Rebate on cement export to Kabul

Rebate on cement export to Kabul
Published: 25 August 2006

Pakistan is being pressurised by the United States for resumption of rebate on cement export to Afghanistan. The rebate was withdrawn by the federal government to stabilise prices in the local market a couple of months ago.  Sources in the federal government told Business Recorder on Thursday the US forces are planning to construct wall at some points along Durand Line to stop influx of al Qaeda terrorists from Pakistani-controlled tribal areas for which they need a huge quantity of cement. 
They said the US has conveyed its demand to the foreign affairs ministry, which consulted the public sector stakeholders concerned, adding the comments of the defence ministry have also been sought on the proposal, before placing it before the Economic Co-ordination Committee (ECC) of the Cabinet for formal approval.

The government had allowed Rs 1,250 per ton subsidy (US$20) on cement export, which includes Rs 750 central excise duty (CED), 15 percent general sales tax (GST) and Rs 25 per ton on packaging material. It was later withdrawn in the light of ECC decision to discourage export, they said. 
However, the cement export to Afghanistan is in full swing despite withdrawal of concessions by the government as figures touched to 190,000 tonnes in July, the sources added. 
"There is no let-up in cement export to Afghanistan and the export figures collected by the Central Board of Revenue (CBR) revealed that the manufacturers exported 190,000t of cement to Kabul during the first month of the current fiscal year," they maintained. 
Sources were of the view that when the cement manufacturers were fully engaged in export, it means they were still making reasonable profit despite withdrawal of concessions. They said the All Pakistan Cement Manufacturers Association (APCMA) had raised serious concern over the withdrawal of rebate a few months ago, arguing that Pakistan would lose its hard-won export market in Afghanistan to India or Central Asian Republics, but the current export trend negates their apprehensions. 
The average capacity utilisation of cement plants during the FY06 remained around 84 per cent due to the government pressure especially from March, but in July, it was recorded at 77.3 per cent, the sources added. 
At present, the import of cement is allowed at zero percent customs duty and withholding tax from all the countries, including India. The ECC, sources said, was also informed that the retail price of locally manufactured cement of different brands in major cities has dropped to Rs 265-300 per bag except Quetta where the rate is static at Rs 335. The international price (FOB) of cement is $38-44 per ton. 
The ministry has also submitted a month-wise price comparison to the ECC, according to which in January 2006, prices registered 15.6 percent increase against the same month last year, February 15.5 percent, March 27.5 percent, April 38 percent, May 22.9 percent, June 9 percent and July slightly above 4 percent. 
Sources said in May last, the APCMA was of the view that by September there would be a glut in the market, but it also proved unfounded as there is no such situation and the cement manufacturers are earning a reasonable profit.