The price of cement has been increased by Rs 55 per 50 kg cement bag even though the effective date of increase in federal excise duty (FED) in the proposed Finance Bill 2017-18 is July 1, 2017. A sales office of a cement manufacturer at Main Peshawar Road, Saddar confirmed to Business Recorder that the landed price of a cement bag is Rs 525 for Rawalpindi and Islamabad; and accused the manufacturer of raising the price of cement bag after a meeting was reportedly held by cement manufacturers last week.

The Finance Bill 2017 envisages an increase in FED on cement from the existing Re 1 per kg to Rs 1.25 per kg. If approved by parliament the new rate of the FED should be applicable from July 1, 2017 and not June 2017 and it would be illegal for cement manufacturers to print the new price that includes the rate envisaging the yet to be approved FED.

Chairman Association of Builders and Developers of Pakistan (ABAD) Hanif Gohar told Business Recorder that they had serious concerns over the increase in the price of cement as it would badly affect the growth of the sector next year. He said the association had requested a meeting with Finance Minister Ishaq Dar to discuss their genuine concerns.

Sources said the recent increase in cement price raises concerns about possible anti-competitive activities of All Pakistan Cement Manufacturers Association (APCMA). Section 4 of the Competition Act, 2010 prohibits trade associations from engaging in collective decision making with respect to prices, production, and quota distribution.

For the Competition Commission of Pakistan (CCP) to initiate action against businesses involved in anti-competitive activities a complaint has to be registered or solid proof of an association engaged in collective decision making presented. So far, the CCP has not been approached with any complaint or solid evidence of the cement association colluding to raise cement price, sources in CCP told Business Recorder.

CCP has taken action against the cement association and its members on various occasions in the past. In 2009, CCP raided the offices of APCMA and after finding concrete evidence of cartelization, imposed over Rs 6 billion fine on the association and its members. In 2012 again, CCP conducted search and inspection of the APCMA. The cement companies have obtained stay orders against the actions of the CCP.

Cement retailers told Business Recorder that the increase in price comes despite cement prices hitting an all time high in Pakistan, averaging at almost double that in neighbouring countries. At present a 50kg bag of cement costs around Rs 530 in Pakistan, whereas the same 50kg bag costs around Rs 292 in neighbouring India. Chairman Constructors Association of Pakistan (CAP) Sikhander Hayat Khattak told Business Recorder that cement manufacturers operate like a cartel and they have requested Minister for Commerce Khurram Dastgir for a meeting to discuss the issue; however, the Minister has so far refused to give time to CAP.

Copyright Business Recorder, 2017