Solving the cement shortage

Saturday, 30 July 2011 00:21 - - {{hitsCtrl.values.hits}}

Sri Lanka is on the verge of a cement shortage. Industry experts have appealed to the Government to find a solution to the problem by engaging with private sector importers so that the amount of cement being brought into the country can be increased without a corresponding leap of prices – a hefty demand to say the least.

At present the Cement Corporation controls the importation of cement in to Sri Lanka. However, even though a shipment reaches the country’s sunny shores at last once every other day, the entire consignment is usually sold within 24 hours, pointing to the high demand for cement in the market. The myriad of development projects that have been launched by the Government as well as other construction buoyed by increasing economic growth has spawned a massive Rs. 250 billion construction industry that demands large amounts of cement, most of which is not forthcoming.

In the short-term industry experts are calling on the Construction Ministry and other stakeholders to put the best interests of the industry forward and increase the supply of cement without hiking up prices. This means that private sector industries will have to cut back on their profit margins and consider the wellbeing of the industry – a tall task at best. But they should consider the point that if the industry grinds to a halt without cement, then the building supply companies stand to be the first to suffer.

At the moment a bag of cement is around Rs. 680 and if the market were to move in tandem with international prices, then this amount should hit Rs. 730 or more. An increase in prices would be a huge blow to the many construction projects, many of which are already on strained budgets. Moreover, it would not be economically viable if construction prices increase.

Lanka Cement Corporation only supplies 20% of the market need, but has the power to regulate prices. Nonetheless, it is clear from the economic path that Sri Lanka is drawing for itself that this is inadequate. The best avenue would be to get the Kankesanthurai (KKS) cement factory up and running as soon as possible. Despite the war ending over two years ago, these crucial factories have not yet gotten off the ground, even though in the case of KKS reports indicated that there was little repair and investment needed to commence operations.

Infighting among ministries was earlier reported in finding a foreign partner for KKS and over time the issue has slipped beneath the carpet. Therefore it is time for the Government to look at ways of making Sri Lanka’s lucrative construction industry safe and developing backward linkages in a sustainable manner. KKS, equipped with its own harbour and limestone deposits, is in an ideal position to provide a long-term solution to the cement shortage problem. Nonetheless, this must be done in a transparent and accountable manner.

In the meantime, it is up to the relevant authorities both in the private and public sector to get together and draft out a short-term solution to the shortage. Recent reports have revealed that construction has virtually ground to a halt during the last two days, emphasising the seriousness of the task ahead.