The retail price of each 50-kg bag of cement has edged up 12 percent, or Tk 50, to Tk 460-470 -- a development that will push up construction costs, be it the government’s mega projects or private buildings.
The correspondent visited half a dozen shops in Uttara, Mirpur and Tejturi Bazar in Dhaka and found the price of cement, a vital material for all kinds of physical construction, has been on the rise since last week.
Cement manufacturers attributed the price hike to the recent rise in gas price for industries and their captive power generation and tax measures imposed on import of raw materials used to produce the construction material. According to new tax measure, cement makers have to pay 5 percent advance income tax (AIT) to import raw materials and there is no scope to adjust the tax at the end of the year.
Until last fiscal year, cement manufacturers paid 5 percent AIT for raw material imports and the tax was adjustable.
In addition, there is another 5 percent advance tax (basically VAT), which cement makers will have to pay while importing raw materials and other required ingredients.
The new tax measures and gas price hike have caused a price rise of Tk 53 for a 50-kg bag, according to the Bangladesh Cement Manufacturers Association (BCMA).
“Some brands adjusted the price on July 1, the first day of the fiscal year,” said Mohammed Alamgir Kabir, president of BCMA, adding that manufacturers had no other alternative or else they would have to incur heavy losses.
Of the total price hike, Tk 42 is for tax and VAT measures and Tk 11 for gas price hike, according to BCMA’s assessment.
Kabir is apprehending that the impact of the price hike may fall on the housing sector and the government’s ongoing infrastructure projects directly. The government’s development expenditure will increase and rural consumers will suffer the most due to this price increase, said Manwar Hossain, managing director of Anwar Cement.
“The government’s effort to reduce the rural-urban gap will face challenges,” he added. However, Zahir Uddin Ahmed, managing director of Confidence Cement, ruled out any negative impact on the sector and the consumers as well.
Despite the latest hike, the price of cement is still lower than five years ago, when it rose to Tk 500 a bag, said Ahmed, also the first vice-president of BCMA.
The manufacturers did not have any intention to increase the price as the sector has been clocking 10 to 15 percent annual growth for the last 10 years. But the tax measures and the gas price hike have forced them to adjust the price.
At present, 42 cement factories are active, with their combined installed manufacturing capacity standing at 5.5 crore tonnes. The investment in the sector is about Tk 30,000 crore. The market size of the cement sector is Tk 13,000 crore and the annual demand is 3.5 crore tonnes.
Of the consumption, individuals account for 25 percent, real estate and commercial developers 30 percent and the government 45 percent.