Prices of rod and cement in the local market have gone up over the last few days as a result of imposition of additional tax and the latest hike in gas price.
Since July 1 (the first day of new fiscal year 2019-20), the retail price of rod has increased by Tk4,000 per tonne, while per bag of 50kg-cement has seen a price increase of Tk50.
Market insiders think that prices of two the principle construction materials may soar more. Analysts think that this price hike will impact the entire infrastructure sector badly. The total demand for rod and cement in the country is now fulfilled locally. Usually, November is the peak season for building construction in Bangladesh. As a result, the prices of construction materials becomes slightly high. But this year the prices have gone up five months before the peak season. Nobody knows where the prices will stand eventually.
According to the steel manufacturers, the sector would need an additional Tk 3,000 crore due to the imposition of a 5 percent advance tax on raw materials at the import stage. The government imposed VAT on MS products at the rate of Tk 1,200 per tonne on those made from imported/locally re-rollable scrap and Tk 1,000 on those from billet or ingot. The rate will be Tk 1,000 on billet and ingot made from imported/locally collected meltable scrap. The MS products made from meltable scrap and billet at the retail will carry VAT of Tk 2,000.
At present manufacturers pay Tk 1,400 in VAT for every tonne of MS rod and those at retail level Tk 200. As a result, industry insiders said, the overall cost will go up by Tk 7,650 per MT while they will have to pay another Tk 4,650 as advance income tax (AIT) at different stages against the existing Tk 1,950. According to Bangladesh Steel Manufacturers' Association (BSMA) and Bangladesh Cement Manufacturers Association (BCMA), new tax and gas price hike have worsened the situation.
Meanwhile, on Wednesday, per tonne of 60 grade rod was selling at Tk65,000 and 40 grade rod was selling at Tk57,000 at the mill gate area. President of Bangladesh Steel Manufacturers' Association (BSMA) and Managing Director of Anwar Group Monowar Hossain told media that for the last couple of days they did not get the new VAT chalan book, and as a result, many mills stopped sale at the mill gate.
Moreover, many companies don’t understand the new VAT policy, which is going to impact their sale too. “Yes, we’ve heard that the rod price is increasing. But we’ve no idea about the price. Steel mill gate is not selling rod to us as the price is not stable. And we are facing trouble with our customers,” said, Md Jahir, proprietor of M/S Pragati steel mills at Uttara, Dhaka.
Md Alamgir Kabir, president of Bangladesh Cement Manufacturers Association (BCMA), said that the government would not adjust the 5 percent advance tax and 3 percent source tax. These additional taxes have increased the production cost of a 50-kg bag of cement by Tk 42. On top of that, an additional 5 percent VAT has been imposed on retail sales, he said, adding this will push up the price further.
Moreover, the energy cost has risen following the latest hike in gas price. As the cement factories use captive power alongside electricity, the gas price increase will cause the production cost to go up by Tk70 per tonne. Overall, the price of per bag of cement will increase by Tk53 when compared to the current price. And, the companies have started push up the price.
The real estate businessmen think that the overall cost of building construction will rise as a result of the surge in prices of rod and cement, which will affect the whole industry badly. They said the price hike for the most important material for the construction industry comes at a time when the real estate sector has just started to look up after years of downturn.