Cement manufacturer calls on govt. to rectify policy mismatch

The country’s largest cement manufacturer has called on the government to rectify a mismatch in its policies, which is causing the cement market to misbehave and adversely affect the construction industry and the consumer.

“The national policy on cement that allows duty free imports of cement, but imposes price controls on domestically manufactured cement, leads to market distortions that do not benefit consumers or the construction industry,” Tokyo Cement Company (Lanka) PLC Managing Director S. R. Gnanam said.

The Rajapaksa regime removed all import tariffs on cement in December 2014 to further energize infrastructure development.

The past regime had focused on infrastructure development as the main economic activity and campaigned both the January and August elections based on the fact despite economists citing infrastructure-based growth statistics, misleading.

Further, the removal of import tariffs could have led to home owners purchasing cheaper, lower quality foreign cement leading to the construction of weaker structures.

“The duty free approach to imports, sans adequate quality controls, leads to inflows of dubious quality cements and price fixation in the market, with no effort on the part of importers towards investing in the future of the domestic construction industry, or ensuring product quality for local consumers,” Gnanam said.

Following the regime change, the populist interim budget called on cement manufacturers to decrease the price of cement, and set a maximum retail price for a 50kg cement bag at Rs.870 against the prevailing market price of Rs.930 at the time. 

Tokyo Cement saw its net profits falling 13 percent year-on-year during the quarter ended June 2015 due to the price cut and the temporary halt of public infrastructure project by the interim government.

The problem for manufacturers was further compounded with state-owned cement producers offering a bag of cement at Rs.770 if purchased at the factory and transported at personal cost.

Finance Minister Ravi Karunanayake said the prices were reduced to fuel house construction and to give the consumers relief.

However, Gnanam said that such ad-hoc measures are taken without industry consultation.

“The present situation is an example of such price changes by the State, without adequate industry consultation, despite the existence of a pricing formula to adjust cement retail prices. Such sudden and unilateral decisions by the State causes unpredictability and instability within the industry, while also alarming potential investors,” he said.

He called on the government to reconsider past practices and to initiate a dialogue with the industry, as cement manufacturing is one of the few heavy industries to survive in a service sector-focused Sri Lanka.

The present government has said that it would focus on developing industries which were left out during past one and half decade. (CW)