Special Report on Cement Sector

Cement Sector of Pakistan - A special Report by Jeevey Pakistan

Performance determinants

Non of the cement producer enjoy any material product differentiation because of highly commoditize nature of the product .Consumers usually regard Prics as a key determinant. Important constitution of the cost are energy - over 50% of cost of production of cement  - and transportation costs. In addition to these elements efficiency of production process is critical in keeping the overall cost structure competitive. In this regard size of the plant, its age, origin - European or Chinese - integration of various components and above all the expertise of the management team are important.

Until recent years , almost all the plants operating in the country based on furnace oil, but the increasing furnace oil prices encourage the cement industry to switch over to comparative lt more cost effective coal firing system. However the prices of coal risen sharply over the recent period. Therefore some plants use the mixture of coal and the gas , alternating between the two as per changes in prices and availability.   .........Continue (courtesy to Pakistan Business Review)

The cement Industry of Pakistan has around 25 active Players. Around 10% have less than 2% market share each. At the same time the top 4 players controle more than 40% production capacity in the industry. The cement sector is divided into the north and south zones. Presently north zone accounts for around 80% of the rated capacity with 19 plants, while south zone accounts for 20% with 10 plants.

PSQCA and Cement Sector

General (Rtd.) Rehamt, Chairman All Pakistan Cement Manufacturers Association, while speaking to correspondent of the daily news  said that we can pay 0.50% of the quantity sold as marking fee only. He said that all the export in bulk may be exempted from the marking fee. He said that the existing marking fee is unaffordable.

Presently cement industry is paying Rs. 800 per ton as FED and 16% as GST, which comes around Rs.750/- per ton. Moreover a roalty of Rs. 10 - 15 per ton is paid to the provincial government for using lime stone. If compared with this tax regime the marking fee of PSQCA of around Rs. 5 - 6 is meager compared to service deliver. A number of cement manufacturers have become defaulters due to non payment of  the marking fee for last many years which has mounted the outstanding amount up to about five hundred million. On sending the recovery letters to cement manufacturers they have challenged demand of marking fee by PSQCA in courts.

Marking fee on cement was notified @ of 0.15% of annual production on January 13, 1986. It was revised as 0.1% of ex- factory price with effect from, April 1, 2008 under SRO 29 (KE) / 2008 dated Febraury 27, 2008. According to revised rate marking fee lies between Rs. 5 to Rs.6 per ton. The news correspondent took the view point of  DG PSQCA Engr. Aftab Ahmed Memon . Responding to the correspondent's query, The DG PSQCA said that the annual accounts of cement manufacturers indicate that their income areon the rise and profits are running in to billions but they are denying the legal marking fee of 0.1% of ex factory price. DG PSQCA has said that he is ready to resolve the issue with the cement manufacturers despite the fact that the matter is in the court of Law. He added that he has written to management of various cement units to come and present their point of view. About Non Renewal of licenses, He said that license of only those cement units would be renewed who cleared their dues. PSQCA grant license for use of PS mark on the product and accordingly manufacturers are levied with Marking fee. This mark is symbol of conformance of the product or process to relevant Pakistan Standards.