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Pakistan’s cement sector flourishing; taxation policy needs reform

Interview with Mr Kashif Habib — Chief Executive, Power Cement Limited

Profile

Kashif A. Habib is the Chief Executive of Power Cement Limited & Safemix Concrete Limited. He completed his article ship from A. F. Ferguson & Co. Being a member of Institute of Chartered Accountants of Pakistan, he gained experience pertaining to different sectors serving clients spanning to financial, manufacturing and service industries. His experience includes being Executive Director of different cement and fertilizer companies of the Arif Habib Group. Power Cement Limited aims to be recognized nationally and internationally as a successful cement producer. To become a profitable organization and exceed the expectations of our customers and stockholders by producing and marketing competitive and high quality products through concentration on quality, business values and fair play is our mission. Our production capacity is 3150 tons per day and we are currently planning to increase it to 11300 tons per day. We manufacture superior quality cement which has allowed us to capture a sizeable chunk of the market share. We believe in quality with responsibility therefore we have installed state-of-the-art European technology bag houses to control emissions.

PAGE: WHAT IS YOUR TAKE ON THE CEMENT SECTOR OF PAKISTAN?

KASHIF HABIB: The cement sector of Pakistan is booming due to consistent increase in demand of cement throughout the country. There are some known expansions in cement sector for companies in the northern region such as Lucky Cement, Maple Leaf Cement, Gharibwal Cement, Pioneer Cement, D. G. Khan Cement and for companies in the southern region such as D. G. Khan Cement, Lucky Cement, Attock Cement & Power Cement. All these expansion plans shall bring in investment, which will work as a catalyst for boosting our GDP and economy as a whole.

PAGE: TELL US ABOUT THE EXPANSION PLANS OF POWER CEMENT:

KASHIF HABIB: Power Cement Limited is setting up a new plant in Nooriabad raising its production capacity to 3.37 million tons a year. The total cost of the new plant shall be around PKR 25 billion. The new project will use the latest technology from FLSmidth, the top international cement equipment supplier and will cater to local and international standards.

Our forecast of increased demand is based on 8 percent annualized growth rate in the southern region over the past 12 years plus an added advantage for export at competitive rates. Increase in production capacity shall allow the company to capture a bigger market share resulting in higher IRR as compare to the existing operational plant. We will also have an opportunity to supply our excess capacity to northern region in a cost effective manner in case of growing/un-met demand in the north.

PAGE: WHAT IS YOUR TAKE ABOUT THE CONSTRUCTION SECTOR IN KARACHI?

KASHIF HABIB: Given the stable socio-economic conditions of the country on the whole, the construction sector of Karachi specifically will not take a dip but will plunge to increased construction activity as substantial infrastructure projects have been under progress such as M9 Motorway Project, Bahria Town and Defense Phase 9 etc.

The builder segment has also shown interest in investing here as the returns on construction projects have increased to a maximum. Moreover the population of Karachi is rigorously increasing resulting in the need of more housing projects and an improved infrastructure as a whole which can only be met if the construction activity in Karachi is equally matched (increased).

PAGE: YOUR VIEWS ON THE TAXATION ISSUES:

KASHIF HABIB: Cement is one of those few products which are victim of double taxation in the shape of FED and GST. Few years back it was planned that sales tax will replace FED therefore 17 percent sales tax was imposed with a view that in two to three years time FED shall be abolished.

This FED was reduced in the following two to three years and again increased to Rs1,000/ton last year along with taxation based previously on ex-factory basis was imposed on market retail price. In the last two financial years taxation on cement has been increased by more than Rs50/bag, which needs to be reduced to promote infrastructure in the country.

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