Consolidating the Nepali cement industry

By Dhruba Thapa

Nepali cement, no doubt, is amongst a very few industries in the country to make speedy progress. And there are certain factors that have fuelled such progress. One of such factors is a rapid rise in the construction of infrastructure development projects (such as road networks, bridges hydropower projects) along with houses and apartments in urban areas. Another is the huge amount of national and foreign investments in the cement industry.  It is estimated more than Rs 200 billion has been poured into the industry.

Dhruba Thapa, President, Cement Manufacturers’ Association of Nepal

Currently, there are 60 cement factories in operation including two government-owned factories- Udayapur Cement Industry and Hetauda Cement Industry, which together boast of the annual transaction worth Rs 150 billion. The cement sector is projected to be growing by 10 to 15 percent annually. There is an estimated demand for 10 million tonnes of cement per year while the operating firms have the capacity to manufacture 15 million tonnes of cement in total.

In fact, Nepal has been becoming self –reliant in cement production as import has been going down year after year.

In the last fiscal year, the cement import came down by 55 percent to Rs13 billion, according to the Department of Customs.

The country is also heading towards being self-reliant on clinkers — one of the major raw materials for cement production. Some 3/4 years back, there were just 6/7 cement companies manufacturing it but now the same number has increased to 15.  The import of clinkers was also down by 61 percent to Rs11.67 billion, states the date of the Department of Customs.

Major Challenges

One of the prime challenges facing the cement sector is the lackadaisical attitude of the government towards promoting domestic cement brands. For instance, it is allowing the development projects funded by foreign donors in the country to enjoy the customs tariff exemption while importing construction materials like cement.

A number of domestic factories have been producing the higher grade cement (43 or 53 grade) which can be used in the construction of infrastructure-related projects. 

But the concerned government bodies such as the Nepal Bureau of Standards and Measurement have neither advanced equipment nor the necessary laws to facilitate the use of such high-grade cement products in such projects.

On the other side, the cost of cement production in Nepal is one of the highest in the world. This is due to the non-availability of sufficient raw materials and coal domestically. Compared to the cement manufacturers especially belonging to our two neighboring nations-India and China- Nepali manufacturers are bound to pay higher prices for various factors involved in cement production like including limestone, electricity, coal, and transport. Because of this, the competitiveness of domestic cement in the marketplaces has eroded seriously.

 A sack of Nepali cement product is costly more than by a whopping Rs 100 compared to that of Indian one. Similarly, the Chinese cement brands are available at a far cheaper rate than the Nepali brands.

Frequent changes in policies, problems in labor laws, compulsion to hire foreign human resources, multiple layers of taxation charged by local, provincial and federal governments are some other key obstacles facing this sector.

Apart from these, there are many other hassles in production right from the mining of limestone to supplying the cement to the end customer.

Likewise, the cement factories in the country have long been the target of political parties to collect ransom by the political parties.

Way Ahead

Given the widening trade deficit of the country, the cement sector can play a vital role in mitigating the same.

In fact, the government has already announced to make cement as one of the chief export products in its plan and policy. It is high time the concerned authorities also adopted some concrete measures to materialize such announcement. One such measure could well be facilitating the domestic cement companies to bring down their hefty manufacturing costs.

Similarly, the government may also incentivize the companies to adopt sophisticated technology to add values to their products. If the domestic cement industry is consolidated in a strategic way, the market competitiveness of its products will surely be enhanced. This, ultimately, can help the country to efficaciously export the cement products at least to India and Bangladesh.

-The author is the president of Cement Manufacturers’ Association of Nepal and Managing Director of Cosmos Cement Industries Pvt. Ltd.

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