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Duty on coal import to cut industry to the bone

Duty on coal import to cut industry to the bone

LAHORE: The PML-N government seems to be working against its policy of encouraging coal use by the industry, as is evident from its decision of imposing duty on coal import in the budget for fiscal year 2014-15.

Prior to the announcement of budget, the government had claimed that it is struggling hard to convert maximum of the industry to coal due to severe gas shortage and give incentives to the industry to maximise coal use but its decision of imposing 1 per cent duty on coal import suggests that the government is working against its stated policy of encouraging coal use.

Although the government is claiming that it is keenly involved in creating alternate energy sources in the country, but on the other hand it is also taking such adversary measures of imposing duties on the import of coal which is beyond comprehension and would only confuse the potential investors and the industry. Many industries have already switched to coal and many others are also converting to coal due to unavailability of gas, so this duty is to nullify the positive initiative of the government to use coal as an alternate energy source.

Muhammad Ali Tabba, Chief Executive Lucky Cement as well as the chairman of the All Pakistan Cement Manufacturers’ Association (APCMA), claimed that there is no duty on any other fuel and the coal is the only fuel which has been brought under the customs duty regime. He requested the government to withdraw import duty on coal as it is a direct injustice to the cement industry.

“Coal is now the only fuel after the budget to have import duty which is a sheer injustice to the cement industry that is the predominant consumer of imported coal in Pakistan, utilizing almost 95% of the 4.5 million tons imported coal annually,” said Tabba.

The APCMA chairman further said that the cement industry has spent millions of dollars in converting its plants from the expensive furnace oil to coal in order to produce cheaper cement for the consumers of Pakistan as well as making our cement prices competitive in global markets.

Our regional competitors including Oman, the UAE and Iran are still cheaper by $5-8 per ton than Pakistani cement.

 

The new taxation measures in the budget will further endanger the survival of cement industry which earns over $500m through export, making it uncompetitive, causing decline in export.

“If the government imposes import duty to our main source of fuel, our competitive advantage will be significantly reduced.”

He said that the cement sector of the country is already facing many issues including massive loadshedding, shortage of labour, slowdown of construction activities, low exports, and losses on coal imports due to no freight subsidies by the government; therefore, this duty is just to add to the woes of the sector.

“At the time when the cement sector of the country in order to enhance its competitiveness in the global market is trying different options of reducing its fuel costs by using alternate energy resources, this imposition of duty would shy away the sector from completing this task,” Tabba said.