The domestic cement industry has been under pressure in recent days following hassles in importing clinker, a major ingredient for cement production. Though the private sector claims that Nepal’s domestic production can cater to country’s demand, Nepal relies on India to meet more than 25 per cent of annual clinker demand. As a result, a majority of cement factories have reduced cement production, as 37 out of 50 cement plants in the country do not have their own clinker plants and rely on clinker imported from India. Moreover, cement price has also started going up following mismatch between supply and demand. Sujan Dhungana of The Himalayan Times caught up with Dhurba Raj Thapa, president of Cement Manufacturers Association of Nepal, to know more on current issues in the cement industry.

How will you define the current state of the cement industry in Nepal?

The domestic cement industry is expanding and Nepal has almost become self-reliant in cement. Similarly, we have targeted to be self-sustained in clinker too within the next two years by increasing clinker production in the country itself. However, though we are on the verge of making Nepal self-reliant in cement, we have been facing a lot of challenges and one challenge is the recent obstruction in import of clinker. As locals from Raxaul — bordering town of Nepal — started creating obstructions to unload the dusty cargoes like clinker and fly ash at the yard of the Raxaul railway station citing health hazards and the court issued a verdict in favour of locals, clinker import has reduced significantly over the past few days. As a majority of cement factories do not have their own clinker plants and are relying on clinker imported from India, the hassle in clinker import has directly affected cement production in the country and hampered the overall demand-and-supply mechanism. While clinker import has reduced significantly affecting cement production in the country, the government has not been able to take effective measures to address this problem. If the issue regarding clinker import is not addressed soon, it will put the entire investment of cement factories at risk, especially of those cement factories located in Birgunj. Such hassles will directly impede growth of the cement industry in the long run.

What measures do you think should the government take to ensure effective import of clinker?

As I mentioned earlier, we have targeted to be self-reliant in clinker within the next two years and domestic cement factories have been investing in clinker plants while those cement factories that have their own clinker plants have been boosting their production. However, a majority of cement factories as of now are still relying on clinker import from India and regular import of clinker is necessary to run different cement factories. Though we have already notified the government and the Indian Embassy in Nepal about the hassles in clinker import, the problem has still not been resolved. Thus, the government should prepare both short-term and long-term plans to address the issue of clinker import. As an immediate step, the government should adopt measures to introduce hassle free loading facility for clinker in Raxaul itself. Due to congestion in the Inland Clearance Depot (ICD) Birgunj, the importers had been unloading the clinker, coal and fly ash at the siding of Raxaul station and ferrying it through trucks. Once the current problem is solved temporarily, the government should adopt some mid-term measures to address the clinker import issue. This can be done by introducing a separate clinker and coal loading facility in an area close to Raxaul where human settlement is low. However, in the long run, the government should develop a separate and big loading station on the Nepal side for dirty cargoes like coal and clinker. Along with these measures, the government should immediately make Raxaul checkpoint systematic. Likewise, such problems arise also because the government allows bulk cargo transportation only via Raxaul. In a bid to ensure hassle free import in the country, the government should immediately allow third-country bulk cargo to be imported from other checkpoints like Bhairahawa, Nepalgunj and Biratnagar, among others. The government should allow third-country bulk cargo to enter Nepal from at least four to five customs points.

Citing hassles in import of raw materials, traders have already increased the price of cement in the market. What do you have to say on this?

Though we have been facing hassles in the import of clinker and coal, we have not officially increased the price of cement. However, cement price might have gone up by almost Rs 10 per sack following increased production cost. We should also note that cement price depends on the price of coal and clinker and a change in the price of these two materials in the international market will affect the price of cement in Nepal. Likewise, months like December and January are regarded to be the peak season for cement factories as the demand for cement during this time is comparatively higher. As we live in an open market economy, price of any product can rise at any time if supply is not smooth.

Though you mentioned that Nepal is self-reliant in cement production, we have been importing huge quantity of Indian cement. Why is this so?

Undoubtedly, Nepal is self-reliant in cement production. Though the annual demand for cement in the country has been recorded at 800 million metric tonnes, total production capacity of cement factories in Nepal is almost 1,200 million tonnes per annum. However, we have not yet been able to substitute Indian cement brands as big projects seek 43-grade and 53-grade cement in their procurement specifications while the government policy does not allow domestic manufacturers to label their products higher than 33-grade though Nepali cement brands also meet international quality standards of 43-grade and 53-grade cement.

However, the private sector and government had planned to grade domestic cement as per quality standard. Where has this process reached?

The Nepal Bureau of Standards and Metrology (NBSM) had prepared the quality certification standards for cement grading quite some time back. However, NBSM has been constantly delaying in implementing the process to issue quality certification for different domestic cement brands and the delay is probably because of some technical reasons. Cement manufacturers are optimistic that NBSM will implement the system soon.

In recent days, the country’s cement industry has been drawing notable foreign direct investment, especially from China. What is your take on this?

I must say that foreign investment in the cement industry is not required. Domestic cement industry has a short history of 15 years and within this short span of time the industry has been able to produce cement as per country’s demand. This shows that the domestic cement industry is growing rapidly. As a result, Nepali cement brands are gradually substituting Indian cement brands and will completely substitute them soon. This also shows that domestic production can alone drive the cement industry of Nepal. However, as the government has been welcoming foreign investment in the cement industry in recent years, this has certainly discouraged domestic investors. Bringing in foreign direct investment (FDI) in the sector at a time when domestic cement factories have been successfully catering the demand is unjust to those Nepali investors who have injected their investment in cement factories. Increasing FDI in the sector will pose a threat to investments worth billions that Nepali traders have made in cement production. The government should first prioritise sectors for investment instead of welcoming FDI haphazardly in every sector.