The Ministry of Industries and Production (MoI&P) is likely to send a reference to Competition Commission of Pakistan (CCP) to identify cartelisation in current increase in cement prices, well informed sources told Business Recorder. The federal cabinet, sources said, in its meeting on January 17, 2019 has conveyed such instructions to the Ministry of industries and Production.
The ministry, sources said, informed the federal cabinet that the issue of cement prices was discussed in the ECC meeting on October 2, 2018 wherein Advisor to the prime minister on Commerce, Textile, Industries and Production, and Investment Abdul Razak Dawood was directed to hold a meeting with All Pakistan Cement Manufacturers Association (APCMA) with a view to rationalise the prices of cement and a submit a report accordingly.
In pursuance of ECC directive, the advisor convened a meeting on October 26, 2018 with major stakeholders including APCMA. Based on the discussion in the meeting, a summary was forwarded to the ECC on November 6, 2018. The ECC considered the summary in November 2018 and directed to place the matter before the federal cabinet for its information and consideration.
In view of the ECC directive, the Ministry of Industries and Production placed the summary before the federal cabinet on January 17, 2019. During discussion, it was pointed out that important stakeholders, especially, Competition Commission of Pakistan, should have also been consulted in the matter to identify if cartelisation is a challenge in supply of cement to the common man at reasonable price.
The cement industry maintained that some seasonal fluctuation occurred in supply and demand, besides changes in supply due to service, repair and maintenance of some plants, and termed current increase in prices a result of increase in coal price and rupee depreciation. The industry further argued that cement sector is not receiving any subsidy from the government.
The industry also claims that it is paying billions of rupees in taxes to the government, e.g, Rs 111.201 billion of taxes were paid in financial year 2017-18, in which the share of federal excise duty was Rs 50.530 billion while General Sales Tax was Rs 60.671 billion. Freight cost of cement sector is high, which is Rs 54 per bag. Pakistan's cement prices and profit are low in the region while taxes are higher. Average market retail price (MRP) of Pakistan, India and Sri Lanka are Rs 579, Rs 680 and Rs 657 respectively whereas per bag taxes of Pakistan, India and Sri Lanka are Rs 159.13, Rs 148.75 and Rs 95.46 respectively.
The sector has exported 4.746 million tonnes of cement in financial year 2017-18 and 19.436 million tonnes of cement of surplus availability for export is expected in financial year 2020-21. Cement industry can earn $600 million to $ 1 billion through export.
Cement sector is also in process of capacity enhancement from current 54.229 million tonnes to 68.184 million tonnes in Financial Year 2019-20. The ECC would be requested not to penalise the cement sector which is performing well without any subsidy like other sectors.
An insider said that the Ministry of Industries and Production which had earlier agreed that the government should not intervene in the cement industry and let market forces determine the prices, will now send a reference to the CCP for a thorough probe with respect to "invisible" cartelisation.