Vasant fights cement hike
By SEAN DOUGLAS Friday, January 11 2013
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Minister of Trade, Vasant Bharath, speaking to the media at yesterday's post-Cabinet press briefing at the office of the PM in St Clair. ...
TRADE Minister, Vasant Bharath, yesterday offered two plans to tackle the 9.5 percent hike in the price of cement announced on Wednesday by the Trinidad Cement Company (TCL).
The price-hike has been hit by TT Contractors Association head, Mervyn Chin, who said it threatens any recovery in the sluggish construction sector.
Bharath told the post-Cabinet news briefing at the Office of the Prime Minister, of a plan to cut the duty on imports of cement from outside Caricom, as a cheaper alternative to the TCL’s local supplies, and a plan to help TCL cut its costs of production.
He said he’d met TCL in December to ask whether the hike was based on increased costs of their inputs, or due to inefficiencies being passed on to their customers.
Of the former, he said the TCL’s costs are made up of an annual energy cost of US$12 million for natural gas; plus a debt of $1.9 billion owed to local institutions; and the cost of labour, packaging and spare-parts, the last two items imported from Europe, and at a higher cost in the past three to four years. “That has resulted in a bag of cement moving from $52.50 to $57.50,” he said.
“What TCL is requesting is a waiver from the National Gas Company (NGC) of their escalation clause (defined as ‘a provision of a contract which calls for an increase in price in the event of an increase in certain costs’) for the next eight years,” said Bharath. “They are also requesting to be re-classified as, what is called a ‘middle user’ which will entitle them to a lower gas-price than they currently enjoy,”
Bharath made out TCL’s case, saying they are 80 percent locally-owned with shares owned by National Insurance Board, and various pension funds, and listed on the TT Stock Exchange. So the Government wants to see TCL become more efficient, said Bharath.
He also said that any cement price-hike could hamper the Government’s planned projects such as the Point Fortin Highway, Rivulet Road and Cumuto-to-Sangre Grande Highway. “The construction industry is working itself out of a depression,” he said.
Bharath vowed to seek Caricom’s nod to cut the 15 percent duty on cement imports (for which TT has had a precedent), and/or negotiate with NGC to hold down gas-prices. “No Caricom country can afford for its citizens to be burdened by any organisation that is inefficiently run,” he asserted.
Bharath said that because cement is made in three nations in Caricom — TT, Barbados and Jamaica — any nation wanting to waive import duty must first get Caricom’s nod. He showed how important the cost of cement is by saying the construction sector accounts for seven percent of TT’s GDP.
The move would cut duty from cement imported from places outside Caricom such as the Dominican Republic, from which a $100 quantity of cement with added duty would end up costing $115. “So the intention really is to allow free-market forces, for a specific period of time possibly.” He hopes to reduce, or totally eliminate the 15 percent duty. “So the price of cement coming in from outside of Caricom would no longer attract the 15 percent duty.” It would then be up to individuals to decide whether they wished to buy from TCL, or buy imported cement.
“Cement generally is a very bulky item and a very heavy item, so it has its own attendant issues in terms of importation. Generally, if you are going to bring in cement in large quantities, you’d do so in bulk in the hold of a large ship, so you could get your economies of scale, and get to the price-point where you could sufficiently compete. You’re talking about bringing in shiploads of cement rather than a few sacks of it. Those are some of the considerations that the private sector will have to determine. Maybe some of the large contractors may have the set up to be able to do that, and to accommodate that type of arrangement.”