Govt. losing money due to shortage of cement

At present, there is a severe cement shortage in the country. Other than the cement shortage, the prices of building iron, aluminum, PVC pipes, wiring material, roofing material, tiles, bathroom fittings, door locks, sand, gravel and all other material relevant to the construction industry are increasing inordinately.  As a result of this, the growth rate of Sri Lankan construction industry is decreasing.  

The livelihoods of millions of people who were dependent on the construction industry are in jeopardy. The tasks of national development are paralysed.  There is a danger of foreign investors shunning Sri Lanka.  Because of this, the government has to provide a solution to the cement shortage very quickly and should take steps to halt the increase of essential raw materials.

Sri Lanka’s construction industry needs 8.8 million MT of cement per annum. The quantity of cement necessary for the construction industry cannot be produced because, as at present, the letters of credit for the import of raw material necessary for cement production cannot be opened. As a result of this, a cement shortage has been created in the market and the price of a bag of cement has increased inordinately.  Accordingly, a bag of cement is selling at Rs.1300 to Rs.2000 at present. Furthermore, there is no controlled price for cement
at the moment.

The price of a tonne of iron has increased from Rs.1,40,000 to Rs.2,30,000 during the past period of time. The price of a tonne of specialised iron has increased from Rs.1,70,000 to Rs.4,20,000. The price of all raw materials required for the construction industry has increased by about 30 percent.

The golden age of the Sri Lankan construction industry is from the year 2012 to the year 2015. During that era, the construction industry generally contributed about 9 percent to the country’s gross national production. Accordingly, the setback of the construction industry directly affects the country’s gross 
nation production.

The adverse effects of the shortage of cement and the price increase of raw material are mostly directed at small and medium-scale contractors. They, their businesses and the workers, who were depending on them are, facing various problems at present. They are in a situation where they cannot continue the construction projects they are handling at present.  Other than that, they are also facing difficulties in quoting prices for new projects under the present conditions.

Under the present condition, the large-scale construction projects of the government are in danger of stopping before completion.  Other than this, the government has to make extra payments to contractors.  Even now, the government has agreed to make an extra payment of 20 percent. So, if quick solutions are not found for these problems, the government will have to pay another extra payment of 10 percent to contractors who are presently handling government contracts. This will be a massive loss to the government. Relative to other countries in Asia, the cost of constructing one square foot in Sri Lanka is increasing hugely. Because of this, foreign investors will tend to invest in countries such as Pakistan and Bangladesh without investing in Sri Lanka.

The cement shortage and increasing prices of raw material are problems that have to be solved by the government. Those problems cannot be solved by those in the construction industry. So, opportunity should be given to relevant companies to open relevant letters of credit to import raw materials. At the same time, a programme has to be prepared to increase the production capacity of local cement and steps have to be taken to control the increasing of prices of raw materials. 
(Dr. Rohan Karunaratne is President of the Ceylon Institute of Builders)