Cement producers ‘unjust profiteering’

Cement producers ‘unjust profiteering’
Published: 22 August 2005

Pakistani cement producers are indulging in “unjust profiteering” by providing cement on high prices without having any considerable increase in the production cost, said the Ministry of Industries, Production and Special Initiatives in a presentation to the prime minister.  The ministry briefed the prime minister about the current prices of cement in different parts of the country. The ministry informed the prime minister at a recent meeting, that the actual cost of cement production is estimated to be around Rs 110 per bag and not beyond, while the retail price of the commodity is between Rs 290 and 310 per bag. The ministry has termed the provision of cement at the highest prices in history as “sheer injustice” of the cement manufacturers, said a government official.

The government, according to the official, wants the cement manufacturers to voluntarily reduce the cement prices. According to the calculations of the ministry of industries, there is, almost, no increase in the prices of raw materials used in cement manufacturing. The prime minister was also informed that no new taxes have been levied on the cement production. The official said that the government had allowed cement export as it was a persistent demand of the cement industry, for it was keen to capture the market in Afghanistan where the demand for cement has increased. About 10 percent of the cement production is being exported mainly to war-devastated Afghanistan and the rest is consumed inside the country. The official confirmed that most of the cement manufacturing industrial units are utilizing their full capacity of production.

The only reason the cement industry cites for the increase in the cement prices is the rate of inflation which witnessed an increase in almost double digits in the fiscal year 2004-05. The other issue, which cement industry points out, is the Central Excise Duty (CED) on cement, according to the official. However, with all the inflation and CED, the cost of cement production has been estimated at around Rs 110 per 50 kg bag. The increase in the cement prices has really disturbed the government as it has hit many mega development schemes which have been undertaken through the budgetary Public Sector Development Programme (PSDP). A number of contractors of the development projects have contacted the concerned authorities to revise the cost of projects upward following the increase in the cement prices.