News Desk |
Magnates of the Pakistani cement sector have supposedly received help from friends in high places. The Economic Coordination Committee (ECC) was recently advised not to interfere in cement prices and rather leave the prices to be set and raised – if needed – by major industry players.
Adviser to the Prime Minister on Commerce; Abdul Razzaq Dawood, favored the stance of the cement producers while suggesting the ECC to not intervene in the matter. Earlier he supported the right of national and private sector companies to freely raise product prices allowing them to collect surplus incomes in terms of billions of rupees.
Previously, on the 2nd of October, the Ministry of Industries and Production ran a keynote for the ECC detailing the demand and supply situation as well as rising trends in the cement industry. The ECC had instructed Mr. Razzaq to organize a meeting with the All Pakistan Cement Manufacturers Association (APCMA). They were of the view that cement prices needed to be regulated and a report was to be furnished with suggestions ensuring accessibility of cement at subsidized rates.
On the 26th of October, Mr Dawood following ECC guidelines held a meeting with the major stakeholders alongside officials from the APCMA and executives from other cement manufacturers. The meeting highlighted that the greater chunk of Pakistan’s cement production costs were linked to coal prices.
As a result of continuous rupee depreciation and rising global oil prices increased cost of fuel especially coal had an adverse impact on cement production cost and domestic prices. Moreover, Mr. Razzaq also discovered that the shipping cost was at Rs54 per bag, making it obvious that the cement sector was operating at a relatively high production cost.
Consequently, the greater impact of the price hike was experienced at the wholesale level by retailers and distributors since cola-based factory prices hadn’t risen much. The cement industry is also one of prime contributors to Pakistan’s GDP and so far in three quarters of 2018 paid around Rs111.20 billion in taxes. Out of that sum the federal excise duty totaled Rs50 billion and general sales tax (GST) summed around Rs60 billion.
In a study conducted by the Ministry of Industries and Production cement prices in Pakistan still had a comparative advantage over India and Sri Lanka despite higher production costs and taxes. As a result of all combined findings and its effects the ministry recommended that the cement sector be not subject to state intervention and instead allow the market to regulate prices.
Read more: Cement Industry rebounds as exports rise
Pakistan’s comparative advantage in cement production is already manifesting through the market as FY18 sees a rise in exports in contrast to slight decrease in domestic consumption. The two-day International Cement conference hosted last week in the country also attracted foreign cement companies all showing a willingness to trade and invest in Pakistani cement production and capacity.