Pakistan price increase

Pakistan price increase
Published: 07 March 2005

Cement companies have increased their per bag prices by Rs5 following increase in transportation charges by Rs2 per bag to Rs3 per bag due to recent surge in diesel prices, sources in the industry say. Two leading cement companies of southern region, Falcon Cement and Pakland Cement, have revised their prices upward, and other companies are expected to follow with similar price raise within next few days.

The cement cartel came under pressure on Tuesday, when marketing committee of Pakistan Cement Manufacturers Association (PCMA) held a meeting to resolve the issue related to unregistered companies and self-assessment of prices by some of the association members. The committee managed to resolve the issue, which could have led to a price war between cement companies, as witnessed in mid-1990s.

“It was a crucial issue for the member companies,” said a source in a leading company, who requested anonymity. “Especially for those companies who follow the prices set by the association.” The unregistered companies, mostly working in southern region, could disturb the prices in the entire country and hurt the companies, which are selling cement at prices set by the association. He said the association is bound to provide a level-playing field for all the members in order to prevent price and distribution war, as has been witnessed in recent past.

The Central Board of Revenue (CBR) in its report regarding the cement cartel has said the industry has failed to pass on the benefit of 25 per cent cut in excise duty and switch over to cheaper coal-based fire system to the end consumer. It said cement manufacturers have always insisted that taxes are too heavy to operate on profitable basis. The CBR report said that the prevailing high prices are even more disturbing in view of the fact that most of the cement plants have converted to coal, a cheaper heating fuel than furnace oil, thereby reducing the cost of production. “Thus, the continuation of higher than market-clearing price is viewed by consumers as excessive profitability of the cement makers that requires corrective measures,” it said.