Southern manufacturer demand level-playing field

It is good news for the cement companies located outside the 100 kilometer radius of the sea ports. The government has finally listened to the old plea of the cement manufacturers, particularly those in the north, to extend a helping hand in the form of a 35 percent subsidy on inland freight charges.
The decision came amid lower FOB prices and higher transportation costs, making exports expensive for manufacturers. This certainly will be a much needed breather for the adversely affected northern cement manufacturers.
Northern cement manufactures are incurring an average freight cost of $14 per ton, to transport goods from plants located in the north of Pakistan to the sea ports, which translates into total cost of more than $46 per ton, excluding administration and finance costs. In short, the grant will result in freight cost saving of an average $5/ton and will make exports more profitable.
The subsidy granted is although lower than what the manufacturers requested i.e. 50 percent, still the cost saving incentive is adequate to strengthen manufacturers enthusiasm for exports. Moreover, it will certainly ramp up export sales during the second half of the fiscal year given that demand for cement leaps during summers.
But, this good news for industry doesn bode well for local buyers as increase in exports will lift prices in the local market, which are hovering around Rs250 to Rs305 per 50 kg bag.
Moreover, manufactures located in south have termed this decision unfair as it will only benefit those situated in the north, demanding similar incentives for themselves as well, since they are also incurring additional cost to transport goods and are major contributors to the countrys foreign earnings.
As per industry officials, it is not clear on the part of government about how will they measure the actual transportation cost and curb the likelihood of abuse of the assistance.
Besides, they also demand the government to create a level playing field among industry players since the subsidy is allocated to specific cement producers without setting any performance achievement targets. There might well be another twist in the tale if the manufacturers in south continue their disapproval of the favour to their peers in the north.