Pakistan's cement industry, having an installed
production capacity of 18 million tons, has running at unprecedented 80
percent of the capacity obviously because of ever increasing demand both
in the domestic as well as in the export market.
The enhanced industrial activity in the cement sector
is the outcome of various factors including good economic decisions,
which enhanced the demand in the local market, which was supplemented by
financial incentives announced in the recent budget 2003-04.
Resultantly, the cement sector has enhanced its
production quota to 79 per cent from 72 per cent. This was the second
quota increase within a period of one month as the cut in excise duty
plus growing demand has obviously encouraged the cement manufacturers to
increase their production.
It is the second time that the production quota has
been increased after the federal budget for 2003-04 announced on June 7.
Prior to the budget the production capacity was being utilized at 60 per
cent which was pushed up to 72 per cent and now the industry is running
at 79 per cent of its capacity which is unprecedented in recent past.
Once the pace of development picks up in the country,
it would generate economic activity in 80 sub-sectors allied to the
In the budget for 2003-04, a duty cut of 25 per cent
was permitted to the cement sector which would ultimately pass on to the
consumers with effect from July 1, 2003. Besides 25 per cent cut in
government levy, the cost of production has also come down significantly
as a result of its switching over from oil and gas based system to the
much cheaper fuel of coal which has also provide cost effective and
reduced the input cost of this important sector.
Another important factor which helped increase in
production capacity was the growing demand of the cement both in the
private as well as in the public sector as the government has also
announced a 30 per cent increase in Public Sector Development Projects
which include construction of highways and above all the construction
activity at Gwadar where country's third deep sea port is under way at a
high pace under the technical and financial assistance of friendly
country, China. While the demand of cement in Afghanistan where
re-construction activity was also taking place, the industry was already
engaged in export business to that country.
The cement units both in the public and the private
sector have a production capacity of 18 million tons a year out of which
the industry has reached an unprecedented level of production capacity
that is estimated at 14.2 million tons.
Three years back, the cement industry had reached at
the brink of total collapse due to crippled state of the economy. Many
of the units had laid off a large number of their work force due almost
a standstill of the construction industry in Pakistan. That period now
seems like a nightmare when the industry was running even 50 per cent
below of its installed capacity and hardly producing even less than 10
million tons of cement throughout the country. The economics of this
sector was not feasible due to exorbitant furnace oil prices at one hand
and low demand of the production.
On the financial side, the State Bank of Pakistan has
allowed the commercial banks and other financial institution for
extending housing finance at easy terms. The accelerated activity in the
banking sector in housing finance is reflected in the fact the House
Building Finance Corporation (HBFC) has raised its house financing limit
to the unprecedented level of Rs5 million while commercial banks are
offering up to Rs20 million which was never expected in the housing
finance schemes in Pakistan.
Although the finances have been made available, how
ever the financing area still needs some correction especially by
eliminating the complexities of the system keep away the people of
middle and low income groups from this facility.
Easy access to housing finance at an affordable mark
up rate is of vital importance for providing low cost housing facility
to the common man. It may be mentioned that due to non availability of
low cost housing facilities in Pakistan and the trend of Katchi abadis
is growing at much faster rate in the urban areas of the country. It may
be mentioned that in Karachi number of Katchi abadis is more than 500
which are become a major source of disrupting the uninterrupted supplies
of water, electricity and construction of roads even in this
metropolitan city of Karachi.
The decision to allow house building loan to the
government employees on much soft terms is another attraction for the
cement industry to enhance its production to meet the growing demand in
If the national economy which has arrived at a take
off point goes on accordingly and Pakistan gets its share in the
reconstruction of Afghanistan and Iraq, the existing production capacity
i.e. 18 million tons may not be sufficient to meet the future demand
hence this sector may attract more investment in near future.