Cement industry grapples with deep crisis

Al Amin :
The country’s cement sector, a major backward linkage industry of the construction, is facing a big trouble due to fall in demand and increase in import cost of raw materials, the entrepreneurs said.

Complication in opening letters of credit (LCs) for importing raw materials due to dollar crunch and increase in production cost for hiking energy and gas prices are also hindering the development of the rising sector of the country, they added.

The customs duty (CD) on clinker, the main raw material for cement, has been increased from Tk 500 per tonne to Tk 700 in the budget for the current fiscal year, leaving manufacturers disappointed.

The manufacturers of the sector have long demanded the CD on clinker be reduced from Tk 500 per tonne to Tk 200. But, the National Board of Revenue (NBR) is not paying head to their demands.

Following this, the Bangladesh Cement Manufacturers Association (BCMA) has sent a letter to the authority of the revenue board seeking attention to their demands.

“The CD on key raw materials of any industry is usually around 5 per cent of the import value. But it will stand at 12 per cent to 13 per cent because of the hike in the budget,” said the BCMA Alamgir Kabir in the letter.

He further said, “The amount of Value-Added Tax (VAT) and Advance Income Tax (AIT) are increasing for sourcing raw materials due to the imposition of additional CD on Clinker.

On the other hand, the demand of cement is falling down sharply in the local market due to hike in prices,” he added.

The industry imports five raw materials-clinker, slag, limestone, fly ash and gypsum. But, the manufacturers are facing the problemmes of capital loss due to devaluation of local currency against dollar, LC opening complication and excessive commission charged by many banks for opening of LC, the BCMA president said.

Apart from the import stage, a 2 per cent AIT is levied at the sales stage and it is considered as the final tax liability, said Kabir, also the Vice-Chairman of Crown Cement PLC.

“We have been demanding for a long time that AIT can be a maximum 0.50 per cent and it would not be appropriate to consider it as a final tax liability. So, we are requesting the government to offer the opportunity to adjust the AIT,” he added.

Cement production in the country is carried out by 35 local and foreign enterprises, with an annual effective production capacity of over 79 million tonnes compared to an annual demand of roughly 39 million tonnes. Due to a production capacity which is almost two times higher than demand, there is a big competition in the market.

Around Tk 40,000 crore has been invested in the sector and more than Tk 6,000 crore in taxes are collected annually from the sector, according to the BCMA.