Cement manufacturers continue to operate below 70 per cent installed capacity in January 2012 as well as in the first six months of this fiscal due to which they could not pass on the high production cost to the consumers. A spokesman of All Pakistan Cement Manufacturers Association (APCMA) pointed out that though current cement rates are over Rs125 (Pak rupees) lower in Pakistan than neighbouring India the industry is being unfairly targeted on the price issue.
He said that during the past four years both the inflation and the bank mark up has remained in double digits that have forced producers of most of the items except cement to increase the rates according to the increase in input cost. Citing few examples he stated that the cement rates increased from Rs252 per bag in December 2006 to Rs293 per bag in June 2011, which is only an increase of 13 per cent. Compared with nominal increase in cement rates the rates of urea increased from Rs530 per bag in December 2006 to Rs1407 per bag by June 2011, an increase of over 275 per cent. In the same way the rates of DAP fertiliser shot up from Rs871 per bag on December 2006 to Rs4031 per bag by June 2011, which is an increase of over 410 per cent during the last five years.
He said sugar prices have increased from Rs30 per kg in December 2006 to Rs69 per kg by June 2011 which again is a hefty increase of over 110 per cent. He said that these increases in the rates of different items were due to abnormal increase in input costs and it affected entire manufacturing sector. However, since the cement demand during this entire period remained below the production capacity of the commodity, the cement manufacturers were unable to pass on the impact of high cost of production to the consumers. Most of them, he added, are posting losses and two cement units have closed down. He said that electricity, coal, gas and diesel are the main input cost of the cement industry. The rate of electricity, he added, has increased from Rs1.87 per unit in June 2006 to Rs10.69 per unit. Even the off peak rates, he added, have increased from Rs1.11 per unit to Rs5.97 per unit. He said that gas that was available to the captive power units at Rs241per MMBTU in June 2011 has increased to Rs382.37 per MMBTU in June 2011. He said that light diesel prices jumped from Rs33 per litre in March 2007 to Rs88 per litre in June 2011. Coal rates have increased from $51 per tonne in December 2006 to $111 per tonne in December 2011. He said that the cement industry paid heavy price for the expansion in production capacity that was planned on the assumption that the economy would grow at an average of six per cent or above. Unfortunately, he added, the economic growth has averaged 2.5 per cent during past four years that suppressed the demand for cement in the local market.