KPK Cement Royalty Hike Proposed to Match Punjab
Staff Report:
In a major development, the royalty on cement in Khyber Pakhtunkhwa (KPK) is set to shift from an ore-based calculation to a bag-based one, with a minimum rate of 6% of the ex-factory sale value—similar to Punjab.
Previously, the royalty on limestone and argillaceous clay used in cement production was fixed at Rs 250 per ton for KPK-based plants. If the new system is implemented, manufacturers in KPK will face a significant increase, with costs rising by Rs 1,100-1,200 per ton based on current ex-factory prices. This aligns with the rates imposed on Punjab-based cement producers.cement aquarium
The KPK Mines & Minerals Department has called a meeting of cement manufacturers today, March 24, 2025, at 11:30 AM, to discuss shifting the royalty calculation to a bag-based system.
Punjab had implemented a 6% ex-factory royalty on July 1, 2024. However, Punjab-based manufacturers obtained a court stay order against the move, with the condition of furnishing bank guarantees. KPK manufacturers may adopt a similar approach but are likely to account for this increased cost, treating it as a non-cash expense until the matter is resolved.
Notably, many KPK manufacturers sell a portion of their cement in Punjab, previously benefiting from lower raw material costs. Currently, Punjab-based cement producers incur approximately Rs 1,500 per ton higher raw material costs compared to their KPK counterparts.
In an August 16, 2024 note, we highlighted that the high royalty disparity might not last long, as provincial authorities could either increase rates in KPK or reduce them in Punjab to balance costs.
If KPK enforces the bag-based royalty, affected companies would include Lucky Cement (North Plant), Kohat Cement, Bestway Cement, Cherat Cement, Fauji Cement, and Dewan Cement.
