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ISLAMABAD: Cement shortage and a sudden hike in the prices of commodity was witnessed ahead of cut in federal excise duty (FED) with effect from Wednesday (today).

"The market speculations are suggesting that the prices of cement will go up further, therefore, most of cement dealers hold the cement stock, which has created artificial shortage and prices of cement have gone up," Arsalan, a cement dealer at Fateh Jang Road told Business Recorder.

The cement is selling at Rs530 per 50 kg bag, which was Rs470 per kg at some places. Around 12 percent increase was witnessed on Tuesday.

However, it is not available not only in twin cities of Islamabad and Rawalpindi but also in other regions.

The price of a 50 kg cement bag is expected to fall by Rs14.5, as the government slashed FED on cement from Rs2 per kg to Rs1.75 per kg with effect from July 1st.

According to the reports, the 0.25 per kg reduction will amount to Rs12.5 for a 50kg cement bag, which will decrease the price by another Rs2 due to savings on General Sales Tax (GST), bringing the total savings to Rs14.5.

Previously, Rs100 FED was being charged on a 50kg cement bag.

The cement sector is one of the handful of industries in Pakistan that have benefited the most from the federal budget 2020-21 in the form of several tax relief and reduction in the FED.

Sector experts said the decline in the FED would not prompt the cement sector to decrease prices.

This is because the sector was not able to increase prices in the past due to negotiations done with the government, which entailed that the tax relief to the sector in the form of the budget would be given in exchange for no increase in cement prices.

Copyright Business Recorder, 2020