The cement industry, despite being affected by the global economic crisis, has managed to boost exports to US$750m in fiscal year 2008-09.
“Being an irregular sector if compared with textile, the cement industry increased exports to US$750m,” a senior official at the Ministry of Industries told The News. “Though the industry has been given relief of INR200/t in central excise duty, it is to be fully passed on to end-consumers. This means the price of a cement bag will fall by INR10 from July 1.”
Before the budget relief, the cement industry was paying INR900 as central excise duty which has been reduced to INR700/t. Despite a cut in the Public Sector Development Programme to just INR219b owing to which domestic cement consumption has dropped sharply, the industry has performed well in foreign markets in these times of worldwide recession.
The official said the government has extended INR40bn to the textile industry as research and development support, but other sectors like cement, which has fared well, were given no further relief in duty drawback for exports. The official said that in 1997, the Nawaz government had provided duty drawback of INR24/t on exports but its impact has now become negligible keeping in view general sales tax on limestone, 30 per cent depreciation in currency and transportation charges to the port city of Karachi. Eighty-five per cent cement production is being done in northern parts of the country.
When contacted, All Pakistan Cement Manufacturers Association General Chairman (Retd) Rehmat said that land transportation cost and port handling charges stand at US$25/t and if the duty drawback facility is enhanced to INR120/t (US$1.5), exports will easily increase to US$1.5bn.
Rehmat said that the government collects INR30bn as revenue from the cement industry, but if the duty drawback of INR24/t is not increased then the cement industry may lose its foreign market.
To a question, he said that if the government edges up the duty drawback facility, the government will absorb a hit of INR1.2bn per annum through guaranteed INR29bn revenues in return. “Now the ball is in government’s court.”
To a question, he said that Pakistan has explored the markets of Afghanistan, Iraq, Sri Lanka, India and Sudan. He said more orders from Sri Lanka are on the cards in the next financial year as the Lankan government wants to build infrastructure which was destroyed in the civil war with Tamil Tigers. “Since the war is over, Pakistan’s cement industry will have more orders from Sri Lanka.” He said that if the government remains stuck to next years’ PSDP, then the cement consumption would also enhance manifold if kept in view the construction of Diamer Bhasha dam, Neelum-Jhelum hydropower project and many other national highways. To a question he said that cement production capacity has increased to 43Mt from 10Mt in 2003-04 with huge investment of INR200bn.