Becoming self-sufficient in cement

Becoming self-sufficient in cement
Republica, 31-Mar-2010
Ang Sanu Lama

Cement covers around 29 percent of the total construction cost in Nepal, according to contractors and developers. Price of cement in Nepal is highly correlated to that in India as it is a huge importer of readymade Indian cement and clinkers -- a mixture of cement elements heated in a kiln that is grounded and mixed with gypsum to form cement.

According to the Department of Customs, Nepal imported 649,244 tons of clinkers and 586,294 tons of readymade cement in fiscal year 2065/66, an increase of 10 percent and 85.4 percent respectively from the previous fiscal year.

There has been a decline in cement prices in recent months due to decrease in demand. But the price is expected to go up as soon as demands shoot up as India has recently increased excise duty on cement to 2 percent. The duty change will increase the prices in India and ultimately in Nepal as the country is highly dependent on India for clinkers and readymade cement.

Annual demand of cement in Nepal is around 2.5 million tons, according to industrialists and developers. “Domestic mine-based industries meet only 15 percent of this demand. Remaining 85 percent -- in the form of readymade cement and clinkers -- is imported from India,” PL Sanghai, managing director of Vishwakarma Cements, told myrepublica.com.

Nepal is rich in limestone reserves, which is one of the key raw materials for cement. “Nepal has a total limestone reserve of 1 billion tons and proven reserves of 210 million tons,” Krishna Dev Jha, senior divisional metallurgical engineer at Department of Mines and Geology (DMG), told myrepublica.com.

The abundant limestone reserves mean Nepal can not only meet its demand but can also export cement to other countries.

Two of the six mine-based cement industries in the country -- Hetauda Cement Industries and Udayapur Cement Industries -- are state owned with total production capacity of 1550 tons per day (TPD). The remaining industries are privately owned with a combined production capacity of 1,550 TPD.

Unfortunately, the government-owned companies produce only 40-50 percent of their total capacity and privately owned industries produce only 50-90 percent of the total capacity because of production lags like strikes, lack of power and obstruction in supply of other raw materials among others.

Department of Mine and Geology has permitted companies to operate 26 mines across the country, according to Jha. Of them, four companies - Butwal Cement, Sagarmatha Cement, Dang Cement and Bhardau Cement -- are busy constructing their own clinker manufacturing plants, according to Jha. Other companies like Ghorahi Cements are scheduled to start production by July, 2011.

The total production capacity of the new companies would be approximately 3,850 TPD, which is about 1,155,000 tons annually. If these companies operate to their full capacity, they would meet 46.2 percent of the annual cement demand in the country.

While taking permission from Department of Mine and Geology, industries usually agree to start production within 3 to 4 years of registration. But it takes a lot of time due to technicalities like Environmental Impact Assessment (EIA) and infrastructure developments like access road, water supply and power source among others.

According to a recent policy decision made by the Industry Promotion Board, companies should start preparation for production. “If they do nothing for five years, they will be given a six-month ultimatum after which they will be prosecuted,” said Dhrubaraj Joshi, director of Department of Industry.

The government hopes the recent policy change will encourage groups that have not started construction despite getting permission. “This policy applies to the hydropower sector and other mine-based industries. We are hopeful that the new policy will discourage the trend of holding license but doing nothing to start production,” Joshi added.

Despite having tremendous potentials, lack of political stability and business doing environment in the country has been deterring investors from putting their money in large-scale industries. If the government ensures suitable business doing environment, Nepal has the potential to emerge as one of the major cement producers in South Asia.