Inflation key factor for price hike in construction sector, NA told

ISLAMABAD: Unprecedented increase in the cost of steel scrap globally, steep rise in freight charges and devaluation of the Pakistani rupee were the reasons for increase in prices of steel used in the construction sector.

This was pointed out by representatives of the Ministry of Industries and Production in the National Assembly (NA) session. “Rise in cost of gas, electricity and fuel are also key factors responsible for increase in the cost of construction in Pakistan,” a written reply by ministry officials stated.

The ministry responded to a question by Member of National Assembly (MNA) Shazia Marri, who shared her concern over the fact that prices of various materials used in the construction sector had multiplied over the last few years.

The price of steel scrap increased from $300 per tonne to $560 per tonne. The price of gas increased by 200pc, power by 70 to 80pc, as the Pakistani rupee devalued by 42pc and cargo charges rose by 100pc, the ministry stated in its defence.

Continuous spiralling of scrap metals in the international market was translated into surge in the rates of steel in the domestic market, he said.

“Scrap prices are on the bullish trend owing to a pickup in demand after the economies began to operate in full swing in keeping with the easing of coronavirus restrictions, driving up the price of scrap steel in the global market,” the written response stated.

Compared to 2017-18 when annual average prices of steel was Rs80,612 excluding general sales tax (GST), its average cost in 2021-22 was Rs147,382, excluding the GST.

Similarly, the ministry argued that 25 cement manufacturing companies in the country operated independently, and did not come under the control of the government. The reasons of increase in cement prices, as conveyed by the All Pakistan Cement Manufacturers Association (APCMA) were significant increase in prices of coal, exchange rate impact of the imported inputs, increase in transportation costs due to increase in prices of petroleum products/diesel and significant jump in ocean freight from South Africa and Indonesia to mention a couple.

APCMA also cited rise in the cost of electricity in terms of fuel price adjustments and increase in tax rates.