The cement industry has not grown or expanded as expected despite high potential for cement industry in Nepal due to lack of investment friendly environment and clear government policy. Though the quality of Nepali cement is good enough to compete with international products, it is not even used in domestic projects due to wrong government policies. The industry is lagging behind despite high potential due to local political and social problems. It is a matter of shame for Nepali entrepreneurs to use imported raw materials in production of cement ignoring domestically available limestone. The Nepali cement factories, however, have gradually started to use domestic limestone instead of imported clinker. It is necessary to make sweeping changes in the policy arrangements for this sector to achieve the potential of substituting the imported cement that has established a good hold in the domestic market and exporting it abroad. This sector, like hydropower sector, can also mobilize huge capital if the government were to stress on cement production with clear policies. Nepali cement can establish its rightful place at least in the South Asian market if the government were to pay adequate attention to address the identified problems like energy, roads, supply system, use of land and others.

The state of cement industry in Nepal is not satisfactory despite its 40-year history. Over 30 cement factories established with investment of hundreds of millions are currently producing quality cement after Himal Cement Factory established in Chobhar by the government showed the way to private entrepreneurs. Government owned Hetauda Cement Factory and Udaypaur Cement Factory started after Himal and private factories are also contributing toward import substitution. It is baffling that these factories are stuck in policy problems despite all this. Nepali cement has not been competitive even in the domestic market, let alone promoting export, due to the inability of addressing the problems arising out of economic and non-economic reasons, lack of policies for promotion of investment required for the industry, ambiguity in policies about extraction of the raw materials required for the industry and use of land, inability of the government to properly develop the requisite infrastructure, domestic product being affected by the tax levied and discount offered in imported cement and raw materials, and existing complexities regarding the supply system of produced cement.

The government has been announcing different benefits for the cement industry prioritizing it during the budget speech in the past few years. The budget for the current fiscal year has also continued the trend and allocated Rs 1.23 billion to provide access of roads and electricity to the cement factories, and announced to expand road connection to five factories within the current fiscal year. But opening of cement factories and their operation have not gathered momentum due to weak implementation of the announced facilities. It is normal for the entrepreneurs to demand the announced facilities and benefits through one-door policy in this context. The cement industry has the most potential to attract foreign investment after agriculture, service and hydropower sectors, and the government must promote this industry accordingly as up to 80 percent of value can be added domestically in cement production considering the availability of raw materials, labor force and, domestic and foreign market.

There are chiefly two types of problems currently seen in the cement industry: infrastructure related like that of roads and electricity; and the obstruction at the local level putting forth different demands. The state and the private sector must join hands to solve both types of problems. The government and private sector should, therefore, search for solution of the identified problems on the basis of co-existence considering the potential and necessity of the cement industry.

source: editorial, Karobardaily,18 July 2013