CEMENT PRICES DOUBLED IN SIX MONTHS

EXPORT UP 181 PERCENT

AMANULLAH BASHAR
July 21 - 27, 2008

The cement prices did not lag behind the flood of price hike currently hitting the economy and got doubled within a short span of six months from Rs220 to current price level of Rs400 a bag at retail stage.

Though the cement price hike has adversely affected the domestic construction industry which has started raising hue and cry which seems valid in a way that the entire input used in cement manufacturing is indigenous which is available at a damn cheap price, yet the producers taking advantage of the situation of the booming export market.

The Association of Builders & Developers (ABAD) has taken a serious note of what they described as illegal and unethical increase in cement prices by the producers has demanded of the government to put a total ban on exports and allow free import of cement to give a strong and stern retort to the cartel of cement producers who are out to take undue advantage of the disturbed economic situation by increasing the cement prices at their will.

Hafeezur Rehman Butt, former Chairman of ABAD accompanied by Saleem Zaki, Vice Chairman ABAD and other senior members of the executive committee have lashed out at the free for all attitude of the cement producers and strongly called for corrective measures by the price control authorities and the people at the helm of affairs to make people realize that government is very much alive to the situation and no body would be allowed to take advantage of the situation.

In fact the primary reason for increase in cement prices is the unchecked and free export of cement at the cost of the development process within the country. They also pin pointed that during the recent budget the government had increased the GST by one percent from 15 to 16 percent while rate of FED was enhanced from Rs750 percent ton to Rs900 per ton. The impact of increase in levies should not go beyond Rs10 to Rs15 per bag but within 30 days after the budget the cement producers increased at least Rs100 per bag which shows their greed without considering the national interest and development.

Hafeez Butt said obviously if the government did not take any notice on the uncalled for and unreasonable price increase of cement which is manufactured purely with indigenous or local raw material and element of imported raw material does not involve in cement production hence the producers have no excuse to mint money both from domestic market as well as by exporting the national commodity of cement.

Butt pleaded that construction industry is the second largest after textile industry which is creating enormous job opportunities besides providing shelter to the people and lending a strong hand in the development process of the country.

Currently, due to exorbitant increase in cost of production many industries including the leading economic player textiles either are stagnant or have closed down. Since the increase would enhance the cost of construction the builders would have no option either to pass on the increase to the customers or stop their business. In fact the construction industry should not been seen in isolation as more than 72 allied industries would also be adversely affected due to inactive construction industry.

It is worth mentioning that the construction companies and real estate developers in neighboring Dubai were given such an importance by Dubai government that the cement import was exempted from taxes to keep the development process uninterrupted due to increase in cement prices.

Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, had immediately come to rescue to construction industry and decided to exempt imports of cement and steel from customs duty that was a big relief for construction industry in Dubai and UAE.

Contractors had pointed out that the prices of steel and cement was raised by up to 30 per cent in the past one year and the decision to exempt from import duty and taxes helped curb the trend.

Nakheel CEO Chris O'Donnell said, "The exemption from customs duty on construction materials will help stabilize the real estate market and allow developers to look beyond the local market for construction materials. This could open up a number of options and help minimize delays due to the shortage of materials."

According to an official statement from Emaar, "The waiver of customs duty on cement and steel by Shaikh Mohammed comes at the most opportune time, when contractors and consultants are reeling under the rising costs of raw materials. Welcoming the move, real estate agents also said it would not bring down rents in Dubai and other emirates.

Ashish Kumar of the Dubai-based Key2own Properties said, "This is a welcome move. But this will not have much effect when it comes to rent. Everyone, from the property dealers to the real estate agents, wants to get a return in double digits," he said.

Ganesh Balaji of the Al Hateef Real Estate Company pointed out that the move might reduce the rents to some extent. "Yes, the rents could see a drop. come down. This will ensure that the rents do not go up. But then one has to wait and see," he opined. Dileep Kumar, owner of Abdullah Al Abdooli Contracting Company, said the decision to waive the 4 per cent customs fee would help the contractors. "However, the rent and property prices are likely to stay the same."

Why the government in Pakistan cannot take notice of such factors which are bound to kill the development and economic spirit of the stake holders, Hafeez remarked.