As the value of the Taka is more than the Rupee against the US dollar now, Indian companies can sell their products at a lower price than Bangladeshi firms
Cement export to India has been declining recently as Bangladeshi companies are finding it difficult to compete with the Indian ones since the neighbouring country devalued its currency in August.
As the value of the Taka is more than the Rupee against the US dollar now, Indian companies can sell their products at a lower price than Bangladeshi firms, resulting in the decrease in exports.
In the first five months of the current fiscal year, cement export to India decreased by 17.1 percent. Bangladesh exports 90 percent of cement produced here to India.
Md Shahidullah, vice-president of the Bangladesh Cement Manufacturers Association and also managing director of Metrocem Cement Ltd, told The Business Standard that the cost of importing commodities by Indian companies has gone up because the value of the Rupee against the US dollar has reduced.
"This has resulted in the increase of Bangladeshi cement prices in India. Also, the production of cement in India has increased, so Indian companies are selling their products at a lower price than we can," he explained.
Shahidullah said the production cost of Bangladeshi companies has increased due to the new tax policy of the Bangladesh government.
The import cost of raw material for cement has also gone up, he said.
"Even if Bangladeshi cement producers want to export, they just cannot do it in India's competitive market. The price per tonne of cement in the global market is $100. Bangladeshi companies are exporting at $74-75 per tonne, but even then they are finding it difficult to sell because of the devaluation of the Indian Rupee.
"This is why the Indian market is no longer profitable for Bangladeshi cement companies," he added.
Export value falls below target
The Bangladesh Export Promotion Bureau says the cement industry earned export revenue of $4.08 million during July-November this year, down from $4.92 million during the same period last year.
This is a fall of 17.1 percent year-on-year.
Also, the export of cement fell 2.2 percent below the target of $4.17 million set by the government for the first five months of the current fiscal year.
The bureau has set an export target for the cement industry of $10.5 million for the current fiscal year compared to $14 million in the previous financial year.
In the 2018-19 fiscal year, the total export was $10.41 million. Therefore, the new target has been revised and lowered by 25 percent due to continuously growing domestic demand and increased competition.
Crown Cement exports the highest amount of cement to India. In the first quarter of the current fiscal year, the company's exports fell by 20 percent.
Its exports decreased by 13 percent in the 2018-19 fiscal year. That year, its export earning was Tk48 crore.
In the 2017-18 fiscal year, the company's exports rose by 13 percent to reach Tk56 crore.
Masud Khan, adviser of MI Cement (parent company of Crown Cement), told The Business Standard that exports fell because competition in the Indian market has increased.
The Indian rupee has been depreciating. On August 3 this year, the Indian Rupee hit the peak at Rs72.41 against one US dollar. Then between September and October, its value fell by about 15 percent.
The value of the Rupee has also fallen against the Taka. Data from Bangladesh Bank shows that one Indian rupee can be bought for Tk1.17.
As the Bangladeshi Taka is stronger than the Rupee, the price of Bangladeshi goods in India has been on the rise. As a result, Bangladesh has been lagging behind India in competitiveness.
Cement production cost rises
The production cost of cement increased in the current fiscal year because of the tax policy of the government, but companies cannot raise the price very much because the local market is highly competitive.
The government imposed five percent advance tax on the import of raw material for cement. It was set as minimum tax or final tax liability.
This means the companies must pay the tax regardless of their profit or loss.
Previously, the five percent advance tax was adjusted against the profit or loss made by the company.
Cement companies have to pay three percent tax at source on distribution of cement in the local market. This means the companies have to pay a total of eight percent tax if one adds the five percent advance tax.
Cement factories in the economic zones are getting a waiver on paying advance tax and corporate tax. They can sell their products at a lower price because their production costs are low.
This is making the already competitive market more unstable.
Shahidullah demanded the same facilities for companies located outside the economic zones.
"If the government does not give the same facilities, the companies cannot survive in the competitive market," he added.
Clinker, a raw material for cement, is imported, and its price in the world market is going up.
"In this context, the government's tax policy has caused the cement production cost to spiral," he added.
Sarwar Alam, director of cement exporter Alhaj Mostafa-Hakim Cement Company, said, "On the one hand, the price of raw material has gone up. On the other hand, the tax has also been increased.
"As a result, cement production cost has increased a lot compared to the previous cost," he added.
Data from Chattogram Custom House show that 33,714.5 tonnes of cement was exported from January 1 to December 8 this year.
During the same period in 2018, the export was 44,578 tonnes. Exports fell by 10,863.5 tonnes in just one year.