Inquiry against cement-makers shelved, Pakistan

Inquiry against cement-makers shelved, Pakistan
Published: 29 August 2008

The Ministry of Industries and Production has shelved an inquiry against cement manufacturers with the argument that prevalent cement prices are justified, well-placed sources told Business Recorder here on Thursday. Earlier, the ministry had confirmed that the per bag price calculated by its cost accountant showed a difference of Rs 55 per bag from the price submitted by the All Pakistan Cement Manufacturers Association (APCMA).
 
The shelving of the inquiry has, therefore, raised several questions as to who was behind this development. "It’’s a victory of the cement manufacturers who have succeeded in establishing that current prices are justified," said one of the officials familiar with this development. The Competition Commission of Pakistan (CCP), which was investigating the price differential noted by the Cost Accountant was also being pressurised to close down the files.
 
When contacted, Industries and Production Secretary Shahab Khawaja told this scribe that price of coal, which is major input in cement manufacturing, had increased from $76 last year to $200 per ton. When asked why the recent lower coal prices did not have a commensurate impact on the cement prices, he explained that the rupee has devalued at a faster rate.
 
He also said that two teams, one comprising representatives from the ministries of the Industries and another from the Finance spent two days on calculating the cost of cement - which indicate that the present price of cement is defensible. "The finance minister has agreed with these cost calculations of the ministries of the Industries and the Finance which are almost the same," Khawaja added.
 
He dispelled the impression that cement manufacturers were overcharging the consumers. A spokesman for the APCMA said in a statement that representatives of cement industry are regularly in touch with the ministry of industries and that there are no misconceptions in the government regarding the industry.
 
There is no difference of opinion between the government and manufacturers: both believe that the unprecedented increase in the price of coal in international markets (which is more than $200 per ton) has contributed towards the increase in cost of manufacturing cement.
 
At this rate, the cost of coal alone to manufacture one bag of cement is more than Rs 150. The total government taxation is Rs 96 on one bag of cement. In addition to this the cost of electricity (which is acknowledged in the report published) has increased by more than 20 percent in the last few months and cost of transportation has gone up by 30 percent in the last three month in accordance with the increase in the price of diesel. All these factors are impacting on the cost of manufacturing cement.
 
The Industries secretary was of the view that country’’s cement industry is the most taxed industry in the world and this has been conveyed to the finance minister. "Our cement industry is the only industry which is vibrant, expanding and showing growth in exports," he added.