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Cement producers ‘salvage’ cartel

September 17, 2013

KARACHI, Sept 16: Cement producers in the country managed to salvage the ‘quota and price arrangement,’ widely known as ‘cartel’, on Monday, after the estranged biggest player in the industry, Lucky Cement Company Limited was persuaded to return to the fold of the manufacturers’ lobby, the All Pakistan Cement Manufacturers’ Association (APCMA).

Lucky had earlier resigned on differences with other competing cement producers.

CEO Lucky Cement Muhammad Ali Tabba confirmed to Dawn on Monday afternoon that Lucky has rejoined APCMA.

An informal meeting of cement producers’ held on Monday decided that Mr Tabba would chair the cement producers’ lobby. The Lucky CEO would be crowned as the chairman of APCMA at the Annual General Meeting on 26th.

Sources in the knowledge of things said that unlike the past when ‘ego’ forced players to stick to their position, even when they suffered losses in billions, most producers, representing a generation ahead, were willing to discuss and reach a compromise.

A person privy to the meeting on Monday said that the cement manufacturers decided at the meeting that there would be no expansion until March next year and a status quo in the matter of production quota would prevail.

The participants of the meeting also agreed to form a five-member committee comprising cement manufacturers from both the North and the South zone.

The committee would rotate after a while so that the players in both zones received equal representation. The task assigned to the committee would be to evaluate the plans of expansions and maintain equilibrium in quota and prices acceptable to all.

Was there an agreement on increasing prices of cement? The cement producers did not respond to the query. An observer, however, quoted Adam Smith, the father of modern economics: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.

However, sources suggested that though there was no decision on immediate raise in prices per bag of cement on Monday; the manufacturers’ mulled over price increases going forward, to cover the increase in cost of production resulting from raise in gas and power tariff.