The Competition Commission of Pakistan (CCP) today conducted search and inspection of the premises of All Pakistan Cement Manufacturers Association (APCMA) and Kohat Cement in Lahore under Section 34 of the Competition Act, 2010 to impound proofs of suspected cartelization in cement sector. CCP had obtained information from an informant that contained copies of certain e-mails which were sent by the Secretary of APCMA to cement manufacturers. The contents of the e-mails provided by the informant revealed that the cement manufactures have prima facie collectively devised a vigilance plan by which the cement dispatches at one cement production unit are monitored by a team of another unit and vice versa. Such monitoring of cement dispatches was previously unveiled as the integral part of a collusive arrangement among the cement manufacturers and it is important to note that CCP through its Order dated 27 August 2009 had declared such arrangement to be in violation of Section 4 of the Competition Act, 2010 and imposed a penalty of Rs. 6.3 Billion on APCMA and its member undertakings i.e. Cement manufacturers. This matter has been taken to court and pending since then. The fresh probe by CCP was based on separate set of facts, which suggested that prima facie the cement manufacturers have again formed a collusive arrangement and to ensure compliance the monitoring function is being performed by cement manufacturers themselves under the auspices of APCMA. Based on the documentary proofs including emails, it appeared that the monitoring arrangement has been formulated under the auspices of APCMA, as the Secretary APCMA appears to coordinate the activities under the arrangement and the Chairman is responsible for rotating the monitoring teams. The CCP search and inspection team, when arrived at the APCMA premises, discovered that the APCMA secretary was not present in the office and all the record was locked. However, after initial hesitation, the office assistant present in the APCMA office allowed access to the data. When the CCP officials asked them to provide access to an APCMA email, which according to the informant, was used to coordinate the collusive activities of APCMA members, the PCMA secretary denied existence of any such email and refused to provide access to it. The search and inspection of the office of APCMA President, who is the Chief Executive of Kohat Cement, was also carried out to obtain proofs of his suspected role in rotating the monitoring teams. Various media reports and people associated with the construction industry have constantly alleged cartelization in the cement sector owing to exorbitant rise in cement prices during current year. The allegations are supported by the facts and figures pertaining to cement prices being steeply increased over the year starting with Rs. 330/- in the month of January 2010 and reaching up to Rs. 425/- in November and December 2010. Cement Manufacturers have continued to increase the prices despite the reduction in sales tax and Federal Excise Duty (FED) by 1 percent and Rs. 200 per ton respectively along with removal of 2.5 percent Special Excise Duty (SED) as announced in the Federal Budget of Fiscal Year 2011- 12. This has rendered into savings of Rs 22-23 per bag which has been completely absorbed by the producers depriving the end users of the taxation benefit announced by the government. By eating the FED benefit, the manufacturers had raised the prices without any fear by Rs35 per 50 kg bag after budget 2011-12 announcement, as reported by the Dawn in October 6, 2011. Coal prices in the international market have been on the rise since April 2009 when they stood at $68 per ton and then gradually peaked at $142 per ton in January 2011, but currently Market sources constantly complained that there was no justification of raising the prices of cement when the global coal price (which is used to heat clinker) has declined to $130 per ton from $150 per ton in the few months. In the given facts the possibility of existence of a cement cartel cannot be ruled out. Although, the evidences obtained during the search and inspection appears to corroborate the information provided by the informant, however, the evidences will be scrutinized by CCP.
The Competition Commission of Pakistan (CCP) today conducted search and inspection of the premises of All Pakistan Cement Manufacturers Association (APCMA) and Kohat Cement in Lahore under Section 34 of the Competition Act, 2010 to impound proofs of suspected cartelization in cement sector.
CCP had obtained information from an informant that contained copies of certain e-mails which were sent by the Secretary of APCMA to cement manufacturers. The contents of the e-mails provided by the informant revealed that the cement manufactures have prima facie collectively devised a vigilance plan by which the cement dispatches at one cement production unit are monitored by a team of another unit and vice versa.
Such monitoring of cement dispatches was previously unveiled as the integral part of a collusive arrangement among the cement manufacturers and it is important to note that CCP through its Order dated 27 August 2009 had declared such arrangement to be in violation of Section 4 of the Competition Act, 2010 and imposed a penalty of Rs. 6.3 Billion on APCMA and its member undertakings i.e. Cement manufacturers. This matter has been taken to court and pending since then.
The fresh probe by CCP was based on separate set of facts, which suggested that prima facie the cement manufacturers have again formed a collusive arrangement and to ensure compliance the monitoring function is being performed by cement manufacturers themselves under the auspices of APCMA. Based on the documentary proofs including emails, it appeared that the monitoring arrangement has been formulated under the auspices of APCMA, as the Secretary APCMA appears to coordinate the activities under the arrangement and the Chairman is responsible for rotating the monitoring teams.
The CCP search and inspection team, when arrived at the APCMA premises, discovered that the APCMA secretary was not present in the office and all the record was locked. However, after initial hesitation, the office assistant present in the APCMA office allowed access to the data. When the CCP officials asked them to provide access to an APCMA email, which according to the informant, was used to coordinate the collusive activities of APCMA members, the PCMA secretary denied existence of any such email and refused to provide access to it. The search and inspection of the office of APCMA President, who is the Chief Executive of Kohat Cement, was also carried out to obtain proofs of his suspected role in rotating the monitoring teams. Various media reports and people associated with the construction industry have constantly alleged cartelization in the cement sector owing to exorbitant rise in cement prices during current year. The allegations are supported by the facts and figures pertaining to cement prices being steeply increased over the year starting with Rs. 330/- in the month of January 2010 and reaching up to Rs. 425/- in November and December 2010.
Cement Manufacturers have continued to increase the prices despite the reduction in sales tax and Federal Excise Duty (FED) by 1 percent and Rs. 200 per ton respectively along with removal of 2.5 percent Special Excise Duty (SED) as announced in the Federal Budget of Fiscal Year 2011- 12. This has rendered into savings of Rs 22-23 per bag which has been completely absorbed by the producers depriving the end users of the taxation benefit announced by the government. By eating the FED benefit, the manufacturers had raised the prices without any fear by Rs35 per 50 kg bag after budget 2011-12 announcement, as reported by the Dawn in October 6, 2011.
Coal prices in the international market have been on the rise since April 2009 when they stood at $68 per ton and then gradually peaked at $142 per ton in January 2011, but currently Market sources constantly complained that there was no justification of raising the prices of cement when the global coal price (which is used to heat clinker) has declined to $130 per ton from $150 per ton in the few months.
In the given facts the possibility of existence of a cement cartel cannot be ruled out. Although, the evidences obtained during the search and inspection appears to corroborate the information provided by the informant, however, the evidences will be scrutinized by CCP.
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