KARACHI, June 7: Cement prices are likely to fall by Rs10-12 per 50 kg bag in view of the budgetary decision of cutting central excise duty (CED) by 25 per cent.

Prior to the budget 2002-03 announcement, CED on cement was being charged at Rs1,000 per ton, which has now been reduced to Rs750 per ton.

“On per 50 kg bag — CED will now be charged at Rs37.50 as compared to Rs50 per bag,” Lucky Cement executive director Abdul Razzak Thaplawala said while giving his reaction on the finance minister’s budget speech.

“The cut in CED is likely to boost sales in an environment of higher economic activity and the cement sector will be the net gainer with better utilization of its capacity,” he said, adding at present the industry is running on 55-60 per cent capacity utilization.

“I cannot give the exact percentage of demand and consumption increase of cement in the country after CED cut as much depends on the construction activities,” he said hoping the government’s incentives to the construction and housing sector would help in boosting up demand of cement in the country. “In case construction activities pick up — our production will rise by one to two million tons from next year,” he hoped.

To a query whether Rs10-12 per bag cut would prove an eye wash in view of rise in prices of cement last month ahead of the budget, he said once the prices were reduced by the cement makers one thing was sure that itwould not be changed in future. It is also good that the government has met “our demands despite the fact that the industry was looking forward for complete withdrawal of CED on cement in the current budget.”

He recalled that cement prices were hovering between Rs235-240 per bag in the last two years. In November 2002, prices came down to Rs170-180 followed by Rs160 in December 2002. However last month cement prices were again reverted to Rs220-230 per bag.

The industry had also come under biting criticism mainly for operating under a ‘cartel’ arrangement. When the ‘cartel’ was in operation, 23 cement producers specified production quotas for each mill so as to keep firm control on supply and market price. But the ‘cartel’ periodically broke down as a result of disputes among producers; it fell apart in November last year and was revived only the previous month, after lengthy negotiations among the players. The rebirth of the cartel had already sent cement prices to Rs220-230 currently.

The cement sector is plagued by 40 per cent excess capacity with eight million of the 18-million-ton industry capacity remaining unutilized.

Karachi Chamber of Commerce and Industry president Nasser Hyatt Maggo also looked unsatisfied over Rs250 per ton cut in CED on cement. “The government should have brought the CED to zero per cent to give full thrust to the construction industry,” he said, terming the government’s decision as an eye wash.

The percentage of taxes on cement in Pakistan is still 37 per cent as compared to India (18 per cent), Iran (nil), Indonesia (10 per cent), Philippines (10 per cent) and Thailand (7 per cent). The per capita cement consumption in kgs in Pakistan is 65 as compared to India (97 kgs), Iran (322 kgs), Indonesia (95 kgs), the Philippines (168 kgs) and Thailand (447 kgs).

Market sources said that CED cut of Rs250 per ton was imminent as the market was abuzz with the news that the government had decided to cut CED in phases each year starting from financial year 2003-04. The cement sector is likely to see the complete removal of CED by financial 2007-08.

Association of Builders and Developers chairman Hafeez-ur-Rahman Butt was of the view that the cost of construction would come down by 15-20 per cent opening new job avenues.

The decision to promote housing finance through banks would also have a positive impact on the housing sector and fill the housing shortfall of over five million units per annum.

He urged the government to ensure proper implementation of the decisions at the provincial level as positive achievement in housing and construction sectors now depends on the full implementation of the budgetary measures.