Cement importers have stopped entering into fresh contracts with Pakistani suppliers as the weak rupee has turned imports unattractive.
No new contract has been finalised in the last 15 days and importers say they do not plan to enter a contract unless situation changes. These importers are also demanding a price reduction from the suppliers.
Most of these importers have valid letters of credit (LC) to import but they have asked Pakistani suppliers to halt shipments. It is only the actual users who are importing in small quantities.
“No Punjab-based importer has placed an order in the last two weeks. We cannot import at these prices. The sharp depreciation of the Indian rupee has rendered cement import unattractive. On our insistence the companies have cut down the prices by US$2 to US$68/tbut import would be feasible only if price comes down to US$60,” said Anudeep Singh Madan, president of the Cement Importers Association. Madan, who is also an importer, has a valid LC to import 4000t but has decided to halt imports.
The Indian rupee has appreciated by about 18 per cent since May this year. Pakistani companies are selling cement to Punjab-based importers at a price of US$68/t (c&f-Wagah). In rupee term, the cost to the Indian importer has increased from INR2765 a tonne in early May to INR3270 now, on account of the 18 per cent weakening of the rupee.
After taking into account the cost of rail transportation from Wagah to Amritsar and local transportation, the imported cement is delivered to retail buyers at INR220 per 50kg bag while the Indian cement is available at INR225 per 50 kg bag. Earlier there was a price gap of INR20-25 a bag between imported cement and domestically manufactured cement.
Authorised Indian representatives of Pakistani companies in India confirmed that no business is taking place and import would happen only when prices get reworked.
In April 2007, the Indian government had scrapped the 16 per cent countervailing duty on cement imports to facilitate imports and augment availability as a part of its inflation control measures.
It also withdrew the four per cent special additional customs duty. In January 2007, it announced zero duty on cement imports. All these measures have rendered cement imports duty free. The Bureau of Indian Standards (BIS) has granted quality licences to 22 Pakistani companies after the Indian government relaxed cement import norms in 2007.