Cement cartel again under CCP’s hammer

ISLAMABAD: Ten years after it busted and penalised a cement cartel in the country, the Competition Commission of Pakistan (CCP) has again started investigating a suspected collusion between the cement companies, which had recently raised cement prices in the north region (Punjab and Khyber Pakhtunkhwa), The News learnt reliably on Wednesday.

Almost 11 years ago on August 27, 2009, the CCP had passed an order imposing a penalty of over Rs6 billion on the All Pakistan Cement Manufacturers Association (APCMA) and its members for cartelisation.

The cartel, however, obtained a stay order from the court due to which the CCP has failed to recover the penalty to date.

The cartel is an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition. For the last many years, the cement sector cartel, particularly in the north region, has remained active and is fixing and raising the cement prices at will, official sources said.

On April 22, senior representatives from the companies held a meeting and decided to hike the cement price in the range of Rs45 to 55/bag in north region.

The commission has now taken notice and has sent letters to these companies asking them to give reasons for price increase by all companies.

Official said the CCP considered this increase unjustified in light of the global decline in coal price, decrease in oil prices and reduced interest rates.

Over the past two months, cement prices in Islamabad have gone up by four percent, Lahore 10 percent and Peshawar by six percent. The CCP has finally taken notice and started a fresh investigation.

Sources in the cement industry told The News that the CCP had directed over a dozen leading cement companies to provide information about the weekly price data from July 2019 to date; weekly production data for the same period, and the objective reasons for each price increase/decrease since 2019.

The CCP has also directed them to provide reasons behind the price hike after the incentivized package announced by the government for the construction industry.

The companies that have received the CCP’s letter include the Bestway Cement, Attock Cement, Kohat Cement, Pioneer Cement, DG Khan Cement, Gharibwal Cement, Dandot Cement, Fector Cement, Cherat Cement, Lucky Cement, Maple Leaf Cement, Fauji Cement, and Flying Cement.

In a recent meeting with the APCMA, federal minister for industries & production had also requested for withdrawing the price increase, but the cement manufacturers flatly declined to do so, an official of the ministry said.

In 2018, cement prices witnessed a sharp increase of 22 percent in Islamabad, 13.5 percent in Lahore and 4.9 percent in Karachi. However, the prices remained stable in 2019 mainly due to ban on its export to India.

Cement dispatches in April 2020 have declined by 23.65 percent to 3.52 million tons against 4.61 million tons in the same month last year, the reason being COVID-19 pandemic.

The decline in domestic consumption has been observed in both the north and south regions. In the April 2020, domestic dispatches in North region fell by 12.68 percent to 2.928 million tons against 3.353 million tons in same month last year. In south region (Sindh and Balochistan), its dispatches have reduced by 49.85 percent to 0.342 million tons against 0.683 million tons in April 2019.

The current year was worst for the cement prices, as the COVID-19 pandemic has pushed the economic activities further down thus lowering the demand for cement. A package for the construction industry announced by the prime minister in the first week of April 2020 has slightly revived the cement demand in the local market.