KPK proposes hike in cement royalty

March 26, 2025 (MLN):The Khyber Pakhtunkhwa (KPK) government is moving forward with a proposal to increase the royalty on cement by replacing the current ore-based structure with a 6% royalty on the ex-factory price.

This proposed hike will significantly raise the cost burden on cement manufacturers in the province, as the royalty per bag will increase from Rs12.5 to Rs78, according to a report by Arif Habib Limited. 

The move follows a similar 6% royalty imposed by the Punjab government in August 2024, though cement manufacturers in Punjab have since obtained a stay order against the decision.

KPK is home to major cement producers, including Lucky Cement (LUCK) with an installed capacity of 10.3 million tons per annum, Bestway Cement (BWCL) at 6.6 million tons, Kohat Cement (KOHC) at 5.0 million tons, Cherat Cement (CHCC) at 4.5 million tons, Fauji Cement (FCCL) at 3.7 million tons, and DG Khan Cement (DCL) at 1.1 million tons.

Industry analysts are of the view that to fully offset the impact of the increased royalty, cement manufacturers would need to raise cement prices by approximately Rs66 per bag.

Recently, cement manufacturers in the North region already raised prices by around Rs 60/bag to Rs1,380/bag.

The proposed change is expected to dent the earnings of major cement producers, with estimated per-share impacts of LUCK (Rs 14.0), BWCL (Rs 4.4), KOHC (Rs 10.2), CHCC (Rs 9.3), FCCL (Rs 0.6), and DCL (Rs 0.9), the report added. 

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