CEMENT INDUSTRY

Introduction:
The cement industry is one of Pakistan's leading industries which have a vital role
in Pakistan's economic development. When Pakistan came into existence it had
cement and four cement plants but at present 20 cement companies are operating in
Pakistan's cement industry. The cement industry needs favorable conditions for
high infrastructure and production. There are a large number of cement companies
in the mountainous region of the country. These areas have a lot of rich material
required for cement production such as clay, iron, gypsum or minerals.

The cement business of Pakistan is partitioned into two wide locales based on their
topographical area which incorporate Northern zone and Southern Zone. The
Northern zone covers more than 80% of the absolute concrete portion of the nation
while rest of the concrete is created in the southern zone. The cement industry of
Pakistan has an oligopolistic market structure where top five organizations have
powers more than 55% of the piece of the pie of concrete. While the excess all
organizations cover just 45% of market shares. Cement industry of Pakistan is
satisfying the nearby interest of concrete and furthermore trading concrete to the
adjoining nations like Russia, Iraq, Sri Lanka, India, Afghanistan and Unites Arab
Emirates. As of now, Pakistan is likewise trading concrete to some African nations
also. As of now, Pakistan is positioned among the world's main 10 concrete
sending out nations.

Pakistan's cement industry recorded a strong growth of 40.4% in April 2021, when
total cement shipments reached 3.52Mt as against 4.943Mt in the same month of
the previous financial year. Similarly, the country's cement exports increased by
252%, while domestic shipments increased by 24% during the month.
According to data released by the All Pakistan Cement Manufacturers Association
(APCMA), domestic shipments during April 2021 increased to 4.066Mt from
3.271Mt a year ago.

Performance of Cement Industry during the last 3 years

PERFORMANCE DURING FY18-19:

 According to All Pakistan Cement Manufacturers Association (APCMA),

the cement industry sold 4.27 million tons of cement in September 2019 as
compared to 3.83 million tons in September 2018.
 Both domestic consumption and exports registered double-digit increases
during the month. Domestic consumption raises 11.5% to 3.47 million tons
compared to 3.11 million tons in September 2018.
 On the other hand, exports go up to 0.798 million tons in September 2019
compared to 0.715 million tons in September 2018, an increase of 11.66%.

PERFORMANCE DURING FY19-20:

 According to all Pakistan Cement Manufacturers Association, the local

selling of cement increased by 32.67% to 3.953 million tons in July 2020
from 2.979 million tons in July 2019.
 On the other hand, exports registered a more accomplished increase of
66.14% at 0.885 million tons in July 2020 from 0.533 million tons in July
2019.

PERFORMANCE DURING FY20-21:

 According to the All Pakistan Cement Manufacturers Association

(APCMA), local cement exports in May 2021 rose to 3.2 million tons
against 2.27 million tons in May 2020, showing a healthy growth of 40.95%.
 Cement mills in northern Pakistan sold 2.71 million tons of cement in
domestic markets, an increase of 35.55% over two million tons sold in May
2020. Similarly, the mills in the south recorded 81.15% growth in sales as
 they exported 487,311 tons to the local market in May 2021. These mills had
exported 269,003 tons in May 2020.
 Due to Covid-19 driven issues, mills in the northern part of the country
exported only 7,520 tons in May 2020, however, exports from north-based
mills increased to 203,625 tons in May 2021.
 Exports from south-based mills increased 52.66% to 542,925 tons in May
2021 compared to exportation of 355,654 tons in May 2020.

CHALLENGES FACE BY CEMENT INDUSTRY:

Challenges facing by cement industry in Pakistan are as given below.

More competition:

 At present era the freight charges are a massive 20% of the retail prices. The
plants located very close to each other and tapping the same market at the
same price of product so the competition will automatically gets high.
 Dan dot, Pioneer, Maple Leaf and Garibwal are allocated nearly to each
other and are selling huge quantity of their production in the same areas and
will thus face serious competition from each other.

Tax structure:

 Instead of giving relief in the budget, the sector was further deal with a 3%
increase in sales tax to 18% and an increase in excise duty to 35%.However,
the possibility of formation of a cartel cannot be ruled out. Since massive
investment has been made in the sector, any reduction in price of cement can
reduce profit margins of all the units.
 Formation of organization and fixation of price at a level high enough to
cover increasing costs of inputs and implement reasonable profit margins
may provide a short-term relief to the manufacturers. Such organization may
 be against the interests of consumers but can help the manufacturers to
survive with some dignity.

Production process:

The cement industry in Pakistan uses two distinct production processes, the ‘dry’
and the ‘wet’ process. In the wet process raw materials are fed into kiln in slushy
form. As it consumes more energy to raise the temperature of the kiln to the
required levels it is costly. In the dry process the ground raw materials are fed into
the kiln in dry powder form therefore energy consumption is low to raise the
temperature to the required level.

Cost of production:

Since the industry faces a situation where sales price will be fixed by mutual
agreement, the cost of production will be the most difficult factor of profitability.
Energy cost is a major component of total cost of production. It contributes at an
average 40 to 45 percent towards total cost of cement production. Energy cost is
even higher in case of those plants which use wet process. A cement plant based on
wet process consumes 165 kg of furnace oil to produce one tone of clinker as
compared to 85 kg of furnace oil used in dry process to produce the same quantity
of clinker. Since cement plants use both furnace oil and electricity, any increase in
the prices of these two products is harmful to profitability of the industry. Ever
since October 1995, however, there has been more than 60% increase in the price
of furnace oil.

Suggestions for Improvements:

The suggestions for improvements of the cement industry of Pakistan like different
industries in Pakistan, the cement business likewise seeing issues and it does not
have a drawn out vision which makes it incapable to distinguish the inadequacies
in the method of its supported development. Accordingly, the cement business
ought to foster a long haul and vital vision to improve its creation and exports.
Consequently, it is truly significant for every industry to embrace current
innovation for development of its creation proficiency. Consequently, the cement
business ought to adjust new and cutting edge innovation to create the best quality
cement to meet homegrown utilization just as the exports requests to produce
income and unfamiliar stores for the country. The cement industry of Pakistan
ought to likewise adjust the most trend setting innovation for energy protection and
natural improvement. The cement industry ought not to be subject to cartelization
for income age rather it should discover different means revenue driven expansion.
The public authority of Pakistan ought to intercede to limit these cartels. There isn't
any exploration and advancement focus in the cement area that could work for
effectiveness underway, quality, attractiveness and directing possibility for the
creation of new items, upgrading creation cost and development of cement
industry. Government should diminish the duty rate forced on the cement business
which is nearly higher than other cement creating countries. Government should
put forth genuine attempts to limit cost of energy for cement industry. The
government should devise amicable strategies to advance and support the cement
business. The public authority should make the rail line totally functional on the
grounds that it is the most solid and least expensive wellspring of transportation for
the cement industry as well as for the whole industries in Pakistan.

Conclusion:
Pakistan's cement industry had gone through many trials and tribulations. The
cement industry experienced different stages of nationalization, de-nationalization
and privatization. Cement industry is one of the important industries which play a
very important role in the economic development of Pakistan. The role of the
cement industry in economic growth has been very significant as it has played an
important role in the economy in terms of profit, investment, and return on
investment, taxes, assets, equity, sales volume and number of employees.
However, the performance of the cement industry did not perform as expected due
to various factors. Due to over-utilization of the total capacity of the plant and
achieving the required level at the local level, the industry could not remain
satisfactory. The cement industry has not been able to produce a satisfactory
skilled and trained workforce. Cartilage has a negative impact on the cement
industry. The cement industry plays a very positive and significant role in the
economic development of Pakistan.

Pakistan was the 5th largest exporter of cement to neighboring countries. Rs 30

billion is added to the national income as tax collection from the cement industry.
In addition, over Rs 100 billion has been invested in the cement industry in
Pakistan over the past few years for expansion purposes. The annual demand for
cement consumption in Pakistan is 7% of the construction industry due to its rapid
urbanization. Pakistan has a huge backlog of 6.30 million housing units as
described by this industry. Pakistan's construction sector is playing a key role in
reviving the economy and job creation accounts for about 8% of the total labor
force.
Background:
The Focal Leading Group, also known as the Central Board of Revenue (CBR),
was formed on 1 April 1924 with the establishment of the Central Board of
Revenue Act, 1924. In 1944, an undeniable Revenue Division was formed under
the Ministry of Finance. After independence, the game plan continued until August
31, 1960, when the FBR was made a joint division of the Ministry of Finance on
the recommendations of the Administrative Restructuring Committee. In 1974,
further changes were made to streamline the association and its functions.
Subsequently, the post of Chairman FBR was created as a former Official Extra
Secretary and the Secretary Fund was removed from his duties as the Official
Administrator of the FBR.

The status of Revenue Division under the FBR Ministry of Finance, 22 October
1991, with the ultimate goal of removing obstacles to the activities of the Secretary
of the Government's regulatory forces and smoothing and enforcing monetary
policy measures and as the case may be, the Revenue Division was abolished in
January 1995, and the FBR returned to its pre-1991 position. The Revenue
Division has been in existence since December 1, 1998.

With the passage of the FBR Act 2007 in July 2007, the Central Board of Revenue
is now the Federal Board of Revenue.

Introduction:
The Federal Board of Revenue (FBR), formerly known as the Central Board of
Revenue (CBR), is a federal law enforcement agency in Pakistan that investigates
tax crimes, suspected wealth and money laundering. The FBR works through tax
inspectors who monitor tax evaders and perform special duties for FBR
headquarters. The FBR is responsible for collecting taxes from all individuals and
businesses in the country. Dr. Muhammad Ashfaq Ahmed is the current Chairman
of the FBR which is appointed on August 24, 2021.

The FBR also collects intelligence on tax evasion and manages tax laws for the
government of Pakistan and acts as Pakistan's central revenue collection agency.
The FBR is responsible for:

(i) Formulation and administration of fiscal policies.

(ii) Collection and recovery of federal duties, taxes and other duties.
(iii) Customs and taxation cases and quasi-judicial work to decide appeals.

The FBR is probably the largest federal department in Pakistan. The FBR operates
primarily through its key collection weapons across the country, including customs
clerks, regional tax offices (RTOs) and large taxpayer units (LTUs).

The FBR has two major departments.

1. The Inland Revenue & customs:

The Inland Revenue Service (formerly known as the Income Tax Department)
manages the imposition of household taxes, including sales tax, income tax and
federal excise duty.

2. Pakistan Customs Service:

It manages import duties and other taxes levied at the import stage, as well as
regulate international trade with respect to sanctions and restrictions imposed by
the government. For the purpose of collecting taxes and prosecuting tax evaders,
the FBR's powers and functions include but are not limited to conducting inquiries
and audits in tax matters, ordering arrests, attachments as well as movable and non-
compliance with the public auction of immovable assets.
STRUCTURE OF FEDERAL BOARD OF REVENUE:

1. Customs:

Pakistan Customs is the caretaker of Pakistan borders against movement of

opposing band things and is organizer of bona fide trade. It gives a major source of
income to the Government of Pakistan in the form of taxes charged on the goods
traded across the borders. It also helps to keep the domestic industry, discourage
consumptions of luxury goods and stimulate development in the under-
development areas.

2. Information technology:

Information Technology Wing of federal board of revenue (FBR) looks after the IT
systems of FBR.

3. Inland revenue:

Domestic Taxes, comprising Income Tax, Sales Tax and Federal Excise Duty,
constitute about 90% of the Revenue collected by FBR. These taxes are not only
similar in core, but also are dependent in practice. The time-tested international
tenor maintains the same. The adjustment of these taxes into a single
administrative structure was imminent since long, but never in the history of the
Pakistan’s Economy, was the need so great for the manifestation of this change.
Encouraged by these demands and with a view to apply the modern taxation
systems to improve the tax to G.D.P ratio, the Inland Revenue Wing of the FBR
was created, combining the three domestic taxes. It is expected that the beginning
of this wing would facilitate the taxpayers, as it would provide them to carry over
their tax matters in one legislative structure. The creation of this wing would also
be helpful for the tax administration, as the access to the taxpayer’s data in respect
of different domestic taxes would be easily presented.

4. Administration & Human Resource:

Administration and Human Resource Wing of FBR looks after the administrative
and human resource activities of FBR.

5. Accounting and taxpayer’s audit:

Tax system in Pakistan is working on self valuation basis aimed at promoting

voluntary-compliance, documents and self-policing. Tax Audit is an operative
instrument of control with the FBR through which submission level is supervised.
Through Audit, the government checks whether a recorded person/ taxpayer has
properly determined his tax liability, deposited due tax in the national treasury and
is making modifications of input tax etc, to which he is legally eligible. In order to
precaution the government’s interests, FBR has recognized a central risk based and
automated “Tax Audit Management System” (TAMS), which is always reviewed
and improved.

In order to achieve the above-mentioned goals, Taxpayers Audit was established in

January 2003. It was given the task of rearrangement and reforming the audit
policy. The main tasks involved drafting National Audit Manual, preparing
National Audit Plan and training the FBR workforce in modern auditing methods
etc.

6. Legal:

FBR is in the process of accomplishing growth in profits by reposing self-

confidence in the taxpayer community and at the same time applying the tax laws
directly.

Legal Wing of the FBR helps in implementation of the tax laws. The objective of
development in revenue is reached in coordination with other Wings of FBR. Legal
Wing of FBR is in continuous efforts to confirm proper representation of Revenue
before several legal forums.

7. Facilitation and Taxpayer Education (FATE).

Facilitation and Taxpayer Education (FATE) Wing is one of the support wings of
FBR formed to provide the identical facilitation to the taxpayers in helping to
fulfill their tax requirements.