Pakistan cement industry pin hopes on MFN status to India
Pakistan and India are likely to discuss the issue of Most Favoured Nation (MFN) during a visit this week by an India trade delegation, headed by its Commerce Minister Anand Sharma, visits Pakistan. Both governments are expected to sign formal agreements including customs cooperation, certification of goods and also address challenges being faced by Pakistan exporters into India.
Pakistan’s cement industry is demanding the removal of non-tariff barriers, more freight trains to India, the opening of the Gujarat port and Wagha Border to transport cement via ship and trucks respectively and the issuance of visas on priority basis.
Pakistan exported 350,057t of cement to India during July-Dec 2011 compared to 215,235t in the comparable period of the previous year, representing growth of 62 per cent.
Pakistan’s cement industry is pinning its hopes that the granting of MFN status to India and the removal of their concerns will increase exports from Pakistan to India.
According to a report by InvestCap, India is an attractive destination for Pakistan ’s Cement exports as the cement industry in India has been facing certain challenges. Indian prices currently stand at ~INR280/50kg bag. Imports from Pakistan, however, are priced at~IND235/bag (or at 16 per cent discount).
Pakistan cement manufacturers have a combined installed capacity of around 44Mta, with local consumption at 31Mt (including 30 per cent exports and 70 per cent local), leaving around 10Mt of surplus capacity. Average prices in Pakistan are hovering around PKR 417/bag in the north while in the southern region they are PKR 401/bag. Therefore, local cement manufacturers need export markets to relieve this huge surplus capacity.
The report highlighted that that exports into India are only being carried out by rail, therefore, only limited quantities of cement have been delivered to date. Should India allow imports through the Wagha border, Pakistan producers based in the north would benefit from lower transport costs with improved export margins. Meanwhile, exporting cement via the Gujarat port would benefit southern manufacturers.
Relations between the two countries have been moving in the right direction as Pakistan has finally decided to grant MFN status to India, taking another step forward to further enhance trade relations. However, the list of goods is yet to be confirmed. India granted MFN status to Pakistan in 1995.
