Punjab cement royalty under fire

June 04, 2026 (MLN): The Federal Constitutional Court has raised serious concerns over Punjab’s 6% royalty imposed on the ex-factory price of cement, questioning whether the levy is being applied within legal bounds.

The bench observed that the structure appears to shift the royalty away from raw minerals and onto the finished product, potentially altering its constitutional nature.

During proceedings, judges highlighted that royalty, in principle, should be charged on extracted minerals such as limestone and argillaceous clay, rather than on processed cement bags.

The court noted that the current mechanism could effectively function as a tax on production rather than a resource-based royalty, raising questions over its legality and intent.

Cement manufacturers argued that the provincial government is only empowered to impose royalties on minerals, and that linking the charge to cement sales creates a situation of double taxation.

They maintained that the existing framework unfairly increases their financial burden beyond the extraction stage.

The court further observed that any upward adjustment in royalty is likely to be passed through the supply chain, ultimately hitting consumers through higher cement prices, rather than being absorbed by producers.

This raises broader concerns about affordability in the construction sector.

Industry estimates suggest that the 6% royalty currently translates into roughly PKR 1,350–1,400 per tonne, substantially higher than the fixed royalty of around PKR 350 per tonne in Khyber Pakhtunkhwa.

This wide gap has already reshaped cost dynamics across provinces.

As a result, cement producers in Khyber Pakhtunkhwa enjoy a structural cost advantage, enabling them to offer cement at PKR 25–30 per bag cheaper than Punjab-based manufacturers in key markets such as Lahore and Rawalpindi, intensifying competitive pressure within the industry.

Copyright Mettis Link News