Thursday July 31 2014

Low tax on cement hits home producers

By Allan Odhiambo


Local cement producers are facing competition from low-cost Asian rivals after the East African ministers excluded the commodity from a list of protected items and retained a lower duty on imports.
The decision is set to hurt producers even as it promises the consumer low prices for the commodity.
“It has been our prayer that the import duty is increased to at least 35 per cent so that we are cushioned from the imports. It is our view that we promote local businesses before allowing in cheap imports into the market,” said Narendra Raval, chairman of Devki Group that manufactures the National Cement brand.
Producers in the region have been lobbying for inclusion of cement in the list of sensitive products following a biting shortage of the commodity. The list contains items which are protected by high import tariffs because the region has the capacity to produce them.

Sensitive products
Under the sensitive list of products covered by the EAC Customs Union Protocol, cement imports into the EAC was to face a 55 per cent tariff but this was to be reduced at a rate of five per cent per year from 2005.
The duty comprised a 25 per cent common external tariff (CET) and a suspended duty of 30 per cent.
The partner states had also agreed that the CET on cement should be reduced by five per cent each year for the subsequent four years to stabilise at a target rate of 35 per cent by 2009.
The local producers say reduction of import tariff on cement has led to an influx of cheap cement imports from India, China, and Pakistan with market insiders saying shipments from those countries sold at 50 per cent to 60 per cent below the domestic market price.

Cement shortage
EAC member states removed the product’s sensitive status in June 2008, due to cement shortages because of construction of stadiums for the 2010 World Cup tournament in South Africa. The import duty was then reduced from 40 to 25 per cent.