ISLAMABAD: Cement in northern parts of the country is selling at record high price of Rs415 registering an increase of Rs30 in one month, while the analysts suspect profit-making in the garb of inflationary impact by the cement manufacturers.
The cement manufacturers have increased the prices by 31 and 20 per cent against prices of September 2010 for both the North and the South zones, respectively, and a bag of 50-kg is selling at Rs385 in the South Zone which includes Sindh and Balochistan.
Analysts think the higher prices will have inflationary impact on the economy as more than 70 per cent of country’s cement production is in the north zone, as out of 24 cement plants 19 are in Punjab and Khyber-Pakhtunkhwa.
“The key reason for establishing cement plants in these two provinces and especially in the Rawalpindi division is availability of key raw material lime stone,” said Asad Siddiqui, analyst at InvestCap.
“Cement units in North zone pay higher freight for importing coal and furnace oil and same way their transportation cost for exporting cement is also high compared to the units in Sindh,” he said.
According to the official figures the total cement exports during July–August 2011 stood at 1.54 million tons, which included 886,282 tons to Afghanistan but the export to India had been limited to 122,335 tons whereas 536,992 tons exported via sea to various locations.
“The export to India is cost-effective due to low transportation compared to freight charges from Rawalpindi to Karachi,” Mr Siddiqui said.
Meanwhile, the industry players said that sluggish demand and rising cost of energy was the main reason for increasing cement prices.
“Cement sector has installed capacity of 44 million tons per annum but due to economic slump the demand has been low and the cement plants are operating at around 50 per cent of their capacity,” said a senior official of a cement plant.
On the other hand, some analysts said that despite increase in the electricity tariff, furnace oil rates and diesel prices in the past six months, the hike in the cement prices was unreasonable.
“Cement sector got the relief in budget 2011-12 when the FED was lowered from Rs700 per ton to Rs500 per ton, GST was reduced by one per cent and the Special Excise Duty was abolished,” said an analyst.
“The net impact of these measures amount to Rs25-Rs30 per bag but it was not passed on to the consumers,” he added.
Talking to Dawn, Competition Commission of Pakistan Chairperson Rahat Kaunain Hassan said that there were evidences of collusive pricing by the cement manufacturers. However she declined to take any action or initiate an enquiry over the rising cement prices.
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