KATHMANDU, Jan 21: Country's cement industry, one of the industries with high export potential, is looking for better future despite facing various problems.
The government has kick-started the reconstruction drive and it is expected that demadn for cement will surge once reconstruction of houses and other infrastructures begin. The industry -- plagued by severe power crisis, transport syndicate and government apathy -- is ready to support the reconstruction drive with build back better concept.
Cement industry uses 80 percent of local resources as one of its key raw material, limestone, is available in abundance in Nepal. The Rs 100 billion industry can compete with foreign products in terms of cost, quality and quantity if the government gives a little more importance to the industry, according to major industry players. They have also asked the government to address non-economic causes that can bring down price so that end consumers can benefit.
Cement industry, which is regarded the second best industry in the country after hydropower, is expanding rapidly, creating new jobs and opportunities.
Nepal Republic Media recently held an interaction with the cement industry players, and discussed the industry's problems, strength, and expansion plans.
(As told to Kuvera Chalise, Rudra Pangeni, Kriti Bhuju and Sagar Ghimire)
Transport syndicate does not allow consumers to enjoy benefits
Aditya Sanghai
Director, Ghorahi Cement Pvt Ltd
We are ready to provide cement at a cheaper price even though demand has increased suddenly. But the price becomes different when our product reaches end consumers. This is because of transportation cost. Syndicate of transport entrepreneurs has been creating problems time and again. When they realize that the demand is rising, they suddenly enforce odd-even number plate system. This ultimately increases the price for end consumers. It all depends on how the government plans to address this problem. Our efforts will be toward reducing the cost of construction material for the reconstruction campaign which is beginning soon. The end consumers need to be benefit from this, not the transport entrepreneurs. When we talk about large-scale projects like national pride projects, priority is usually given to imported cement. It is because government officials fell our product is not up to the mark. The problem is government doesn't want to grade our products above 33. Grade 33 is not acceptable in most of the countries. The government should make use of domestic products mandatory to some extent. The contract signed by the government with GMR for development of Upper Karnali Hydropower Project states that local insurance company, cement manufacturer, steel and other local products should be given priority. Other projects can also move with the policy that supports local products. A lot of mega projects, which are enjoying VAT and customs duty waiver, and other benefits, are using imported cement. Having domestic industries alone is not sufficient. The policies also need to be supportive.
We are committed to sending quality products in the market
Maruti Cement, United Cement and Jagadamba Cement found selling...
Rajesh Agrawal
Director, RMC Group
There is no doubt that Nepal has the capacity to meet demand for cement. But production of domestic cement companies have been affected due to chronic power cut. Currently, we are getting only 30 percent of the power supply. This means, we have been able to produce only 30 percent of our total capacity. We can run our plant round the clock by using generators. But it increases our cost of production by Rs 40-50 per bag. This cost ultimately passes on end consumers. We can operate the plant round to clock to meet the 'blast in demand' when the reconstruction campaign begins. But who will bear the additional cost? As a corrugated sheet producer, I have sat in meetings with various donors. My conclusion from those meetings is that there will be a blast in demand for steel, corrugated sheets and cement from Baisakh (mid-May). Are we capable to meet the demand? We can! But I don't think we will be able to supply cement despite having capacity. I think the government should use its trading entities like National Trading Ltd and Salt Trading Company Ltd to purchase cement and store them from today itself. Then can supply the cement in the market when there is sudden blast in demand. Load-shedding hours might go up further; we should be prepared for such adverse situation.
We are committed to send quality products in the market
Tara Prasad Pokharel,
Managing Director, Agni Cement Pvt Ltd
As cement is a key construction material, we need to have quality cement for quality infrastructure works. That is why cement manufacturers as well as Cement Manufacturers Association of Nepal has been making efforts toward quality control of the products. All cement manufacturers are committed to send quality products in the market. While talking about cement, the issue of price also comes to the fore. We, the cement manufacturers, always pay attention to reduce cost of production of cement. However, its price is also linked with the international market. Rise in price of inputs in international market will lead to price hike in domestic market. The government can reduce price of cement by arranging smooth power supply, and lowering customs duty on coal and other raw materials. We have to pay huge amount of money for transportation while importing fly ash waste from India. The government imposes high customs duty on it. This increases our cost of production, making us less competent in the market. Transportation is the biggest problem in cement industry. Around 20 percent of the total cost of cement production goes in transportation. We are talking about exporting our products and new industries with installed capacity of millions of tons are coming up. But it might not be possible if we don't address the problems that the industry has been facing. Despite all these challenges, including scarcity of petroleum products, we have managed to continue production and supply our products in the market. There is no black market in cement.
We will be self-reliant on clinker in the near future
Surendra Kumar Goel
Chairman, Shivam Cements Pvt Ltd
We are providing technical knowhow to customers on getting maximum output with minimum use of cement. We are self-reliant in cement production and will be self-dependent on clinker in near future. Nepali cement industries are capable of producing quality cement. We can supply cement of above 33 grades as per the demand. But our products are only up to 33 grades as per Nepal Standard certification. We are restricted to produce cement of higher quality cement.
We should be allowed to produce cement above 33 grades
Bishnu Prasad Neupane
Managing Director, Jagadamba Cement Pvt Ltd
To rebuild around 650,000 houses, we need more than 6.5 million bags of cement if we assume one house needs an average of 100 bags. Combined capacity of Nepali cement plants is 160 million bags annually. This shows we are capable to meet the demand for reconstruction. Similarly, additional plants with combined capacity of 4 million bags are in pipeline. We need to find new market to sell our products. Cement companies are facing severe energy crisis. Load-shedding has increased and diesel is scarce. Supply of coal has also been affected. The government should allow us to import petroleum products on our own. Similarly, the government should sign an agreement with India to facilitate us to purchase coals from Indian firms at cheaper rate. We are not allowed to produce cement above 33-grade even though there is demand in the market. The government should address this problem. We want our representatives in quality regulating body like Nepal Bureau of Standard and Meteorology, like in India, so that these structural problems can be addressed. There will not be shortage of cement for reconstruction. But there might be shortage of laborers when reconstruction works starts. For that, the government must retain youth flying to overseas job destinations.
There won't be shortage of cement for reconstruction
Pashupati Murarka
Chairperson, Arghakhachi Cement
President, FNCCI
We assure there will not be shortage of cement for reconstruction. Even without regular power supply, we can continue cement production by running diesel plants on our own. I don't see 'blast of demand' happening, as the government's reconstruction work starts slowly. I don't think there will be need to import cement for reconstruction. As per existing law, we cannot sell cement without getting 'Nepal Standard' certification. But standard is not required for imported cement of above 33 grades. More than 90 percent of cement consumed in the country is produced by Nepali companies. Our products are of better quality and they reach to the market sooner than the imported products. We expect our cost of production to reduce once price of diesel starts falling. Uninterrupted power supply can bring the cost down further
We expect cement demand to increase by 20 percent
Dhurba Thapa,
President, Cement Manufacturer's Association of Nepal (CMAN)
Nepal is self-sufficient in terms of cement as the demand is less than the combined installed capacity of domestic cement companies. However, it will take another two to two and half years for Nepal to become self-sufficient in clinker. Given our production capacity, there is no need to import cement. But the country has been importing cement mainly due to two reasons: first due to custom rebate for International Competitive Bidding (ICB) and second because Nepali cement companies are not allowed to label grading above 33 grades even though the cement produced here is of high quality. Despite having capacity to produce cement as per the requirement of mega projects, the government does not allow us to do so. However, discussions are underway to rectify this structural problem. The government should either provide custom rebate for us as well or introduce a mandatory provision that specifies that cement imported for a particular project cannot be sold in the market.
We expect demand for cement to go up by 20 percent once the reconstruction work begins. At present, we have not been able to manufacture cement as per our installed capacity. Despite this, we have sufficient cement in stock as construction works have been halted after the earthquake. We would like to request the government to buy the cement from us now and keep in stock so that it can be used in reconstruction works.
We would also like to suggest to the concerned stakeholders to clear the myth that pillar-system houses are stronger. We should focus on building homes at villages using locally available resources and expertise of skilled technicians so that they are stronger as well as earthquake resistant.
Problems faced by cement industries:
· No level playing field for domestic manufacturers due to custom rebate on cement imports for mega projects
· Not allowed to label cement grading higher than 33
· Expanding transportation syndicate, miscreant groups at local level
· Severe power outage
· Restriction on import of petroleum products to operate plants during load-shedding
· Challenge to reduce cost of production to be competent enough for export
· Lack of road connection as well as other infrastructures
