LAHORE, March 29: As the cement production in the country is projected to go up to 28.208 million tons by 2008, from current 17.555 million tons, the industry sources fear it may trigger yet another crisis (of low capacity utilization) and lead to defaults and higher prices for consumers.

"The possibility of opening up of trade with India under Safta would put further pressure on the local cement industry as Indian cement is cheaper than ours because of low-cost raw materials and efficient utilization of energy," a cement manufacturer told Dawn here on Monday.

"Import of cheaper cement from other parts of the world, apart from India, can also be not ruled out under the WTO regime," said the manufacturer. "Hence, the industry should undertake a planned research to study the possible, negative impact of enhancement of the production capacity."

He insisted that the capacity was being enhanced mainly due to recent growth in the demand sparked by exports to Afghanistan and increase in local consumption as a result of greater construction activity both in private and public sectors.

The cement sales have gone up to 8.389 million tons, including 617,000 ton exported to Afghanistan, in the first eight months of the current year, and are projected to increase to 12.969 million tons by the end of present fiscal year.

It would mean 14 per cent growth from total sales of 11.410 million tons, including exports of 430,000 tons, during the fiscal year 2002-03.

"Let's be cautious while planning expansion because the growth in demand may subside sooner. We are already witnessing a decline, though still minute, in the demand as a consequence of a slowdown in the construction activity caused by higher steel prices," said another manufacturer.

Despite the growth in the sales from 9.912 million tons in the year 2000 to 11.410 million tons in 2003, (an installed) capacity to manufacture 5.515 million tons of cement still remains idle.

By 2008 the sales, including exports, are projected to grow to 17.645 million tons at annual rate of eight per cent. "This means we would have a total idle capacity of 10.563 million tons if the cement production is enhanced to 28.208 million tons by that year as is being projected on the basis of the industry's plans," said sources.

"What's the fun in expanding (production capacity) if we cannot utilize it?," they wondered. The sources say the industry had suffered huge losses "because of unplanned rise in installed capacity in the last one decade or more".

"If such a thing happens in future, we would find ourselves in deep waters. The expansion in manufacturing capacity will make us uncompetitive, and result in higher prices for consumers and bank defaults," they maintain.