ISLAMABAD: The Competition Commission of Pakistan (CCP), as part of an inquiry launched in May 2020 to investigate the possible anti-competitive activities by the cement manufacturers carried out a raid at All Pakistan Cement Manufacturers Association (APCMA) in Lahore office on September 24, 2020.
Two different teams entered and searched the APCMA main office and a member of APCMA. Since a senior employee of one of major cement company is also the office bearer of the APCMA’s executive committee, representing the north region, therefore, the commission also conducted raid on the premises of member concern with the objective to gather evidence of any collusive arrangement for the purposes of the Act.
In a handout, CCP said the inquiry was started based on the information gathered through various media reports, and concerns and complaints expressed regarding a concurrent increase in cement prices, particularly during April 2020. The reports indicated an increase of Rs. 45 – Rs55 per cement bag apparently decided in a meeting of the cement manufacturers. Some of the media reports also quoted cement dealers saying that the leading cement companies in the north region had collectively decided to increase the cement prices by Rs. 55 per bag.
From the analysis done by the CCP’s inquiry officers to see the cement companies’ profitability trend, it transpired that due to the lower demand of cement in the first quarter of 2020, the companies had to undergo financial losses at variance, however, the increase in price was starkly parallel, raising concerns of collective decision making and price fixing by the cement manufacturers. Some other players of the construction industry also hinted upon the cement cartel in the North region becoming active following price increase trend in northern region.
The official data available with the CCP indicated the cement price increase of 4 percent in Islamabad, 10 percent in Lahore, and 6 percent in Peshawar from the second week of April 2020. From analysis of the information obtained from the news reports, price trends and facts gathered pertaining the same, it appears that objective basis, if any, needed to be assessed and/or the correlation between increase in the price of cement and grounds presented by the representatives of the cement industry.
Sudden rise in price by the cement manufacturers at a time when there is low demand compared to the installed capacity of the manufactures and considering that input fuel cost (coal and oil), transportation and interest rate have declined raises suspicion of a collective rise in price by cement companies.