The rising cement prices will hurt the construction activities in the country, as the prices have surged by Rs110 per bag after the budget. Cement manufacturers have already hinted at increase in cement prices, following an increase in federal excise duty (FED) and general sales tax (GST) announced in the federal budget 2009.
Though manufacturers had already increased the cement prices by Rs40 per 50-kg bag during the last 20 days of June. With the start of July they have further raised the prices by Rs60-70 per bag.
After current increase the price of cement has reached new peak level of Rs370-80 per bag earlier stood at Rs270 per bag in the local market.
On the other hand, industry sources claimed that the cement industry was paying highest tax per bag of cement in the region, including India, Afghanistan, Dubai (UAE), Sri Lanka and Iran.
“As per tax comparison of regional competitors shows that impact of taxes on each bag of cement in India, Afghanistan, and Sri Lanka is Rs45, Rs27 and Rs52 respectively, while there is zero tax on cement industry in Dubai (UAE) and Iran,” they added.
Industry sources said that an increase in FED and GST on cement industry would shoot up impact of taxes to Rs85 per bag of cement with the start of the new fiscal year by July 1, 2008.
The federal government has increased FED to Rs900 per tonne from earlier Rs750 per tonne and GST from 15 percent to 16 percent in next fiscal year budget 2008-09.
While, marking fee levied by Ministry of Science and Technology is another additional tax factor, which is imposed at the rate of 0.1 per cent of ex-factory price and if calculated in terms of rupee it tantamounts to Rs3 per bag. 
The industry sources has claimed that cement industry is also paying some provincial taxes including Provincial Excise Duty and Royalty per ton on raw materials, ranging between Rs3 to Rs5 and Rs10 to Rs30 respectively.
A total impact of both provincial and federal levies was being calculated as Rs73 per cement bag before the budget speech, but increase in excise duty and sales tax has skyrocketed per bag impact to Rs85 instantly.
However, it is interesting to note that cement manufacturers had already increased cement prices by Rs40-50 per 50-kg bag after the announcement of the budget.
While, during the first week of July, they once again increased the price of cement by Rs60-70 per bag to Rs370-80 per bag in the domestic market, which previously was being sold at Rs270-280 bag a month’s earlier.
After the current surge in the cement prices the minimum price of cement has also increased to Rs300 per bag in the local market.
Dealers said that cement exporters are looking for new opportunities to export cement, as results local market is being effected its prices have gone up.
Some cement manufacturing companies have officially announced the new rates, while the rest companies have just informed us on phone, they added.
However, the analyst believed that the increasing prices of cement would directly hit the construction activities, which are already on a slow track due to the price hike in other raw materials.
"Continuous increase in the cement price would rise the cost of project in the million of rupee, which would be unaffordable for us", said a leading builder.
He said that steel bar prices in the country already has been surged by over 50 per cent, while increase in the petroleum products is been also hurting in the different shapes.
He urged the government to take immediate action against the cement manufacturers, who have raised the commodity prices by Rs110 per bag against the impact of only Rs15 per bag.
"We are expecting further increase in the cement price and the prices may cross Rs400 mark during the next months on the back of gradually increasing demand," he added.
On the other hand cement manufacturers are earning huge profit with a export opportunity of cement.
As per Statistics made available from All Pakistan Cement Manufacturers Association (APCMA), country's cement exports have witnessed a healthy growth of 142 percent to historical level of 7.712 million tonnes during the last fiscal 2007-08 in the wake of rising international demand.
They said that presently regional countries are facing huge shortage of cement, which has played a key role in achieving landmark cement exports during the last fiscal year.
"During the last fiscal year strong external demands from gulf countries have continued pushing the local the companies to more invest in the cement sector, besides utilize their maximum capacity to meet international demand" they said.
Cement export registered a robust increase of 4.528 million tonne during the last fiscal year 2007-08(July-June) and it has touched a new mark of 7,716,620 tonne against 3,188,494 tonne exports of same period of last fiscal 20006-07.
Pakistani companies are exporting cement at an average rate of 60-70 dollar per tonne and as per average price overall exports stood at some 500 million dollar in fiscal year 2008.
Over all cement dispatches have also been increased by 24.31 percent to all time high level of 30,112,142 tonne during the last fiscal year as compared to 24,222,775 tonne during fiscal year 2006-07, depicting a raise of 5,889,367 tonne tons during July-June of fiscal year 2008.
However, the local dispatches showed poor performance, as the growth in the local dispatches witnessed at 6 percent during the fiscal year 2008.
Local dispatches during the last fiscal year stood at 22,395,522 tonne as compared to 21,034,282 million tonne, depicting an increase of 6.10 percent during the last fiscal year.
To meet international and local demand cement companies' have used maximum capacity utilization during the last fiscal year 2006-07, which stood about 80 percent, sources said.
Over all cement dispatches witnessed an increase of 24 percent during June 2008, reaching at 2,771,210 tonne as compare to 2,225,630 tonne in June 2007.
During the last month cement export stood at 916,604 tonne with an increased of 133 per cent, while local dispatches have gone up by 1.16 per cent to 1,854,606 tonne during June 2008.
Cement industry's installed capacity have more than doubled, during the last five years, which helped the industry touch all time high dispatches mark during the last fiscal year, industry sources said.
"Easy availability of raw material help to capture the regional cement market, however they demand for the raise in the duty drawback", they added.
They said that the raise in the export has emerged after the government decisions regarding restoration of the duty drawback on cement exports, in which Central Board of Revenue (CBR) has allowed duty drawback at the rate of Rs25.08 per tonne on export of cement through a notification.
The duty drawback facility is effective since September 27, 2006, however despite the increases in the dollar rate and other changes it still stood at Rs25 per bag, which needed to increase, they said.
They said that slow growth in the local dispatches is comprised by increasing cost and high tax burden standing at Rs90 per bag, some 30 percent of overall cement bag price.
However, they pointed out that 85 percent of the listed cement companies have registered huge losses from operations amounting to Rs14 billion during first nine months of the current fiscal.
These losses occurred mainly due to rising cost of doing business and an imbalance in supply demand phenomenon, resulting in depressed market rates, they added. "Government should realize the taxes imposed on the local sale of cement and give some relaxation to the cement sector and the decline in the taxes would help to provide cheapest cement in the local market,” the demanded.