Government all out to bring down cement prices

The government will soon exercise its options to bring down cement prices as All Pakistan Cement Manufacturers Association (APCMA) has failed to honour its oft-repeated commitments to return the cement prices to pre-budget levels, Economic Adviser and spokesman of the Finance Ministry Dr Ashfaq Hassan Khan told Business Recorder on Saturday.
In an exclusive interview with this scribe, he said, " the government does not believe in knee-jerk reaction and it has given more than a month to the cement manufacturers body, but it cannot wait indefinitely for the cement prices to decline to the June 9 level of Rs 240 to Rs 259 per 50-kg bag."
Dr Ashfaq made it clear that the government has two clear and specific options to exercise: first to rationalise duty structure with a view to encourage private sector to import cement and secondly to impose regulatory duty on the export of cement to discourage the practice which is currently taking place on an average of over 120,000 metric tonnes per month.
He said that the cement manufacturers'' cartel must realise that the extraordinary increase in the cement prices was totally against the government''s policy of reducing the inflation on the one hand and increasing job opportunities for the unskilled and semi-skilled workforce on the other hand.
The finance ministry adviser categorically stated that there was no economic justification for the increase of cement prices as even at the rate of 259/50-kg bag, the industry was already making profit which was not only highest in the country''s history but also in the region.
Dr Ashfaq noted with dismay that according to the daily report of cement production/consumption of July 28, instead of decreasing the prices, the APCMA has slowed down the cement production from 90 percent to 77-78 percent in the north and south zones.
Dr Ashfaq clarified that increase in cement prices has far-reaching complications for the socio-economic fabric of the nation, as it has a direct bearing on the hike of house rents and inflation; slows down construction activity with laying-off of thousands of semi-skilled and unskilled labour force, increases the cost of development projects etc.
The economic adviser said he did not agree with the APCMA''s contention that the present increase in the cement prices was due to the market forces and added that on average a 50-kg cement bag was being sold @ Rs 281 (Rs 260/- at Karachi and Rs 300/- at Islamabad and Quetta) on July 28 despite the APCMA''s repeated assurances to the government to bring them to pre-budget level.
Sources of construction industry told Business Recorder that the APCMA has asked the government that instead of allowing import of cement by the private sector, which would badly hurt the domestic industry, it should withdraw the central excise duty to bring down the cement prices.
However, the sources opined, that the empirical evidence suggested that whenever the government had reduced the CED on cement, the manufacturers, instead of passing on the benefit to consumers have increased the cement prices. In this respect, they have even lost the support of President General Pervez Musharraf who had earlier supported their demand of reduction in CED, they added.
The sources pointed out that in 1997, the then government reduced the CED on cement, but the manufacturers, instead of reducing the price, further increased it. Once again, in May 2002 President Musharraf''s direct intervention led to 25 percent reduction in CED, but instead of passing the benefit on to the people, the manufacturers cartel again increased the prices of cement from Rs 210 per 50-kg bag to Rs 240 in the month of June 2002 and after the budget they reduced the price only by Rs 5 per bag, and pocketed the most unreasonable profit of Rs 25 per bag despite reduction of excise duty and without any economic justification, the sources added.
They were bitter in respect of the track record of the cement manufacturers and stated:" even if the government reduced the CED, there was no guarantee that the cement industry would reduce the prices as it operates like Opec cartel where every country has an assigned production quota." They further argued that "if this cartel was broken the country will see the cement prices rapidly declining."
The APCMA sources, however, have justified the increase in prices claiming that buoyant demand from both private and public sectors in the domestic market and expanded construction activities in Afghanistan and the Gulf region have led to this surge.