Tax for cement producers reduced by 4 times; state budget losing again billions in revenue

Cement became cheaper throughout 2023

Economist Otabek Bakirov said that the argument of Uzsanoatqurilishmateriallari association that the price of cement has increased due to tax increase is not true. 

The Uzsanoatqurilishmateriallari association’s argument, which claims that high taxes have led to an increase in the price of cement, is so weak and fragile that I have doubts about the awareness of the association, which considers itself a ministry, about cement prices. 

So, the average exchange prices for cement are: 

• December 9, 2022: 601 thousand soums per ton;

• December 11, 2023: 571.4 thousand soums per ton;

• January 9, 2023: 605.5 thousand soums per ton;

• January 9, 2024: 550.4 thousand soums per ton. 

Similarly, you can compare the price dynamics of the corresponding periods of 2023 and the corresponding periods of 2022. Prices have had a clear downward trend throughout 2023 (and the last 6 years). That is, it is a lie that cement has become more expensive because of high taxes on cement producers,” Otabek Bakirov wrote. 

According to the economist, the defense argument that if cement becomes cheaper, housing and construction will become cheaper, does not describe the real situation. 

“In January 2023, cement prices are cheaper than in January 2018. But house prices have doubled in dollars in Tashkent and in the regions. Where is the connection? I won’t talk about bridges and roads on state orders,” Bakirov said. 

Who owns the big cement plants? 

According to the information of the Uzsanoatqurilishmateriallari association, there are a total of 37 enterprises specializing in the production of cement in Uzbekistan, and their annual capacity is 32.7 million tons. There are 14 enterprises with a capacity of 1 million or more. 

Kizilkumsement JSC 

It has the capacity to produce 5.7 million tons of cement per year. 68.2% of the plant belongs to the offshore company United Cement Group registered in Cyprus, and 31.8% to Kizilkumsement itself. 

China Energy International Group Samarkand Cement LLC 

Annual capacity – 3 million tons. 100 percent share belongs to China Energy International Group. 

Tashkent Konch Cement LLC 

Annual capacity – 2.5 million tons. Conch International Holdings owns 65%, and Xin Lei LLC owns 35%. 

Also, the following are major cement producing enterprises: 

• Akhangaransement JSC, annual capacity – 2.4 million tons. The plant belongs to Akkermann Cement CA, which is related to Alisher Usmanov;

• Fergana Yasin Construction Goods LLC, annual capacity – 2 million tons. 90% of the plant belongs to Shanxi Xiangsheng, 10% to Great Amirkhan Oil;

• Qoraqalpoqsement LLC, annual capacity – 1.8 million tons;

• Huaxin cement jizzakh LLC, annual capacity – 1.66 million tons. The sole founder is Huaxin Central Asia Investment;

• Bekobodsement, annual capacity – 1.6 million tons. It belongs to the above-mentioned United Cement Group. This company also owns Kuvasoysement (capacity – 1.08 million tons). 

Tax reduction is a big loss to the budget 

As a result of the 4-fold reduction of taxes for cement plants, the receipts to the state budget will decrease by several 100 billion soums. This kind of practice to increase production capacity has happened before, but it did not work. 

In particular, in 2022, taxes on natural wealth were significantly reduced in Uzbekistan. For private companies, the tax rate for natural gas was reduced by 3 times, and for oil and gas condensate by 2 times. It was said that the purpose of this is to encourage private companies to make investments. 

In practice, in 2022, the users of the underground will pay about 2 trillion soums or 12% less taxes than a year ago, gas production will decrease by 4%, and gas condensate production will decrease by 3%. 

This trend continued in 2023. In particular, the volume of gas production in 11 months was 42.75 billion cubic meters and decreased by 9.6 percent or 4.56 billion cubic meters compared to the same period of 2022. Also, oil production decreased by 1.7%, gas condensate production decreased by 7%.