Cement subsidy: needy sure, but likelihood little

In their quest for survival, following the decrease in cement prices in both local and international markets, domestic cement makers are demanding 50 percent subsidy on inland freight charges.
Cement prices in the local market started tapering off just as domestic construction lost its pace and the cement cartel ended during the start of current fiscal year - pushing the tag lower by 20-30 percent to an average of Rs250 per bag from Rs360 per bag.
Given weak demand at home, cement manufactures have no other option than to increase exports. But international cement export market is also grim, as capacities in the region and elsewhere have been coming online in the face of sluggish construction activities across the globe. The FOB price of cement in international market has slid to $52 per ton in recent months from $80 per ton a year ago.
The decline in cement export prices is alarming for Pakistani exports. Since 80 percent of total cement capacity is situated in northern part of the country and almost 70 percent of all exports are made through sea ports, cement makers have to incur an additional $11 to $17 per ton in order to dispatch cement to seaports in the south.
On an average, cement manufacturers are incurring $32 per ton manufacturing cost which together with an average freight cost of $14 ton translates into total cost of more than $46 per ton, excluding administration and finance costs, making exports expensive.
Industry sources reveal that some of the cement manufactures are exporting at a loss just to cover a portion of their fixed expenditures, while many small manufacturers have suspended their operations.
These conditions seem to justify the demand for subsidy. However, for successful implementation of subsidy, if provided, the government needs to come up with proper cost monitoring system that will track actual cost of transportation since transportation cost per kilometer differ for different producers who are located at different places.
There are just two problems though: one, that transporters monopoly, in some regions will make it difficult to measure the actual transportation cost and curb the chances of the misuse and ineffective use of assistance, and two, there are little chances that the fiscally challenged government would dole out funds for the cement sector, when others are perhaps more needy.