Cement industry: High production and low demand open door for export

In the 11 months from mid-July (Shrawan) to mid-June (Jestha) of the current fiscal year 2022/23 (2079/80), a total of 893,121 tonnes of cement and clinker worth over Rs 677 million have been exported.

The cement export which was halted after FY 2014/15 did not resume until 2020/21. According to the Department of Industry, in FY 2021/22, a total of 15,189 tonnes of cement worth Rs 1.293 million was exported. 

In the year 2012/13, Nepal exported cement worth Rs 156,000. Officials say that exporting ready-made cement by bringing raw materials from India was expensive and the cement industry itself was not as self-sufficient as to continue export.

However, industrialists started exporting after the government has made arrangements such as giving cash subsidies for cement export. They claim that exports have started because the cement industry has become self-sufficient.

About a decade ago, RMC Cement exported Portland Slag Cement (PSC) in the border town markets of India — a total of 553,240 kg of cement worth Rs 5.692 million in the year 2013/14 and 16,225 kg of cement worth Rs 254,000 in 2014/15, according to the department.

Tansen and Arghakhanchi brands of Palpa cement, and Balaji Cement have started being exported to India. 

There are 65 cement industries in the country. A possibility that 10 to 15 industries will be closed down in the current fiscal year looms due to reduced demand for cement, according to Dhruva Thapa, president of the Cement Production Association. 

According to the association, it has been five to six years since Nepal became self-sufficient in cement production. In 2018/19, the domestic demand was 100 million tonnes, while last year it reduced to 80 million tonnes. The demand has not been even 80 million tonnes this year. 

The domestic industry has an annual cement production capacity of 250 million tonnes. Of this, only 33% is in demand. Industrialists say that an average of 33% cannot survive by running the industry. The industry with an investment of around Rs 300 billion is in a state of collapse. 

Five to seven grinding units were closed three months ago, at least 10 industries will be closed this fiscal year, according to Rajesh Agrawal, operator of Palpa Cement and president of the Confederation of Nepalese Industries. He suggests that cement export is the solution.

The government has provided a subsidy of up to 8% on the export of cement worth Rs 500 million as per the Subsidy on Export (Second Amendment) Procedure, 2022. It is also mentioned in the current budget (FY 2022/23) that the industry consuming more than Rs 100 million worth of electricity will be given a tariff discount of 2 to 15%.

However, the implementation of the discount is stalled over the confusion of whether it will be effective from the beginning of FY 2022/23 as it was brought in October last year.

To increase internal consumption, the government has put forward a provision to use domestically manufactured cement while constructing roads following certain standards for the next fiscal year (2023/24).

Following this, as per Finance Minister Prakash Sharan Mahat, durable and quality roads will be built and the import of bitumen (alkatra) will decrease. The government has been gradually addressing the long-awaited demands of cement industrialists.

Not only cement export is increasing, but the import is also decreasing. Compared to last year (2021/22), the import of cement and clinker has decreased by 55%. 

In the last 11 months, cement and clinker worth Rs 288.46 million have been imported. In the same period of the last fiscal year, cement and clinker worth Rs 652.61 million were imported. This means that enough cement has been produced in Nepal and the door of export has been opened.

Although the government has arranged an 8% cash subsidy on cement export, this is not enough as the quality mark is mandatory. A quality mark of India should be taken for exporting the produce to India. Seven to eight domestic cement industries have applied but only three received the mark so far.