KARACHI: Cement manufacturers continue to operate below 70 percent installed capacity in January 2012 as well as in 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) said though the current cement rates were over Rs 125 lower in Pakistan than neighboring India the industry was being unfairly targeted on the price issue.
Chairman APCMA Aizaz Mansoor Sheikh said the industry produced 17.94 million tonne of cement in the first seven months of this fiscal ending on January 2012. This is only 3.94 percent higher than the production during corresponding period of last fiscal. He said the surge of 7.21 percent in domestic demand of cement was offset by 3.59 percent decline in exports.
He said during the past four years both the inflation and the bank mark up has remained in double digits have forced producers of most of the items except cement to increase the rates according to the increase in input cost.
He said the cement rates increased from Rs 252 per bag in December 2006 to Rs 293 per bag in June 2011, which was only an increase of 13 percent.
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 are posting losses and two cement units have closed down, he added.
He said electricity, coal, gas and diesel were the main input cost of the cement industry. The rate of electricity has increased from Rs 1.87 per unit in June 2006 to Rs 10.69 per unit. Even the off peak rates have increased from Rs 1.11 per unit to Rs 5.97 per unit.
He said gas was available to the captive power units at Rs 241per MMBTU in June 2011 has increased to Rs 382.37 per MMBTU in June 2011.
He said light diesel prices jumped from Rs 33 per liter in March 2007 to Rs 88 per liter in June 2011. Coal rates have increased from $51 per tonne in December 2006 to $111 per tonne in December 2011.
He said 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 6 percent or above.
Unfortunately the economic growth has averaged 2.5 percent during past four years that suppressed the demand for cement in the local market.
Compared with nominal increase in cement rates the rates of urea increased from Rs 530 per bag in December 2006 to Rs 1,407 per bag by June 2011, an increase of over 275 percent.
In the same way the rates of DAP fertilizer shot up from Rs 871 per bag on December 2006 to Rs 4,031 per bag by June 2011, which is an increase of over 410 percent during the last five years.
He said sugar prices increased from Rs 30 per kg in December 2006 to Rs 69 per kg by June 2011, which again is a hefty increase of over 110 percent.
He said these increases in the rates of different items were due to abnormal increase in input costs and it affected entire manufacturing sector.
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