Ban on export, duty-free import, crackdown: Industries Ministry proposes three options to cut cement prices

The Ministry of Industries and Production is to recommend three options to the government--imposition of ban on cement export; duty-free import of cement from China; and launching a crackdown on cement units--to bring down prices in domestic market, sources told Business Recorder.
They said that all three options were discussed at a meeting of the Economic Monitoring Committee (EMC), headed by Finance Minister Naveed Qamar, a couple of days ago. Shahab Khawaja took the proposal to the committee, which, sources said, decided to place the issue before the Economic Co-ordination Committee (ECC) of the Cabinet, expected to meet on Tuesday.
The EMC, sources said, has been apprised by Industries Secretary that cement manufacturers have been selling cement at a price of Rs 375-390 in different parts of the country which, according to officials and independent cost analysts, is not justified, given the real cost.
According to audited accounts of cement units, they earned up to 60 percent profit in 2006-07 but they were not willing to publish external cost auditors' reports of 2007-08, fearing that this would generate another controversy.
Finance Ministry's investigations also show that the current cement prices in domestic market are irrational, as the manufacturers are taking advantage of political uncertainty. Sources in Finance Ministry quoted reports of Commercial Counsellors stationed in Beijing and Kabul which contradict the claims of the cement manufacturers regarding cost of production.
According to Beijing-based Commercial Counsellor, the price of a cement bag in China is about Pakistani Rs 115. It is a fact that price of electricity, which is one of the major inputs in cement manufacturing, is slightly lower in China but the price of coal is almost the same in Pakistan and China as both countries import it.
Commercial Counsellor in Kabul has intimated to the government that price of Pakistani cement in Kabul is Rs 300 per bag, which also includes Rs 108 per bag freight charges. Industries Ministry has also rejected cement manufacturers' cost calculations on the grounds that the input cost was massively exaggerated. Sources said that cement manufacturers, who have a powerful lobby, were trying to establish that per bag price is Rs 375, which the ministry was not willing to accept.
Secretary, Industries, said that there was a difference of Rs 60 per bag in the cost calculated by the Ministry's Cost Accountant and that given by the cement manufactures who showed Rs 40 per bag increase in cost of production.
"There are three or four items, apart from transportation costs, on which the ministry and cement manufacturers differ," he further said. According to Industries Secretary, cement manufacturers said that the price of coal, a key input in cement manufacturing, had increased to $200 per ton from $76 in a year. There are also differences on prices of paper bag used in cement packing, transportation and other inputs.
The prices of cement in different parts of the country range from Rs 390 to Rs 400 per 50 kg bag which do not match the ground realities.