Pakistan's cement industry, which pocketed windfall profits in previous years, is claiming that its exports declined by 9 percent in April as compared to March 2009. The All Pakistan Cement Manufacturers Association (APCMA) is already in hot pursuit of fiscal incentives in the 2009-10 federal budget with the argument that it would collapse if the government did not extend a rescue package to it.
The Association says that reduction in Public Sector Development Program (PSDP), the high cost of energy, high interest rate and Rs 96 per bag tax are some of the reasons for the decline in cement industry. According to the Association's data for the first ten months (July-April) of current fiscal year, local dispatches declined by 15 percent, whereas 6.47 percent growth had been witnessed in the previous year.
Last year, local dispatches were estimated at 22.396 million tons, against the 15.909 million tons of first ten months of current fiscal year. Overall exports of clinker and cement increased by 51.3 percent, to 8,996,839 tons against 5,946,706 tons of last year. Last year, growth was 150 percent. Interestingly, the data released by the cement manufacturers does not contain the impact of high cement prices.
Analysts in the Ministry of Industries and Production have termed cement manufacturers' claim of financial losses as an effort to harvest more financial gains by understating some of the facts, which are challengeable. The cement industry is of the view that the cost of one bag of cement, inclusive of all duties and taxes, comes to Rs 358, whereas it is being sold at Rs 340, which means that manufacturers are already facing a loss of Rs 18 per bag.
"Without concerted efforts, the cement industry will collapse," the industry said in a presentation to the government, a copy of which was made available to this newspaper. The cement industry, which operated on 81 percent capacity, is now utilising 71.57 percent of its capacity due to world-wide economic melt down.
The figures show that cement exports to Afghanistan declined from 362,869 tons in March to 244,698 tons in April 2009, followed by India, from 103,424 tons to 97,965 tons. However, export of cement from sea route increased from 300,963 tons to 341,355 tons. Thus, total export of cement and clinker in April was 1,003,943 tons against 790,547 tons. In the presentation, APCMA has tried to convince the concerned officials that the industry is about to die, because of taxes imposed on it.
"High inland costs of transportation and port handling make sea exports non-viable for the plants based in the north, which account for most of 10.59 million tons surplus capacity," the Association said. The Competition Commission of Pakistan (CPP) has evidence of cartelisation against the cement manufacturers. The Association, in turn, has taken a stay order against the CCP, which is in the process of having the stay order vacated.