Cement ‘cartel’ inquiry proceeds

Updated 25 Sep 2020

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Teams of Competition Commission of Pakistan on Thursday carried out search and inspection of All Pakistan Cement Manufacturers Association in Lahore. — AFP/File
Teams of Competition Commission of Pakistan on Thursday carried out search and inspection of All Pakistan Cement Manufacturers Association in Lahore. — AFP/File

ISLAMABAD: Teams of Competition Commission of Pakistan (CCP) on Thursday carried out search and inspection of All Pakistan Cement Manufacturers Association (APCMA) in Lahore.

The move is part of an inquiry launched in May 2020 to investigate possible anti-competitive activities by cement manufacturers.

The CCP enquiry was initiated on the information gathered through various media reports and complaints regarding increase in cement prices, particularly during the month of April 2020.

The reports indicated that an increase of Rs45-55 per cement bag was apparently decided in a meeting of the cement manufacturers held under the umbrella of APCMA.

Some of the media reports also quoted cement dealers saying that the leading cement companies in the north region had collectively decided to increase the cement prices by Rs55 per bag.

CCP team searches APCMA office in Lahore

A CCP official said an initial analysis by enquiry officers to see the cement companies’ profitability trend shows that due to the lower demand of cement in the first quarter of 2020, the companies had to undergo financial losses at variance. However, the increase in price was in stark contrast, raising concerns of collective decision making and price fixing by the cement manufacturers.

Some other players of the construction industry also hinted upon the cement cartel in North region becoming active following price increase trend in the area. Official data available with the CCP indicated the cement price increase of 4 per cent in Islamabad, 10pc in Lahore, and 6pc in Peshawar from the second week of April 2020.

The official said the sudden rise in price by the cement manufacturers at a time when there is low demand compared to the installed capacity of the manufactures and considering that input fuel cost (coal and oil), transportation and interest rate have declined raises suspicion of a collective rise in price by cement companies.

The CCP has noted that the production capacity of cement sector has increased from 44 million tonnes in 2014 to 69m tonnes in 2020.

It added that the losses incurred by the cement sector and increase in the price of cement in a similar time period raises suspicion of collective decision of the cement companies to recover losses incurred due unutilised installed capacities.

“But the cement sector has history of collusive activities and they have been imposed a collective penalty of Rs6.3 billion on account of involvement in the prohibited agreements,” said an official of the CCP.

However, the matter was under litigation as cement companies had obtained stay order from the Lahore High Court.

Published in Dawn, September 25th, 2020