CEMENT EXPORTS TO INDIA
May 2 - 15, 2011
Pakistan is expected to export 100,000 tons of cement to India during the remaining last three-month of the current fiscal year 2010-11, as India opens its gates giving a green signal to Pakistani cement exporters.
Bureau of Indian Standards (BIS), an Indian quality control institution, has accorded approval to Pakistan to resume cement exports to India by renewing licenses of Pakistani cement exporters last month. Licenses of around 90 percent cement manufacturers had expired earlier in the year, dropping cement exports by 14 per cent in the current fiscal year. The country exported 382,000 tons of cement or 5.68 per cent to India in the first nine months of the current fiscal year, while the country's overall cement exports stood at 6.72 million tons during the period. The demand for cement is expected to boost, as Indian government plans to allocate $1 trillion for housing construction during the next five years.
The BIS has revived certificates of local cement exporters, allowing them to export to India. The country's major producers including Lucky Cement, DG Khan Cement, Lafarge Pakistan Cement and Maple Leaf Cement have started exports to India this month. The experts estimate that the new opportunity of export is set to enhance cement dispatches to India in the range of 500,000 tons to 800,000 tons in next two years.
The experts believe that Pakistan cement industry will earn more profit on exports to India where cement prices hover around Rs570 per bag (300 Indian rupees) than the exports to Afghanistan with current export price of around Rs225 per bag. Resumption of exports to India came as a sign of relief for Pakistan cement industry owing over 125 billion rupees in bank loans.
Local cement manufacturers had requested the Prime Minister Yousaf Raza Gilani - who visited India on March 30 on the invitation of Indian Prime Minister Manmohan Singh to watch the cricket world cup semi-final in Mohali - to ask Indian Prime Minister to allow import of cement from Pakistan through Wagah border in trucks.
Cement is the 12th top exported product that earned $245 million for exporters during the first half of the current fiscal year, according to the Trade Development Authority of Pakistan (TDAP).
During the first eight-month of current fiscal year, Pakistan exported 320,000 tons of cement to India, which was 24 percent less than the same period last year.
Pakistani cement companies have completed additional capacities of domestic cement manufacturers to reap the possible benefits from India's rising cement demand. The main cement manufacturers set up new plants for further expanding their production capacities.
The country produces four types of cements and the raw material - gypsum, limestone, clay/shale - used for cement manufacturing is found in abundance in the country. BIS license is essential for all kinds of exports to India. Majority of cement exporters got their licenses expired in the last four to five months. The country exported one million tons to India in the fiscal year 2007-2008 when there was an acute shortage of cement in India.
Some experts however believe that Pakistani cement exports to New Delhi will gradually lose charm with the passage of time, as India already has a cement manufacturing capacity of 261 million tons which is expected to increase to around 290 million tons by the end of fiscal year 2012.
Pakistan has already been supplying cement to Afghanistan for the last many years. It has been the key player and a traditional supplier of cement in Afghan market. The cement units in northern areas of the country continued to feed the Afghan market by supplying up to 2.5 million tons. Like Afghanistan, Pakistan has been exporting cement to the war-torn Iraq where the demand for cement has been higher for reconstruction work. However, export to Iraq remained irregular due to acute port congestion.
China is the biggest rival to Pakistan in the regional markets. The quality of Pakistan's cement is however far better than China.
Analysts believe that India is the most feasible market for exporting Pakistan's excess cement capacity, while it is most competitive for India in the form of transportation charges as compared to other regional countries, which usually constitute 15 percent of the imported price of cement. There is also no big gap in the cement prices of Pakistan and India.
Pakistan and India have been engaged in negotiations to devise a comprehensive mechanism for the export of cement. The immediate barrier in the way of export is inadequate transportation facilities for the lucrative trade across the border. Both the sides have realized the need for improving road transportation facilities for smooth flow of trade. Due to abolished countervailing duty and additional customs duty on cement imports, the Pakistani cement would become competitive in the huge Indian market. Analysts calculate that the landed cost of Pakistani cement in India would be cheap.
The cement exports to India have largely been through sea or by railway. Cement exports are also affected by the high freight charges, which are received by the tucks and foreign shipping companies for the haulage of cement from Pakistan to India. Pakistan Railways (PR) charges more freight for carrying cement to Indian border than the India charges on its side.
The Pakistani exporters have yet to fully explore the Indian market where annual demand stands at around 5 million tons. Though India is the non-traditional cement market, yet a number of non-tariff barriers (NTB) are hampering Pakistani exporters to export cement to India. The exporters, who already have registration and certification from the BIS, are struggling hard to capture the Indian cement market.
Critics say that TDAP is not extending Pakistani exporters much support to capture the Indian market. It is also not giving freight subsidy for export of cement, which is a non-traditional commodity, to India.
The expiry of BIS license forced local cement producers to explore other markets by sending consignments to Sri Lanka, South Africa, Namibia, Oman, and Mauritius.
Long-term survival of cement industry depends upon government spending on watercourses, canals, drainages and housing projects announced under Public Sector Development Programme.