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Pakistan Has Hugely Developed Cement Industry, Scaling Down Duties And Taxes Will Nurture It Further

Interview with Syed Muhammad Talha – Director, Safe Mix Concrete (Pvt) Limited

PAGE: KINDLY TELL ME ABOUT YOURSELF AND SAFE MIX CONCRETE LIMITED:

SYED MUHAMMAD TALHA: I am the fellow member of the Associations of Certified Chartered Accountants and hold a Master’s degree from Karachi University. I completed my articleship from EY Ford Rhodes and Co, Chartered Accountants, where I gained experience of diverse sectors serving clients spanning the financial, manufacturing, trading and service industries. Before joining the Arif Habib Group Company, I served Al-Abbas Group and Ghulam Farooq Group. I am serving as a Director of Safe Mix Concrete (Pvt) Limited (SMCPL). Further, I am also the Chief Financial Officer of Javedan Corporation Limited and International Builders and Developers (Pvt) Limited. I have a working experience of more than 15 years in various diversified capacities including property operations.

Safe Mix Concrete Limited is the pioneer in the ready mix concrete industry of Pakistan. Also SMCPL is the only ready mix concrete company in Pakistan listed on the Pakistan Stock Exchange. Ready mix concrete is one of the most versatile materials available to the construction industry. Its application can range from building a house to a high rise apartments, sidewalks, driveways, bridges, tunnels, subways etc. It ensures high strength concrete of consistency, efficiency and environment friendly.

PAGE: WHAT ARE YOUR VIEWS ABOUT QUALITY OF CEMENT PRODUCED IN PAKISTAN?

SYED MUHAMMAD TALHA: Pakistan’s cement quality is considered to be in upper shallow. The quality of cement mainly depends on the quality of input material, processing of materials and grinding process. Input material mainly comprises of limestone, which is around 80 to 90 percent, gypsum of around 5 percent while some other additive may also be included to enhance the quality or to improve product mix. In Pakistan, cement manufacturers rely on latest imported technology plants like FLS, which ensures high quality product by testing the input material to desired level of output. Further, cement manufacturers are also investing in quality control equipment like X-ray, Fluorescent Analyzers and Diffractometers to ensure quality consistency in the product. However, more research has to be conducted in cement sector for further improvement in cement quality by identifying superior quality coal deposits as it is one of the substantial factors in production of cement. Energy efficient coal can reduce cement manufacturing cost and subsequently make its quality much better. Technical advancements in production plants are also necessary with qualified and professional plant engineers. Let’s take an example of a cake. A cake comprises of 90 percent sponge and remaining 10 percent of cream and other flavoring stuff and if it is not baked well, all can go wrong. Same is the case with the cement as 90 percent cement contains limestone and remaining 10 percent contains gypsum, shale and other controlling ingredients and with fuel efficient coal it can be baked upto the standard and professional engineers can make it possible with their expertise to make it perfect.

PAGE: IS PAKISTAN ONE OF THE LEADING CEMENT PRODUCERS IN THE WORLD?

SYED MUHAMMAD TALHA: Cement industry is one of the few industries that existed in Pakistan before the partition of the sub continent. The major reason for the existence of this industry is the availability of the raw materials. In 90s, cement production capacity of Pakistan was just around 9 million tons and in the year 2000, it was expanded to 16 million tons and currently it is around 46 million tons, which clearly reflects the huge increasing trend in Pakistan. The trend seems positive after 2012 and it is still moving in that direction where the surplus cement as per production capacity reduced on day to day basis and in last month of October 2017 it stood at just 1 percent. Pakistan is considered one of the best cement producers in the region and stands amongst the top 10 cement producers in the world, as its products are readily accepted in Middle Eastern countries, Africa as well as the neighboring countries including Sri Lanka and Afghanistan, though the exports remained below the full potential mainly due to high transportation cost as most of cement units are located in north along with imposition of higher duties on export.

Industry sources say cement industry has now been focusing high-growth markets within the fastest-growing Asia and MENA regions and planning to go beyond borders. Pakistan has inexhaustible reserves of limestone and clay which can support the industry for another 50-60 years. Pakistan’s construction industry is thriving and is expected to continue doing so in the foreseeable future. However, to maintain healthy capacity utilization rates, increased exports are needed. Additional tax on cement sector needs to be reduced as it has suffered the local domestic consumption.

PAGE: YOUR VIEWS ON INVESTMENT IN THE CEMENT SECTOR OF PAKISTAN:

SYED MUHAMMAD TALHA: The local cement production companies have already started their working to increase their production capacity like Power Cement, Lucky Cement, Cherat Cement, Attock Cement, D. G. Khan, Hub Cement, Pioneer Cement and Maple Leaf Cement have already announced their investments. Foreign investors have also shown interest in equity financing for any extension in cement manufacturing plants.

 

Sources in the All Pakistan Cement Manufacturers (APCMA) say that the cement industry is going to invest from $700 million to $1 billion for increasing capacity utilization in the next three years following increase in local demand as multiple public and private development projects are launched and the China-Pakistan Economic Corridor (CPEC) moves ahead. Fertilizer and other industries grew in an environment of relaxation and relief from the government. However, the cement sector did not get any relief even on liquefied natural gas (LNG) from the government, taxes etc. despite of the fact that the cement industry paid Rs40 billion in excise, sales, and income tax during the first six months of this financial year and the figure would touch Rs90 billion mark at the close of the fiscal year.

PAGE: YOUR VIEWS ON CONSUMPTION OF CEMENT IN PAKISTAN:

SYED MUHAMMAD TALHA: The cement industry in Pakistan is currently flourishing, thanks to the country’s booming construction industry and high demand for residential and commercial developments within the country. The All Pakistan Cement Manufacturers Association (APCMA) claims that they have been unable to reduce the cost of cement due to additional taxes on gas and coal within the country. Construction companies and in particular the ABAD have been clashing with the government over the new federal excise duty proposals, claiming that the rise will unnecessarily increase the cost of construction. The growth can be seen affecting both the commercial and residential sectors, with many new housing developments taking root, in response to increasing demand for luxury gated communities, and raising living standards across the country. There is a need to reduce the taxes and duties so that the cost of production of cement may reduce, which in turn would be beneficial for the construction and cement industry.

The introduction of CPEC which is linked to China’s mega visionary project i.e. One Belt One Road has indulged many of cement producers to expand their production line and capacity so that they would be able to compete with the existing local and foreign cement suppliers.

Despite having an extremely well developed cement industry, Pakistan’s per capita cement consumption stands at 140 kgs, which is one of the lowest in the world – the global average is 400 kgs per capita. Poor economic growth, lack of government interest in infrastructure projects and high real estate and housing prices have kept local cement demand fairly low and for many years, cement manufacturers, especially those based in the south region (Sindh and Balochistan), have focused mainly on exports.

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