Preventing cement imports from Pakistan, a conspiracy

By Gamini WARUSHAMANA

Preventing cement imports from Pakistan by raising quality issues is a conspiracy that some private sector companies and government officials engage for personal gain, the Minister of Internal Trade and Consumer Affairs Johnston Fernando told the Sunday Observer.

There is a sharp increase in demand for cement due to a boom in the construction industry. Therefore, to prevent a short supply and resulting price increase the ministry has to intervene and import cement.

Since there is a rapid growth in the construction sector in India, cement is expensive in India. On the other hand as a result of terrorist attacks and continuing unrest in Pakistan, the construction sector has been seriously affected. The price of cement is cheaper in Pakistan and the Ministry decided to import cement from Pakistan. Today 20 percent of cement is imported from Pakistan and there are several Pakistan manufacturers that export to Sri Lanka and have SLS certification. The SLSI has issued a quality certificate to a private sector company to import 1.4 million bags of cement last month, therefore, this decision of the SLSI is suspicious and the government will inquire into this incident.

He said that although SLSI has suspended imports from this Pakistan manufacturer, the public has not been informed. Already some local manufacturers have increased the price of cement to Rs. 785 per bag, while there is a regulated price of Rs. 750, he said.

Meanwhile, the Chamber of Construction Industries (CCI) said that Cement that is sold in Sri Lanka should adhere to standards certified by the Sri Lanka Standards Institution (SLSI).

The CCI said that boom in the construction industry in the country has created a cement shortage.

Commenting on the release of a stock of cement to the market without the SLS certification CEO of CCI Dakshitha Thalagodapitiya said that what is required now is for all suppliers to adhere to the country’s standards and prevent substandard cement from entering the market.

Use of substandard building materials will cause heavy losses such as structural failure in the future.

The Ministry of Internal Trade and Consumer Affairs had imported 14,000 bags of cement from Pakistan to address the cement shortage, which was certified by SLSI for quality. Meanwhile SLSI has temporarily suspended the permit of this Pakistan manufacturer and had also advised him not to export cement to Sri Lanka until it is proven that the quality of cement has improved.

The Director General, SLSI Dr. L.N. Senaweera said that the imported cement does not meet the country standard SLS 107 : 2008. SLS always follows the rules and regulations as governed on the SLS marks scheme as the ultimate objective of the scheme is to ensure the quality of the product, he said.

The importer the National Co-operative Council (NCC) challenged the SLSI and released the stock to the market without the SLS certification. The chairman of the NCC said that SLSI has issued the SLS certificate for cement imported by the private sector from the same manufacturer in Pakistan. However, SLSI denied this charge.

Is there a cement shortage?

Thalagodapitiya said that the construction industry in the country has recorded unprecedented growth of 9.3 percent during 2010 compared to 5.6 percent in 2009. According to the Central Bank cement availability in 2010 has grown by 18.1 and it was a 11.1 percent growth in 2009.

The growth has been due to various factors such as massive infrastructure development activities, accelerated post conflict reconstruction, new projects such as resettlement of undeserved communities in Colombo under the ambitious urban renewal program by the UDA and the Ministry of Defence, construction of the military complex, outer circular road, ports infrastructure development and heavy investment in the leisure sector. According to CCI estimates the construction industry will record a `double digit growth’ this year, Thalagodapitiya said.

The size of the cement market in Sri Lanka in 2009 was 3.1 million MT and has grown to 3.7 million MT in 2010. According to my estimate the market will be around 4.1-4.3 million MT this year. Production of the two local producers Holcim and Tokyo Cement account for two-thirds of the market while the balance is imported by the same producers as well as other private sector players. Therefore, one-third of the market is fed by imported cement. All these importers have been active in the cement market for a considerable period of time. The most important factor is that all these importers have strictly adhered to the country standard SLS.

Thalagodapitiya said that from January to May the estimated cement availability in the market was around 1.7 million tons. During June and July 340,000-370,000 MT have reached the market. These figures are consistent with the Institute of Construction Training and Development as well as market researchers.

New strategies

The Country needs new options and new strategies to cater to the increasing cement demand due to unprecedented construction activities being carried in the country to ensure an uninterrupted supply. I believe that the key manufacturers should make use of the fully installed capacity and invest in expansion. The Puttalam factory of Holcim has produced 97,000 MT in July, the highest ever production of the manufacturing facility. It is hoped that rehabilitation of Kankesanthurai factory will be completed simultaneously to augment the domestic production capacity, he said

Conventionally cement has been imported from countries such as Indonesia, India, Thailand and Malaysia. The boom in the domestic construction industry in India has increased the domestic demand for cement while the monsoon weather in the West coast of India has affected the production capacity.

Thalagodapitiya said that CCI is satisfied with the enforcement of quality standards of building materials by SLSI. Branding and quality assurance is an essential ingredient while the private and public players should strictly follow them.

According to statistics published by the Institute of Construction Training and Development from March 2009-March 2011 the price of major building materials have increased while cement price has acted as a deflater maintaining consistency, Thalagodapitiya said.