Cement manufacturers asked to cut prices

Cement manufacturers asked to cut prices
Published: 21 February 2007

The federal government on Tuesday warned the cement manufacturers that if they did not reduce prices within one week, they would have to face the music.

The cement price issue was discussed in a meeting between the federal government officials and cement industry tycoons here, but it apparently failed to yield any positive results.

The meeting was attended by the chairman All Pakistan Cement Manufacturers Association, All Pakistan Contractors Association, Association of Builders and Developers and government high-ups.

“The existing prices of cement around Rs260 per bag are unjustified and if the prices do not come down, the government can impose ban on its export or may withdraw rebate on export or resume import subsidy,” Federal Minister for Industries, Jahangir Khan Tareen said while talking to reporters after the meeting with cement industry stakeholders.

The minister said the government would review the cement prices in one week and if they remained in the existing range of Rs260 per bag, then a summary would be tabled before the Economic Coordination Committee (ECC) in its next meeting for taking action to control the spike in prices.

When the minister was asked how much the price of Rs260 per bag was higher than the government’s estimates, he was reluctant to reply directly and only said he did not want to give any figure as the prices were determined by market forces on the basis of demand and supply.

However, the sources said the government had asked the APCMA to reduce its prices to the level of Rs210 to Rs220 per bag, otherwise the government would take stern action against them.

At present, the government is providing Rs25 per ton rebate on the export of cement. The influential cement manufacturers are also enjoying exemption from Rs725 per ton central excise duty (CED) and 15 per cent general sales tax.

The government is facing a difficult situation in the case of cement prices as all decisions will have some kind of negative impact and it will have to take a hit one way or the other.

Sources said if duty-free import was allowed into the country, it would not serve the purpose, as its cost would reach Rs280 per bag. Earlier, the government had provided subsidy of Rs60 per bag on imports. If the government decides to grant a subsidy again, it will have to give money from the national kitty. If the government slapped ban on cement exports, it could hurt the country’s export share in its existing market, added the sources.

The government had agreed with cement importers that the subsidy amount would be provided to those who had opened L/Cs before the abolition of the scheme. There were L/Cs for the import of 217,000 tons of cement which were opened before the scrapping of the scheme, out of which 104,000 tons have been imported so far.

There is also controversy over utilisation of capacity by the cement manufacturers. The government estimates showed that the utilised capacity stood at 71pc in January and the APCMA claimed it was more than 77pc.

According to the APCMA data, there are a total of 28 units in the cement sector with annual installed capacity of 33 million tons.