Inland freight cost: cement makers seek 50 percent subsidy

Cement manufacturers have sought a 50 percent subsidy on the inland freight cost to boost cement export to more than one billion dollars, industry sources said here Wednesday. All Pakistan Cement Manufacturers Association (APCMA) has written a letter to the government in this regard seeking a payment of $36 million as the freight equalisation subsidy to the cement factories to get an additional export earning of $359 million.
Pakistan's cement export through Karachi seaports is estimated to increase from $422 million in 2008-09 to $781 million in 2009-10. Exports to India and Afghanistan through land routes, the cement industry is likely to fetch the country more than $1 billion per annum.
These sources explained, that depending on the cement units location in the north, which has 80 percent of the production capacity of the country, inland freight cost for exports to the port range from Rs 900 ($11) to Rs 1400 ($17) per ton. The cement factories located in the south are paying an inland freight at an average rate of Rs 300 ($3.5) per ton.
APCMA has maintained, in its letter, that high inland freight costs of the units located in the north is a major impediment in the way of raising cement exports, particularly when cement prices have gone down in the international market. The FOB cement prices have dropped in the international market from about $80 per ton to $50 - $56 per ton.
APCMA has projected an increase of 36 percent in cement export if the government agrees to pay a subsidy of 50 percent on inland freight costs. It may be mentioned here that the cement production capacity in Pakistan has surged to 44.07 million tons per annum. With the additional capacity coming up in the north this will further increase to 46.34 million tons per annum by 2011.
The domestic demand for the cement in the country during the year 2008-2009 was only 19.40 million tons. After providing for exports to Afghanistan and India by the land route the industry has a surplus exportable capacity of 13.27 million tons of cement. Sources said that Pakistan which is ranked 5th in global cement export, can take the second position if the government would provide the freight subsidy.