News

Shortage of cement: Builders under strain

  • Govt. restrictions, shortage hurting local SMEs
  • Failure in price controls have led to price hike
  • Industry warns of possible job losses

By Uwin Lugoda

Several construction projects are at risk of being halted due to a shortage of cement in the market and the rising price of stocks that are available, The Sunday Morning learnt.

Several stakeholders of the local cement industry expressed concern over the prevailing cement issue, and told The Sunday Morning that the shortage had brought a majority of their projects to a halt.

National Construction Association of Sri Lanka (NCASL) Chairman Deshabandu Susantha Liyanarachi stated that it was an added burden on the already pressurised sector.

He explained that developers were suffering due to the ongoing Covid-19 pandemic and the moratoriums that were introduced in the last few years.

“We currently have several large-scale construction projects in progress, and these are being done by both international and local developers. These local developers mostly fall under the small and medium enterprises (SME) category, and have been heavily impacted over the last few years, which included delayed payments from financing companies that are authorised by the Finance Ministry. Now, they are also subjected to increased prices of cement and a shortage,” said Liyanarachi.

He explained that the Government had restricted construction material imports despite the country only being able to source 28-30% locally, and repeatedly failed to impose effective price controls on these building materials.

Having spoken to Finance Minister Basil Rajapaksa regarding this matter, Liyanarachi stated that he was assured that two people were assigned to handle the imports of these materials in order to meet the country’s demand by later this month. 

However, he stated that, instead of being distributed amongst developers, these materials were being given to agents, who then distribute them to hardware stores, leading developers to buy them at increased prices.

“Despite the gazetted price for cement being Rs. 1,098 (per bag), developers have to buy it at rates as high as Rs. 1,200 or Rs. 1,300, which is a very unfair situation. So, a cement mafia during a time like this, is detrimental to our developers, and can have negative long-term implications on the industry.”

He stated that this could also lead to foreign developers coming in and monopolising the industry, leaving local domestic developers unable to contribute to domestic projects.

“This will bring our industry down, and then what will happen to the 1.6 million labour force of architects, engineers, quantity servers, technical officers, and labourers that are in Sri Lanka? Authorities need to be responsible for what lies ahead in the future,” he questioned.

Liyanarachi stated that the Government’s defence to this ongoing issue was the Sri Lankan rupee (LKR) depreciation and the dollar shortage. However, he stated that the procurement guideline 5.4.2 of 2006 has predicted such issues, and stated that any increased cost for a project exceeding three months after the price variation formula for the LKR has been formulated by the Construction Industry Development Authority (CIDA) has to be paid by the Government.

“I have personally sent this to all the relevant authorities, and when contacted, the Finance Minister understood the issue, but others in the Ministry didn’t. The increased prices need to be paid by the Government because if not, the developers will have to foot the bill, despite these unprecedented price increases.”

He stated that the Government has given a solution for the cement shortage, which is to get the local manufacturers to increase production along with the importation of 1,000 metric tonnes of cement within this month. He stated that the Government had assured them that this would alleviate the country’s cement shortage.

Ceylon Hardware Merchants Association Secretary H.M. Jayweera echoed Liyanarachi’s sentiments, stating that its members have been left in a difficult situation following the shortage. 

He explained that the hardware merchants who depend on imported cement were currently unable to supply cement to projects, which have since been halted.

“Our members who import cement are currently facing a tough situation because they have run out of stock. We also see several construction projects having been halted due to these import restrictions and the pricing matter.”

An official from the Chamber of Construction Industry stated that they were lobbying with the Government regarding this crisis and were trying to get the materials down for these development projects to continue.

Late last evening (6), the cement companies announced that the retail price of a 50 kg bag of cement would be stipulated at Rs. 1,375 with effect from yesterday.