Reduction in cement prices likely from April: Ministry

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (March 27 2009): The Ministry of Industries and Production has indicated the possibility of a substantial reduction in cement prices from April 1, 2009 after the dealers clear their existing stocks. We are expecting a reasonable reduction in cement prices within a couple of days, as the dealers have asked the factories to give them time till March 31 to clear their existing stocks, a top official in the Ministry told Business Recorder.

He said an investigation is already underway in the Competition Commission of Pakistan (CPP) against the cement manufacturers for reportedly charging high prices from the consumers last year. The input cost of cement came down substantially, but this was not passed onto the consumers.

The establishment of Mobile Courts, dropped after charges of their possible abuse for political victimisation, had the objective of keeping a close eye on profiteering, the government sources said. Analysts in the Ministry have calculated that the cost of one 50kg cement bag, is in the range of Rs 200-210, which means that the manufacturers are overcharging the consumers.

The CPP, which raided the head office of cement manufacturers in Lahore last year, had gathered adequate proof of cartelisation, the sources said. Further, the government is also examining balance sheets of all the cement factories, which indicates that cement manufacturers charged high prices from the consumers not only during the period when furnace oil prices were at their peak, but also when the prices touched their lowest level.

In July last year, the government intended to launch a crackdown on cement manufacturers against raising cement prices to over Rs 400 per 50 kg bag, without any justification, but the plan was shelved after intervention from the top level, said another official.

According to some of the officials in the Finance Ministry, who participated in the ECC meeting, prevalent cement prices are still on the higher side and the government may fail to contain inflation, if prices of cement and other essential items are not reduced. Cement prices in the federal capital, were Rs 349 per 50 kg bag, but in Quetta, its price was Rs 410 per bag.

Moreover, the CCP, which was also conducting investigations against cement manufacturers, has already intimated to the concerned quarters that it was under severe pressure from the cement cartel. The Ministry of Industries had planned to submit a summary to the ECC for the provision of more incentives for the cement manufacturers, enabling them to start export from Gwadar Port. However, the plan has been shelved after the Ministry was unable to find any support from the stakeholders, sources added.

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