May 9, 2006	Tuesday	Rabi-us-Sani 10, 1427

LAHORE, May 8: The cement prices continue to remain under pressure because of a lower demand in the local market, with the retail rate in the provincial capital dropping to Rs290 a 50kg bag.

The cement distributors and retailers told Dawn on Monday that the producers were “adjusting the prices downward on a day-to-day basis”, hoping that the rates would fall further to Rs280 per bag in the next couple of days in the retail market.

The cement sales began falling from the middle of April after the federal government allowed tax and duty free import of cement from India, announcing heavy freight discount of Rs60 per bag on the imported cement in order to bring down the rates of the commodity, which had shot up to an all-time high of Rs450-500 per bag. The commencement of wheat harvesting in Punjab, which coincided with the government decision to allow duty free import of cement, caused the commodity’s demand to drop further.

The distributors said the cement manufacturers were likely to adjust their ex-factory prices further to Rs280 per bag in the next couple of days. They said no cement was being imported for the time being owing to the same reasons that had forced the prices of the local cement to come down. “Import is not feasible at this point in time because of very low seasonal demand and reduced prices of local cement,” said a dealer.

However, he said, the importers may consider the option of bringing in cement from India “if the prices surge again once the demand for the commodity begins to go up again from the next month”. “The decision to import cement from India also depends upon its availability (for export) as well as price there,” he said.

Besides allowing unprecedented freight discount on the import of duty and tax free cement from India, the government also placed a ban on its export, especially to Afghanistan, till further notice in order to increase its availability in the market.

The manufacturers termed these decisions as punitive, saying the “government action did not match the ground reality”. The producers have been blaming distributors and retailers for the increase in the retail prices of the commodity. “We raised ex-factory rates only after the dealers and retailers had increased the consumer prices. The ex-factory rates never went up beyond Rs350-360 per bag despite the fact that the retail prices went beyond Rs450 a bag in some parts of the country,” said a producer, who did not wish to be identified. The distributors deny the charge.

The manufacturers, who want the government to remove the ban on cement export, say this step would result in Pakistan losing the hard-won markets. “If we lose the export markets, it will prove to be detrimental to the health of the cement sector, which is already in the process of doubling its production capacity to 42m tons from the existing 21m tons in the next 12-18 months.

The producers are also strongly opposed to huge freight subsidy allowed on Indian cement, saying it amounted to “promoting the Indian cement manufacturers at the cost of the local industry, which has consistently been investing heavily to increase its production to meet the rising demand in the local market”.