Cement price dispute rages in Pakistan

Cement price dispute rages in Pakistan
14 April 2016

The Pakistan cement industry and the Association of Builders and Developers of Pakistan (ABAD) are loggerheads with each other on the price of cement price. Both players are advocating their point of views and are appealing to the government to safeguard their industries, and the current and future investment in their respective sectors.

While defending, Chairman of All Pakistan Cement Manufacturers Association (APCMA), Mohammad Ali Tabba, said in a statement that the cost of doing business is very high in Pakistan. "Gas prices declined internationally but here in Pakistan industry is not getting relief. Gas prices for domestic consumers and fertiliser industry were lowered by the government but the other industries are still paying heavily as compared to them," said Mr Tabba.

The drop in coal prices has fuelled further calls to decrease the price of cement accordingly. The coal price was US$80/t in 2013-14 but has now fallen to US$57t. However, this is only part of cement production costs, while many other cost factors have been increased in recent years, said Mr Tabba. He highlighted that the gas infrastructure development cess (GIDC) was imposed last year, industrial tax is now five per cent and was four per cent two years back, while a one-time supertax was imposed and duty on coal import increased from one to six per cent.

"This all increased the minimum retail price of cement bags," said Mr Tabba adding that these taxes have also increased the cost of doing business in Pakistan. The State Bank of Pakistan should have considered all these taxes and duties before commenting on the cement industry in its latest report, he added. "Yet, the fact remains that cement prices decreased in last two to three years," he said.

He said profit-making is not a bad thing. "The cement industry has been accused of profiteering, but the critics forget that businesses have to make money for their shareholders and they also support the national economy by paying taxes and duties. This is being posed as a bad thing. This should not be the case," he added.

As opposed to common belief, the prices of cement bags went down in past few years. The comparison of average maximum retail price per bag in 2013 against 2016 clearly shows reduction in prices.

"The government needs to cut down the duties and taxes on raw material and cement to make it cheaper as these duties and taxes are around one fifth of the total cost of a cement bag," he said.

Earlier, the Association of Builders and Developers of Pakistan (ABAD) in an appeal to Prime Minister of Pakistan, Mian Muhammad Nawaz Sharif, finance minister, Ishaq Dar, and Advisor to Prime Minister, Haroon Akhtar has drawn their attention and accused that the inflammatory price of cement is damaging the construction industry.

They pointed out that exorbitant cement prices brought construction at halt. They requested government to take necessary steps to reduce prices of cement or allow construction industry to import cement. 

They argued their case by pointing out that coal prices reduced from US$140 to US$52, crude oil prices reduced from US$118 to US$39, cement prices in international market are almost half that of in Pakistan, and while production and transportation costs fell, there was no reduction in cement prices are seen in Pakistan.

They further pointed out that fuel price difference is not being passed on to the construction sector and no action is taken by regulatory authorities. Under these circumstances, how could builders deliver ‘ Affordable and Low Cost Houses’ in the country? The government should rationalise rates of construction materials to achieve the goal, they asserted.

Published under Cement News