The Economic Co-ordination Committee (ECC) of the Cabinet, which met with Prime Minister Shaukat Aziz in the chair, on September 1, among other things, took decisions on two major controversial issues that had been awaiting resolution rather too long. There has been an agonising increase in the prices of sugar and cement, to the bewilderment of both the consumers and the government.
It will be noted that a number of measures earlier taken by the government to bring an end to the dismay of the consuming public on both counts failed to yield the desired results. As such, deeply concerned as the government has, apparently, remained about the matter, the ECC seems to have deemed it expedient, evidently as a last resort, to allow duty-free import of cement, through private sector. As for sugar, 50,000 tonnes of it is to be put to auction from the stocks lying with the Trading Corporation of Pakistan, two weeks prior to the advent of Ramazan.
In so far as their likely effect is concerned, reference may be made to the observations made by Dr Ashfaque Hasan Khan, Economic Adviser to the Finance Ministry, while talking to Business Recorder after the meeting.
According to his assessment, demand for cement is likely to start increasing this month, in view of the prospect of Public Sector Development Programme projects taking off in the later half of the current year, thereby accelerating construction activities by the private sector.
This may be why he sounded confident of duty-free import of cement so improving the supply position as to help stabilise, at lower levels, its market prices which had touched Rs 300-320 per bag in June. It will appear to be convincing too, except for the likely behaviour of prices in the market being influenced by the response of the domestic cement industry, which is alleged to have formed a cartel, in quest of abnormally higher profits.
Some idea of response to the ECC's decision, may be had from the negative ideas expressed by a high official of one of the biggest cement plants in the country. Talking to Business Recorder he is stated to have dismissed the expectation of cement prices coming down as a result of duty-free import of cement.
For, as he claimed, domestic cement price is already among the lowest in the world. He also pointed out that the cement-makers were not much worried either, as prices in the international market are higher than the local prices of cement of much better quality.
According to him, members of the All Pakistan Cement Manufacturers Association are exporting cement at $68 per ton ex-factory, or Rs 200 per 50-kg, without paying Rs 95, as local taxes and transportation charges.
This, as he claimed, was why Pakistani exporters in the international market were competitive even against nearest rivals, Iran and India. Moreover, he tried to make it appear that foreign manufacturers were not responding well to the queries of Pakistani importers. And even if they did, imported cement would not cost less than Rs 300 per 50-kg against local prices of Rs 265 to 280 per bag.
It is not known whether the ECC has taken note of the price situation of cement in the international market while placing heavy reliance on its duty-free import. Be that as it may, the industry's contention that prices have lately been creeping downward from a record Rs 330 per 50-kg bag, should serve as an added pointer to the advisability of the decision.
In so far as the decision on sugar is concerned, notable is Dr Khan's revelation that the TCP would sell 50,000 tonnes sugar through auction, in small lots of 50-500 tonnes, two weeks ahead of Ramazan, that is, before building up of the pressure of prices.
However, his assertion that the mill-owners and their representatives would not be allowed to participate in the auction, would point to fears of foul play. But barring the sugar mills from the auction, can hardly be any guarantee of keeping them away from the process, for it should not be difficult for them to find an alternative to direct participation.
If they manage to creep in somehow, the stop gap scheme of things may run into trouble. However, on the whole the two decisions of the ECC will certainly create the hope of beginning of the end of spiralling increase in cement and sugar prices.
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