LAHORE - The FED on cement is likely to be enhanced by Rs100 per metric tone in the upcoming budget for the financial year 2014-15.

FBR officials said that the govt had curtailed the FED on cement from Rs750 to Rs500 in the fiscal 2011-12 and from Rs500 to Rs400 per metric tone in the financial year 2012-13. The govt had promised with cement manufacturers that FED will be gradually slashed and phased out within three years. However, FBR sources said FED was likely to be increased by Rs100 per metric tone to bring it back to the level of Rs500 per metric tone again in the budget for the year 2014-15 in the wake of shortfall registered in collection of tax revenue. However no final decision has been taken on this count so far.

APCMA has proposed FBR to abolish FED on cement in phase-wise manner from current Rs400/ton. Moreover, they have proposed to reduce GST rate to 12.5% from 17.0%.In contrast, media reports suggests that FBR may raise FED on cement to Rs500/ton. This may increase the cost by Rs5/bag, which is likely to be passed on to end-consumers.  Experts believe chances of higher FED seem likely keeping in view the ambitious tax revenue target of FBR for FY15. 24% higher PSDP allocation which include mega projects like Diamer-Bhasha dam and motorways in Budget FY15 is likely to increase local cement demand.

 Some experts flag the upcoming FY15E budget as neutral to positive for the cement sector given 1) the expected uplift in PSDP allocation for next year, and 2) a low probability of hike in FED on cement.