High cost takes its toll

 LAHORE: Six cement wet processing plants have closed down in the wake of high energy cost, taxes, freight and other charges while dry processing plant owners warn if energy tariffs remain high they will also stop operations, The News has learnt. Fuel and power are main components in the cost of production of the cement sector. Coal price has increased by 170 per cent to $202 per tonne against $75 per ton last year while diesel cost has risen by 54.41 per cent to Rs55.31 per litre from Rs35.82 last year. Similarly, furnace oil cost has jumped by 90 per cent at Rs50,740 per tonne compared to Rs26,678 per tonne in 2007. Power cost has increased by 30 per cent to Rs5.18 per kilowatt hour from Rs3.99 per kwh last year. In this regard, the cement industry gave a presentation to the Ministry of Industries and Production, saying the cost of production had hiked 64.50 per cent or Rs147 per bag since June 2007. After that rise, the industry said, the cost to manufacture and sell cement had reached Rs375.60 per bag compared to last yearÆs price of Rs228.21 per bag. It told the ministry that the cost of production and other expenditures including taxes, freight and commission charges rose Rs106.64 and Rs40.77 per bag respectively. Sources in the ministry said the industry had provided a detailed break-up of the cost of production, which included raw and packing material, fuel and power, stores & spares, salaries and wages, depreciation, financial charges, administration and selling charges and other operating expenses. Raw and packing material cost went up to Rs27.79 per bag in June 2008 against Rs18.27 per bag in June 2007. Fuel and power cost increased to Rs152.28 per bag in June 2008 against Rs65.70 in June 2007. Stores & sparesÆ cost (including repair and maintenance) rose to Rs6.60 from Rs6 per bag. Salaries and wagesÆ cost increased to Rs8.50 per bag against Rs7.39. Depreciation cost moved up to Rs12.98 per bag against Rs11.80. Financial charges were up to Rs17.01 per bag from Rs12.42. Administration and selling charges increased to Rs8.76 per bag against Rs5.69. Other operating expenses, however, remained stagnant at Rs3.04 per bag. Paper bag was dearer by 58 per cent at Rs16.60 against Rs10.50 last year. Sources said the industry in its presentation pointed out that both coal and electricity prices had been playing havoc with the cement manufacturers and a further rise in their prices would multiply the losses.