Southern cement companies win freight subsidy

Farhan Zaheer April 20, 2010

KARACHI: Cement companies located in the southern part of the country have won an inland freight subsidy from the government, cement manufacturers said. Executives of Attock and Lucky Cement, operating in the south of the country comprising Sindh and Balochistan, confirmed on Tuesday that the court had given a decision in their favour and asked the government to give an inland freight subsidy to all cement companies working in Pakistan, said Khurram Shehzad, Head of Research, Financial & Economic Research Department, Invest Capital Investment Bank Ltd.

“The court’s decision in favour of southern companies is a fair one,” said Badruddin Fakhri, Chief Executive Officer of Galadari Cement Gulf Limited whose upcoming cement plant will also be in the southern zone. “Cement companies are set up in areas where they can easily receive raw material like other industries. Similarly, being closer to seaports is also a competitive advantage,” he said.

“The subsidy will help southern cement companies in cost competiveness,” said Atif Zafar, analyst at JS Research. Lucky and Attock were the companies which had raised the issue of southern companies being denied the inland freight subsidy. “According to our calculations, southern companies will save at least Rs10 per 50kg bag in exports,” they added.

The government announced a 35 per cent inland freight subsidy on cement exports about a month ago. However, the cement plants located within 100 kms of seaports were excluded from the facility which irked the manufacturers working in the south. The All Pakistan Cement Manufacturers Association (APCMA) then wrote a letter to the Trade Development Authority of Pakistan (TDAP), asking it to allow the freight subsidy to all (northern and southern) companies. Twenty cement plants are working in the north zone and 10 in the south zone. Total production capacity of cement plants in the north zone is four times that of the south. Cement exports have been increasing for the last three years reaching 11.38 million tons in 2008-09 from 3.18 million tons in 2006-07 despite a financial crunch in world markets.


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