CEE Oct-Dec 2002

INTERNATIONAL COUNTRY PROFILE, EVENT ETC. FACING THE CHALLENGE G. N . Murad, LajCn-ge Surma Cement Ltd, Bangladesh The first ceme nt plant in Bangladesh, Chhatak Cement Factory, established in the early 1940s, is the o nl y integra ted ceme nt plant in the country, as Bangladesh does not have any easi ly extractab le li mestone. This state owned plant has a capacity of 270 000 tpa. The second cement factory, Ch ittagong Cement Clinker Grinding Co. Ltd (CCCGCL). based on impor1ed clinker, was started in 1967, but went into production in 1974 with a grinding capac ity of 3,00,000 t. This was also government owned. The first cement plant in the private sector, Ayenpur Cement Factory, was initiated in 1992, adj acent to Chhatak Cement ractory and ha~! a production capacity of on ly 300 000 tpa. This is also an integrated cement plant, however, it never played any significant role in the cement market until today due to a man age rial problem. All the cement production facilities that operate today are clinker grinding units using imported clinker. This situation began to change in the early 1990s, due to the withdrawal of the price control. a favourable tax regime for clinker. adoption by the government of a proactive policy for promotion of industry in the private sector and an increasing demand for cement. Disinvestment ofChittagong Cement Clinke r Grinding Co. in 1993, provided a boo st in creat ing an environment in wh ich the industry could grow in the private sector. Efforts are continuing to make duty more favourable for the local industry. In 1994, 20 years after the establishme nt of CCCGCL, anothc!· grinding facility named Confidence Cement Ltd with a production capacity of 180 000 tpa began operating. Due to favourable policies the cement market made a leap forward in the mid-1990s. Table I shows the key facets of the cement industry in Bangladesh during the 9 years for 1997 to 2005 (actual and forecast). Year 2001 was a very s ign ifi cant year for the industry. The number of plants increased from only 20 in the preceding yea r to 50, wh ich more than doubled the installed capacity. Some existi ng grinding faci lities were also expanded during and around the yea r and the country produced enough cement to make it sel f-sufticient. 62 Table I Key facets of the cement industry in 000 t Year No. Production /\ctual Dl:mand Production or capacity Production capacity Plants demand gap 1997 10 1895 I() 1:1 3335 -14-10 1998 13 2210 1240 3590 - 1380 1999 15 2845 2085 4-l50 -1 605 2000 20 4625 35RO 53 16 -(J9l 200 1 50 9657 5005 5526 4131 2002 61 13 557 5913 764-l (P) 2003 65 13887 o327 7560 (P) 2004 68 15 887 6770 9067 (P) 2005 69 17037 7243 CJ794 (P) One of the reasons that encouraged entrepreneurs. inc lud ing the multinationa ls to set up cement production uni ts was the favourable duty imposed for local production. A comparative posit ion of duties of cement and clinker is shown in Table 2. Ta ble 2. Duties ll nd taxes B<lggcd Clinker Cement In C&F price 100 Per cent PSI charges 1.00 CRF 101% 101 value ofC&F value Custom duty 37.50 Assess- 101% 102 on ment o f CRF · assessable value value value (AV) Supplemen- 20.00 Import 22.50% 22.95 tary duty duty asses- (on ment AV+CD) value VAT (on 15.00 Supple- 0.00% 0.00 /\V+CD ~SO) mentary (assess duty ment value+ import duty)