The Pakistan Economic Co-ordination Committee (ECC) of the Cabinet has rejected a proposal regarding ban on import of cement, saying that the decisions taken earlier in this regard would remain intact, official sources told Business Recorder here on Wednesday.
Sources said the Ministry of Industries and Production had suggested to the ECC that the previous decisions taken to stabilise cement prices through withdrawal of freight subsidy of Rs 60 per bag and restoration of rebate on cement export to Afghanistan.
"The government should withdraw freight subsidy on import of cement, however, this facility should remain intact on already opened L/Cs," the sources quoted the ministry as suggesting in its proposal. The Ministry of Finance had suggested that the government should have to choose one option as subsidies on both imports and exports cannot be in place at the same time, the sources quoted the Finance Ministry as saying.
The Ministry of Industries was of the view that it has considered all the circumstances, which include price situation in different parts of the country, capacity utilisation and the loss inflicted to the local industry due to subsidised import and recommended to the government that in order to protect the hard won cement export market, exemptions of Central Excise Duty (CED), GST, and duty-drawback on exported cement may be restored.
At present, the import of cement is allowed at zero customs duty and zero withholding tax from all countries, including India. A freight subsidy of Rs 60 per 50-kg bag of imported cement is also being given to the importers to stabilise cement prices in the country.
The government claims that cement prices have stabilised in the local market as a result of steps taken by the government which also include cement imported to the tune of 104,147t against the expected quantity of 217,891t for which L/Cs have been opened.
In the meantime, the installed capacity of cement plants has also increased as there are 27 cement plants in the country with an installed capacity of around 28Mta as against 25 plants of 21Mta installed capacity in April 2006.
The cement manufacturers are of the view that due to increase in plants, the capacity utilisation has reduced to 74 percent in July and August 2006 as compared to 84 percent during July and August 2005.
Sources said the production of cement plants will become 33Mt by the end of December 2006 per annum due to expected commissioning of two new plants and capacity expansion by some existing units. The ECC discussed the issue in detail and decided not to impose ban on import as part of its strategy to keep close eye on cement prices in the domestic market, the sources added.