Despite a substantial cut of 25 per cent in the
central excise duty on cement announced by the government in the
recently announced federal budget for 2003-04, the cement
manufacturers are reluctant to pass on the benefits to the end users.
Instead of bringing down the cement prices, the
cement manufacturers in the private sector have formed a cartel to
resist the decline in the prices. They are restricting the capacity
utilization of the cement manufacturing units so that the limited
supply could be used to retain the prices at a certain level.
The cement manufacturers while denying the charges
of not passing on the benefit of duty reduction on the cement have
said that there is a price mechanism through which the duty cut has
already been passed on the consumers. However, contrary to their
claim, the cement prices in the market are still at the pre-budget
level and no sign of reduction is found anywhere in the market.
The cement manufacturers also maintain that they
have suffered heavily during the days of economic crisis in the
country and the banks were still charging the financial charges at the
previous rates of the mark up. Although the lending rates of the
commercial banks have steeply come down, but the cement industry
except the NDFC loans, servicing their debt on the old rates.
The construction industry, however, has described
the reasons of the cement manufacturing units as the lame excuses. The
construction industry feels that the trade conduct of the cement
industry was contrary to the government policies of economic revival
in the country.
This highly unfair trade tactics on the part of the
cement manufacturers but it is also a failure of the government
organization responsible for controlling prices of various commodities
in the country.
Commenting on the situation, Hafeezur Rehman Butt,
Chairman Association of Builders and Developers (ABAD) said that apart
from incentives announced by the government in the budget, the cement
industry has been enabled to reduce cost of production to a great
extent with the shift of the cement industry from gas or oil to
Despite all these incentives offered by the
government as a part of its policy to give a spark to the economic
activity at a massive scale by activating the construction sector,
however the attitude of the cement manufacturers may prove counter
productive to all these efforts.
The cement producers are reluctant to reduce the
cement prices, which constitute the principle ingredient of the
In a representation to the Ministry of Production
as well as the Ministry of Commerce, ABAD has strongly recommended
that if the cement industry fails to bring down the prices despite all
incentives, the government should allow the private sector or to the
public sector organization to import cement which would help creating
a healthy trade competition in the country. ABAD chairman declined to
name the country for importing the cement as certain quarters are
suggesting to import cement from India where the cost of cement is
much below as compared to Pakistan. Hafeezur Rehman Butt, however,
said that cement might be imported from the countries wherever it is
available at a cheaper price.
The Monopoly Control Authority (MCA) has, however,
initiated an inquiry against the alleged formation of a cartel by the
cement manufacturing units to maintain cement prices at their will.
ABAD while welcoming the initiative of the MCA has
demanded of the government that representatives of ABAD should also be
included in the inquiry committee so that meaningful results could be
produced of the investigations. ABAD chairman said that MCA had
conducted inquiries against alleged formation of cartel of the cement
manufacturers but the findings of the investigations never made public
or it shelved the investigations. There is a need of transparency into
the investigations to avoid recurrence of such events in future also
in the best interest of the country and the economy.
According to a spokesman of a leading cement
manufacturing unit, currently, the cement industry is running at 62
per cent of the capacity utilization and in view of the growth in the
demand for cement, the industry may enhanced its capacity utilization
at 66 per cent in near future.
Regarding the reports about tremendous demand for
cement in Afghanistan, he said some reports have exaggerated regarding
demand for cement in Afghanistan. In fact, one can imagine that how in
the face of persistent disturbed conditions, how any sort of trade can
grow in the disturbed conditions. There is of course demand for cement
in that country but not to that level being publicized in the country.
Whatsoever the demand in Afghanistan is, the cement units located in
the northern part of the country meet it. However, due to public
sector development projects plus increased activity in the private
sector within the country, the demand for cement is growing and the
industry is fully alive to the situation and increasing its capacity
utilization in accordance to the demand in the market.