Denying the existence of a cartel, cement manufacturers have told the Ministry of Industries that they are operating at the lowest rate of return and have passed on the bare minimum impact of inflation to consumers in the past few years.
Industry players point out that prices of cement, which were at Rs320 per bag in 2005, stand at only Rs425 to Rs440 per bag, though the cost of input has increased more than that.
They say total equity of the industry is Rs128 billion and it has a 10% rate of return. In contrast, independent power producers (IPPs) are operating at 18% rate of return.
There is no uniformity in prices of cement, utilisation and market and therefore no cartel existed in the industry, the cement manufacturers told the ministry in a meeting.
“The cement industry is getting the lowest rate of return at 10% on equity of Rs128 billion compared to other sectors,” Waleed Sehgal, Director of Maple Leaf Cement Factory Limited told The Express Tribune.
Citing examples, he said in the past eight years, prices of sugar had gone up from Rs25 to a peak of Rs125 per kg, urea from Rs400 to Rs1,900 per bag and di-ammonium phosphate (DAP) from Rs800 to Rs4,000 per bag.
On the contrary, the price of cement has risen from Rs320 to Rs440 per bag, which he said was still the lowest in the world market.
Sehgal stressed that prices of electricity, gas, coal and paper bag, labour cost and freight rate had increased manifold. “We have given the rationale behind the increase in cement prices to the Ministry of Industries,” he said, adding that the cost of electricity alone had jumped from Rs2 to Rs10 per unit.
He further said the industry was under debt of Rs100 billion, which it has to pay despite a low return.
Industry people say action taken by the Competition Commission of Pakistan could discourage foreign investors, who have made investment in the cement industry.
Published in The Express Tribune, March 31st, 2013.
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