHCC (PKR 9.3/share), FCCL (PKR 0.6/share), and DCL (PKR 0.9/share).
Courtesy – AHL Research
