The Competition Commission of Pakistan (CCP) has decided to issue show cause notice to the All Pakistan Cement Manufacturers Association (APCMA), Lahore on Monday against the Cartelisation of the cement manufacturers, allegedly involved in price hike of the commodity.
Sources told Business Recorder on Sunday that the CCP has completed investigation against the cement manufacturers on the basis of evidence available during inspection of the APCMA headquarters at Lahore. The inquiry has been completed and subsequently show cause notices would be issued to all the cement manufacturers.
Sources said that the CCP would also issue show cause notice to the chartered accountant firm engaged by the APCMA to maintain data of the cement manufacturers. The CCP has found that the firm has assisted the cement manufacturers in Cartelisation. The firm was hired to monitor production, clearances and other matters of the cement units, which supported Cartelisation. The CCP has enough evidence to prove Cartelisation against the cement manufacturers and necessary proceedings would be initiated under the provisions of Competition Ordinance 2007.
Despite immense political pressure, the CCP has decided not to withdraw inquiry against the cement manufacturers. There is enormous pressure from government departments and politicians to end the inquiry against the cement cartel. However, the CCP would complete the inquiry as per provisions of the Competition Ordinance 2007.
"There is always pressure on regulators from government departments as well as the industry. In the current political environment, legal action against the cement manufactures is an uphill task for the CCP", sources said. Sources said that the CCP is legally empowered to impose penalty up to 15 per cent of the turnover or maximum penalty of Rs 50 million on each company involved in Cartelisation. In US and European countries, the penalty for committing a crime of Cartelisation is substantially more as compared to Pakistan. For example, US commission can hand down 12 years of imprisonment to a person involved in Cartelisation.
It may be recalled that the CCP had raided the headquarters of the APCMA, Lahore and recovered valuable record including computers, giving accurate data on cement production. The CCP has also obtained necessary data from the Federal Board of Revenue (FBR) on cement production and tax paid by the units. It is important to mention that the federal government wanted to strengthen the CCP, and deal with cartels in the cement and sugar sector.
The Economic Co-ordination Committee (ECC) of the Cabinet had also proposed that consumer societies should be established at Tehsil level to keep a close watch on sugar prices besides making CCP fully functional, the sources added.
The objective of this suggestion was to strengthen CCP by enabling it to examine all aspects of supply, demand and Cartelisation of sugar and cement sector stakeholders.
The ECC had decided that CCP may be assigned the task of looking into the entire issue including supply, demand and Cartelisation of sugar and cement and submit its report to the ECC.
In the past, it was argued that unprecedented increase in the price of coal in international markets (which is more than $200 per ton) has contributed towards the increase in cost of manufacturing of cement. At this rate, the cost of coal to manufacture one bag of cement is more than Rs 150. The total government taxation is Rs 96 on one bag of cement. In addition to this the cost of electricity (which is acknowledged in the report published) has increased by more than 20 per cent in the last few months and cost of transportation has gone up by 30 per cent in the last few months in accordance with the increase in the price of diesel. All these factors are impacting on the cost of manufacturing cement, some units opined.