LAHORE - The government has accepted the cement manufacturers standpoint regarding Rs147 per bag increase in prices on the pretext that the manufacturing cost went up by 64.50 per cent; pushing the price up to Rs 375.60 in June 2008 from Rs 228.2. The government accepted this viewpoint during a presentation, which the cement industry representatives gave to the Ministry of Industries here. During the presentation, the industry representatives explained that the reason of price increase of Rs 147 since June 2007 was increase in cost of production and convinced the government that there was no other way but to increase the prices. Sources in the Ministry, quoting the presentation, said that cement industry representatives briefed the ministry officials about the impact of unprecedented increase in cost of production, taxes, freight and other charges over the last one year. According to the data collected by the Ministry officials, the cost to make and sell of cement consists of two components, namely cost of production and taxes/freight/commission charges, which are shot up to Rs 106.64 per bag and Rs 40.77 per bag respectively during June 07 to June 08. The data further demonstrates that the component of cost of production includes raw and packing material, fuel and power, stores & spares, salaries and wages, depreciation, financial charges, administration and selling charges and other operating expenses. The cost of raw and packing material has increased to Rs 27.79 per bag in June 08 against Rs 18.27 per bag in June 07. The cost of fuel and power has increased to Rs 152.28 per bag in June 08 against Rs 65.70 per bag in June 07. The cost of stores & spares (including repair and maintenance) has increased to Rs 6.60 in June 08 from Rs 6 per bag in June 07. The cost of salaries and wages has increased to Rs 8.50 per bag in June 08 against Rs 7.39 per bag in June 2007. The cost of depreciation has increased to Rs 12.98 per bag in June 08 against Rs 11.80 per bag in June 07. The cost of financial charges has increased to Rs 17.01 per bag in June 08 against Rs 12.42 per bag in June 2007. The cost of administration and selling charges has increased to Rs 8.76 per bag against Rs 5.69 per bag in June 2007. The cost of other operating expenses however remains stagnant at Rs 3.04 per bag. Meanwhile, the component of taxes includes federal excise duty, special excise duty and general sales tax. The presentation noted that fuel and power are the main components of cost of production in cement sector. The price of coal has jumped up by 170 percent i.e. $202 per ton in 2008 against $75 per ton in 2007. The cost of diesel has increased by 54.41 percent i.e., Rs55.31 per litre in 2008 from Rs 35.82 per litre in 2007. The cost of furnace oil has also increased by 90 percent i.e., Rs 50,740 per ton in 2008 from Rs 26,678 per ton in 2007. The cost of power has increased by 30 percent i.e., Rs 5.18 per kWh in 2008 from Rs 3.99 per kWh in 20007. It may also be noted that the cost of paper bag has jumped up by 58 percent i.e., Rs 16.60 in 2008 against Rs 10.50 in 2007. The mark up rate has gone up to 16 percent in 2008 from 10 percent in 2007. On the other hand, the sources said that they pointed out that both coal and electricity prices are playing havoc with the industry and any further rise in their existing levels will further multiply the losses. While bearing heavy losses owing to increase in production cost, industry is bound to pay Rs 90 per bag revenue to the exchequer, they added. The industry circles have urged the government for extraordinary measures to save the industry from collapse.