Business

CAA to increase cement prices if Govt. approves

  • Importers request increase in prices
  • Construction industry complains over shortage

By Yakuta Dawood

The Consumer Affairs Authority (CAA) is willing to increase the local prices of cement if the Government approves a price hike, in the face of sustained lobbying by cement importers amidst the Sri Lankan rupee depreciation, The Sunday Morning Business learns.

Speaking to us, CAA Executive Director Thushan Gunawardena stated that the requests from cement importers to increase the existing maximum retail price (MRP) are on the rise due to the present global market conditions.

“The CAA will increase the MRP of cement once the Government approves the requests,” Gunawardena said.

Addressing the concerns present in the industry, Lanka Readymix Concrete Association (LRCA) Secretary Tissa Mallawarachchi told us that there is a shortage of “bulk” cement in the market due to the rupee depreciation, as importers now have to pay a higher price to get down the materials.

“Importers do not have money to import cement with the present conditions existing in the market. No one is understanding this problem, and more importantly, there is no one to tell this problem about,” Mallawarachchi explained. 

Further, he said that another reason as to why there is a scarcity in the market is due to the low quality of raw materials produced in the countries from which Sri Lanka used to import earlier; for example, if the quality standard doesn’t meet the requirement of the Sri Lanka Standards Institute (SLS), then importers are not permitted to import cement.

“Because of all these problems, the cement market has crashed right now. However, if this continues, the cement industry will face a similar situation that was recently faced by the steel industry,” he added.

The Sunday Morning Business also spoke to a senior official from Sri Lanka’s sole cement manufacturer, INSEE Cement, with regard to the topic. Speaking to us, the official also confirmed that the scarcity present in the market is due to the price hike in raw materials of almost more than 30%.

Explaining further, he said that unlike several other industries, cement prices are, unfortunately, controlled by an MRP, due to which cement companies are unable to increase the price when the costs of the raw materials increase drastically.

“Despite all these challenges, in August, we were able to have the highest volume production in history. But because of the increased raw material price, it has taken away our expected profit. Hence, the request to the CAA for a price increase from all players in the industry has been there since the beginning of this year, but nothing has been approved so far,” the official said.

When inquired if INSEE Cement faces any challenges while importing raw materials, the official stated that even though almost 50-55% is locally manufactured at facilities in Sri Lanka, the rupee depreciation is one of the major concerns the company is facing right now.

Commenting with regard to the quality concern in terms of importing materials, the official also said the quality has dropped significantly in comparison to what INSEE Cement produces in the local market, which is beyond their capacity to control, given the scarcity in the market.

“Sri Lanka gets most of the imports from India and Pakistan. Right now, Pakistan has curtailed exports as demand in their local market has risen, thereby making it very difficult for companies that import cement to ensure proper quality,” the official said.

The official added that the Government should see that every industry is treated the same way; for example, the official said, if steel prices can be increased, then why not cement as well? The official further noted that, while keeping the consumers and other stakeholders in mind, the Government should look into this system.

“In my experience in the industry, cement has never faced an issue like this. Hence, the authorities need to go deeper into the issue to identify the cause of this situation in order to provide an effective solution,” the official added.

Tokyo Cement Company (Lanka) PLC refused to divulge any information pertaining to this matter in hand.

In the meantime, according to recent local media reports, cement is currently unavailable in the country and constructors have expressed that they cannot meet the deadlines of their contracts due to this reason.

“Kurunegala District Building Constructors’ Association Chairman N.M. Nimal Perera said that the authorities should take immediate steps to resolve the issue,” the local media report added.