KARACHI: The government is reported to have taken notice of the Rs50 hike in cement bag price by northern zone manufacturers in the immediate run up to the activation of the government’s incentive package for the construction sector.
Cement prices in northern region have jumped to Rs504-508 per 50 kg bag while the rates in southern region are steady at Rs625-650.
Sources said that the Ministry of Industries has written a letter to the cement makers seeking reason for raising prices besides demanding numbers of cement wholesalers and retail office bearers from the manufacturers so that it can independently check and verify price data.
The price hike came precisely when the government announced its much anticipated incentive package for the construction sector which was expected to lead to a boost in demand for cement, steel bars and other construction materials.
Sources said soon after the issuance of the letter, Industries Minister Hammad Azhar also held a meeting with members of All Pakistan Cement Manufacturers Association (APCMA) urging them to take back price hike urgently as it could skew the impact of the construction package.
The government believed that this is not the right time to increase cement prices in view of lower global coal prices, falling oil prices, low interest rates and marked decline in transportation cost on account of persistent drop in diesel prices. The overall cost of cement manufacturing has reduced significantly.
However, the manufacturers advised the government that at the moment all the cement plants, barring few two to three units, are making huge losses because of higher input cost in the past and huge financial charges.
Steel bar prices have also jumped by Rs 2,000 per tonne for those made of billets by branded steel bar makers, and Rs 6,000-7,000 per tonne by steel bars made from scrap, which is also likely to increase construction cost.
Northern zone cement plant owners and secretary APCMA, Shehzad Ahmed did not respond to repeated calls seeking comment.
Shankar Tarleja at Topline Securities in a note issued recently said there might be good reasons for cement makers to seek a price increase. “The cement sector during 3QFY20, turned in cumulative losses compared to cumulative profits in 3QFY19 and 2QFY20.
“The deterioration in profitability during the quarter was mainly due to declining cement prices amidst competition over market share as industry production capacity has increased by over 50pc to 70mn tonnes over past 2-3 years.”
But builders and developers are unhappy over the move, predictably enough.
Former Chairman Association of Builders and Developers (ABAD), Hassan Bakhshi says cement makers seem to be acting in a cartelized manner.
“Cement cartel in North is again active to cash in soaring demand in view of upcoming rising construction activities after government’s construction package,” he said urging PM to take strict action against cement cartel and also steel bar makers for raising prices.
He pointed to TV news reports which claimed the Prime Minister has already “taken notice” of the price hike.
Published in Dawn, May 2nd, 2020