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Cement industry registers 20 percent sales growth

KARACHI (May 12 2003) : Cement sector has achieved record sales during the first nine months of this fiscal year, growing by 20 percent with March deals highest ever in the history of local cement industry.

The cement sales (including exports) have increased by 20 percent to 8.6 million tons in the first nine months of FY03 from 7.1 million tons in same period last year.

Cement sales of 1.2 million tons in March 2003 were the highest ever-monthly sales in the history of local cement industry.

The cement exports also created a record of 44,000 tons during the month of March.

Both Lucky & DG Cement have dispatched highest ever amount of cement in the same month.

According to a report of Invest Capital Securities, genuine buying is coming from housing sector since such a long-lived demand growth cannot be sustained on speculation of cartel reformation alone.

Increasing remittances, combined with lower interest rates have led people to invest in the housing sector as visible from the real estate price boom.

Cement manufacturers have met a number of times in last few weeks to resolve their conflicts.

The two primary issues for reforming cartel are exports to Afghanistan and quota allocation.

It seems that the cement manufacturers have at last realised that they do not need to decrease prices to boost demand. The strong demand is there even after partial recovery in cement prices.

The cement prices, that eroded by Rs 60 per bag due to rift in the cartel, have now stabilised at Rs 200-210 per bag in South and Rs 190-200 per bag in North amid informal understanding on the said issue.

Cement industry pays around Rs 17 billion per year in taxes. Central Excise Duty (CED) is applicable at the rate of Rs 1000 per ton.

Besides this, there is sales tax of 15 percent, which roughly equals to Rs 500 per ton. Government taxes make up 35-40 percent of selling price (Rs 4000 per ton) of cement.

Reduction in CED is on the cards for 2003-04 Budget as reported in last few days.

Moreover, Dr Hafiz Sheikh, Privatisation and Investment Minister, has again indicated that CED may completely be removed from cement sector. The reduction in CED, according to industry sources, is expected to range between Rs 200-Rs 400 per tonne.

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