Massive cut in PSDP, power outages hit cement industry
Thursday, May 06, 2010
By Khalid Mustafa
ISLAMABAD: The massive cut in the Public Sector Development Programme (PSDP), power tariff hike, increase in coal prices in the international market and power outages have exposed the cement industry to vulnerability owing to which several business tycoons have indicated to the Industries and Production Ministry that they feared closure of their plants as running cement industry is no more feasible, a senior official told The News.
The power tariff has increased by 30 per cent within a year. The coal prices, being used as a fuel in the cement industry, swelled by over 100 per cent to $125-135 per ton during 2009/10 from $57-85 per ton during 2008/09, he said.
In April 2009, only one plant of Lafarge Cement paid Rs124 million, but due to power tariff hike it had paid Rs163 million during the current year.
The paper sacks price has increased by Rs13-14 in the wake of increase in paper price in the international market, the official said, adding that the cost of per ton cement has increased by Rs500, but in the wake of less domestic demand, the price of a cement bag has drastically tumbled by Rs100 from Rs315-320 per bag during the last fiscal year to Rs225-240 during the current year.
Likewise, the massive power outages are also causing phenomenal increase in the input cost of the commodity.
All the cement plants are running at just 50 per cent production capacity despite the fact that more plants have been installed, the official said.
The domestic demand for cement has witnessed significant reduction of 10-15 per cent during the current year, he said, adding that the massive cut in PSDP has also reduced the local demand for the commodity and huge increase in input cost has forced several enterprisers to seriously think to either reduce their operations or close the plants as most of them are not even have enough liquidity to service their debts.
Under this scenario, three main cement plants, Best Way Cement, Lafarge Cement and DG Khan Cement in Chakwal, are working hard to survive, but the incessant power outages are inflicting huge losses to the industry.
The three units are producing 11 million tons of cement, which is 25 per cent of the total cement production.
Around 10 million people are employed, directly or indirectly, with the cement sector.