The Federal Constitutional Court has questioned the Punjab government’s decision to link royalty payments on raw materials to cement prices, in a case that could bring relief to some of the country’s largest cement manufacturers.

A three-member bench led by Justice Syed Hassan Azhar Rizvi raised concerns during the hearing of petitions against the revised royalty structure on limestone and argillaceous clay, the key minerals used in cement production.

The court observed that royalty should be charged on minerals extracted from mines, not on the value of the finished cement sold in the market. Justice Hassan noted that the current mechanism, which calculates royalty at 6 percent of the ex-factory cement price, appeared at first glance to resemble a tax on the end product rather than a royalty on mineral extraction.

The bench also sought details from the Punjab government on how the revised levy could affect cement prices. Justice Rozi Khan remarked that any increase in royalty burden would likely be passed on to consumers through higher cement rates.

The dispute arose after the Punjab government replaced a fixed royalty system with a variable formula tied to cement prices. Punjab-based cement producers challenged the move, arguing that the provincial government is only authorized to impose royalty on minerals taken out of mines, not on cement sales.

Industry estimates suggest the revised formula raises royalty costs to around Rs. 1,350 to Rs. 1,400 per tonne, compared to roughly Rs. 350 per tonne under the system followed in Khyber Pakhtunkhwa. Analysts say this gap has created a major cost disadvantage for manufacturers operating in Punjab.

The case is being closely watched by leading cement companies with a strong presence in the province, including Maple Leaf Cement, Fauji Cement, Pioneer Cement, DG Khan Cement, and Bestway Cement. Market participants see the court’s remarks as potentially favorable for firms with significant Punjab exposure, especially Pioneer Cement, Fauji Cement, and Maple Leaf Cement.

The hearing was adjourned after the Punjab government’s counsel asked for more time to obtain fresh instructions. The court’s final ruling is expected to have wider implications for cement production costs, retail prices, and competitive dynamics in Pakistan’s 79 million-ton cement industry.