The incentivised package for the construction industry announced by Prime Minister Imran Khan in April 2020 has paid dividends within a year. Robust construction activities across the country have resulted in cement sales in the month of April to about five million tons, registering a growth of about 40 percent on month-on-month basis over April last year. Also, there has been enormous increase in cement exports, valuing $300 million during this period.
The incentivised package for the construction industry announced by Prime Minister Imran Khan in April 2020 has paid dividends within a year. Robust construction activities across the country have resulted in cement sales in the month of April to about five million tons, registering a growth of about 40 percent on month-on-month basis over April last year. Also, there has been enormous increase in cement exports, valuing $300 million during this period.
Indeed, the national cement industry has been effectively revived, and the cement companies have returned to profits amid the challenges of Covid-19 pandemic. Cement industry is also serving as a precursor to the stability of allied industries like iron and steel, bricks, glass, plastics, ceramics, aluminium etc. Manufacturing sector has thus registered substantial growth during this period. Other sectors benefitting from this upsurge in activity are the SMEs and services such as architecture, engineering, transport and real estate. This should have a pleasant multiplier effect countrywide on improving the employment situation and socio-economic development, thus significantly reducing the pandemic and the lockout negative effects.
Total cement despatches or sales during the ten months of current fiscal year (July 2020-April 2021) have recorded 48.274 million tons compared to 40.555 million tons during the corresponding period of last year. This translates to over 19 percent growth on year-on-year basis, and optimal utilisation of total operational capacity of 69.164 million tons of cement annually. In terms of growth, however, it would be more specific showing a comparison of the monthly production or output figures. As the pandemic seriously impacted the economic activities since beginning of last year, overall cement production had declined to 2,996,000 tons in March 2020, 3,276,000 tons in April, 2,284,000 tons in May, and 3,524,000 tons in June 2020. Sales registered nominal despatches to domestic market, whereas exports came to standstill.
In comparison, after implementation of the massive relief package to construction industry, the domestic demand of cement abruptly increased, and, subsequently, cement production rose to 4,100,000 tons in July 2020, 3,067,000 tons in August, 4,143,000 tons in September, 5,121,000 tons in October, 4,009,000 tons in November and 4,133,000 tons in December. Positive trend continued in the year 2021, the factories having produced 4,281,000 tons in January, 4,053,000 tons in February, 4,347,000 in March and 4,699,000 in April 2021.
There were several other encouraging developments during this period as well, including launch of mega projects like Mohmand Dam, Diamer Basha Dam and Dasu Dam, ongoing CPEC projects of infrastructure and energy, reduction of interest rate by the State Bank of Pakistan and significant allocation of funds under the development budgets including highway and motorway projects. Total disbursement so far under the Public Sector Development Programme (PSDP) has been to the tune of Rs70.62 billion just for water projects including small dams in various provinces.
A similar pattern is emerging for the next fiscal year starting July 1, 2021 showing strong cement demand, maintaining growth momentum. A number of housing projects in public and private sectors including Mera Pakistan, Mera Ghar Scheme, and Naya Pakistan Housing Programme are being implemented. Commercial banks have received applications for mortgage financing of over Rs52 billion under the Mera Pakistan, Mera Ghar scheme, and, among these applications, banks have already approved financing of Rs15 billion. Likewise, a subsidy of Rs30 billion has been announced for houses constructed under Naya Pakistan Housing Programme. It is expected that the PSDP outlay for 2021-22 would be of the size of Rs900 billion mainly for large infrastructure projects. Also, the second phase of CPEC projects will take shape with the commencement of a new fiscal year. There is improved export potential too, as new markets of the Philippines, Bangladesh, Yemen, Qatar and Sri Lanka have been explored recently.
In the wake of ongoing economic recovery and cement demand projections, the cement industry has embarked upon restoring its earlier plans for capacity expansion, and a few projects have recently come on stream. DG Khan Cement’s additional cement plant of 9,000 tpd (tons per day) capacity in Hub, Lasbela District – the largest and most modern in the country – and set up with an investment of $345 million started production last year. Power Cement’s plant at Nooriabad, Dadu District has also expanded its installed capacity up to 2.3 million tons annually and production commenced last April.
Currently, the industry has an installed (not operational) capacity of 73.12 million tons of cement per annum, which will expand by 11.8 million tons by 2023, and by another 6 million tons in subsequent years. Punjab Chief Minister Usman Buzdar had announced on April 26 that 16 cement plants, greenfield as well as brownfield, are being constructed in the province. Five projects have already been sanctioned for construction in Dera Ghazi Khan, Mianwali, Khushab and Jhelum. These include expansion of Bestway Cement and DG Khan Cement plants both located in Chakwal District. Attock Cement will expand its existing capacity by 1.2 million tons per annum.
A new plant of 2.05 million tons annual capacity is being set up by Fauji Cement in Dera Ghazi Khan, the construction of which is scheduled in next financial year. Pioneer Cement has also applied for the sanction of a greenfield cement project in Dera Ghazi Khan. Kohat Cement has finalised its plans to establish a greenfield project of 10,000 tpd capacity in Khushab. The greenfield projects in Khyber Pakhtunkhwa are also coming up. Fecto Cement’s new cement plant in Mardan District is under construction. Gharibwal Cement will construct a cement plant in Haripur. Lucky Cement has plans to expand its Pezu (District Lakki Marwat) plant of 6.81 million tons annual capacity by 2.8 million tons annually, and to construct a greenfield plant in the KP province.
Implementation of the large-scale capacity expansion of cement industry will create opportunities for thousands of additional direct and indirect jobs, and likely to contribute substantially to socio-economic development in the country.
The writer is retired Chairman of the State Engineering Corporation
