Cement manufacturers in Pakistan are currently grappling with royalty-related challenges, particularly in Punjab, where many production facilities are located. In this context, “royalty” refers to the fee paid by cement producers to provincial governments for extracting raw materials—such as limestone—from state-owned land.
According to Topline Pakistan Research, the Lahore High Court recently issued a ruling that enforces a six per cent royalty on cement producers in Punjab. This decision stems from a long-standing legal dispute over the rate and method of calculation. The court’s larger bench announced on 16 June that producers must pay royalty fees amounting to six per cent of the retention price – a figure net of sales tax and excise duty. While speculation remains that companies may appeal to the Supreme Court, no final decision has been announced.
In contrast, the neighbouring province of Khyber Pakhtunkhwa (KPK) has maintained a fixed royalty rate of PKR350/t, offering a significant cost advantage. Manufacturers such as Kohat Cement Company (KOHC), Cherat Cement Company (CHCC), Lucky Cement (LUCK), Fauji Cement Company Limited (FCCL), and Bestway Cement Limited (BWCL) benefit from this lower rate. The KPK government has proposed increasing the royalty from PKR250-350/t in its recent budget—a move that, while modest, still keeps costs well below Punjab’s six per cent levy. This creates a cost disparity of approximately PKR1000/t.
According to IMS Research, KPK-based cement producers have already met with the province’s Chief Minister and agreed to the proposed increase, effective FY26. If approved, KPK manufacturers are expected to retain their competitive advantage and continue to achieve relatively stronger profitability. The proposed change is not expected to materially impact their cost structure.
