Cement Industry in Nepal: An Overview

The cement industry in Nepal faces numerous challenges that

must be addressed to ensure sustainable growth and
development. This article explores the historical perspective,
market analysis, energy status, raw material availability,
environmental concerns, and ongoing developments in the
Nepalese cement industry.
The cement industry in Nepal began in the 1950s with imports.
The first local plant, Hetauda Cement Factory, was established
in 1975. The government prioritised industries like lumber and
plywood in the 1960s, reducing the need for imports.
As demand grew, new cement industries emerged. After
democracy was established in 1950, private-sector cement
manufacturing industries developed. From 1972 to 1994, the
government established major factories and shifted toward
privatisation from 1995 to 2003. Regulations were enacted,
leading to increased domestic production and new industries.
The industry experienced growth from 2011 to 2019 with the
new industrial policy of 2010. Registered industries increased,
and cement is categorised into two groups. The Department of
Mines and Geology issued 179 licenses for limestone mines,
mostly held by private companies.
Cement consumption in Nepal has significantly increased. In
2021/22, consumption was 3.2 million tons, reaching 6.9 million
tons by 2022/23 and is estimated to reach 8.5 million tons by
2023/24.
The cement industry is vital to Nepal’s economic growth,
contributing approximately 7 per cent to the country’s GDP. The
total installed capacity of Nepal’s cement industry is 20.5
million tons, with expectations of a 6 per cent compound annual
growth rate (CAGR) from 2023 to 2028. This growth can be
attributed to the government’s emphasis on infrastructure
development and the increasing demand from the private sector.
Market and Energy Status

Energy efficiency is a significant concern for the cement

industry in Nepal. Cement production requires substantial
energy, with coal being a crucial energy source. It takes
approximately 200 kg of coal to produce one ton of cement,
accounting for about 20 per cent of the total coal required per
ton.
The quality of coal used in cement production is essential, as it
affects the combustion rate, flame profile, and heat profile.
Nepal relies heavily on coal imports from South Africa,
Australia, Russia, and Syria. However, transportation issues and
a lack of coordination between the Nepalese and Indian
governments limit the coal supply.
Efforts are being made to improve energy efficiency in cement
manufacturing. The optimal energy consumption for limestone-
based cement industries is 105 kWh/ton and 750 kCal/kg
(0.0313 GJ/ton) of clinker, according to the Energy Efficiency
Centre in Nepal. However, the average specific energy
consumption in cement industries is estimated to be 156.01 kWh
of electricity and 5.411 GJ/ton of thermal energy.
Raw Material Availability and Sourcing Challenges

Nepal is rich in raw materials like limestone, clay, and gypsum,

essential for cement production. However, there are challenges
in sourcing and procuring these materials. While Nepal has
substantial limestone reserves, the country still imports clinker
due to insufficient domestic production.
Limestone, the primary cement component, is available in
various regions of Nepal, including Udayapur, Dhankuta,
Sinhuli, Rakwanpur, and Rautahat. The quality of limestone
directly impacts the quality of cement. Clay, another vital raw
material, is derived from the weathering of aluminium silicates.
Gypsum, crucial for controlling cement settings, is entirely
imported from Bhutan, China, India, Pakistan, Oman, and Iran.
Environmental Concerns and Sustainability

The cement industry’s rapid growth has led to significant

environmental and social challenges in Nepal. Unregulated
quarrying, lack of safeguards, and overexploitation have caused
floods, landslides, and air, water, and soil pollution. While the
industry benefits investors, local communities suffer.
The cement industry provides employment and economic
benefits, but its environmental impact is often overlooked. The
government prioritizes short-term gains over environmental
protection.
Despite higher market prices, Nepal’s cement companies pay
low royalty fees compared to India. The government has
collected little royalty fees, while the industry’s turnover is
substantial. This highlights the need for revising royalty fees to
reflect the true environmental cost.
Cement quarries harm local communities, affecting agriculture
through groundwater depletion, soil degradation, and air
pollution. The government’s response to these issues needs to be
revised.
Environmental impact assessments for new factories are often
bypassed, and warnings from reports should be addressed. Close
ties between companies, politicians, and contractors hinder
effective regulation. Recent legal cases expose exploitation and
royalty fee evasion.
Nepal’s cement consumption surpasses India’s but lags behind
China and Bhutan. Unregulated industry expansion risks
groundwater and slopes, contradicting Nepal’s goal of achieving
net-zero emissions by 2050.
While a few benefit financially, local communities near cement
sites see little economic gain. Forest resources and vacant lands
are exploited without equitable distribution of benefits.
Balancing economic growth and environmental conservation
requires community involvement, stricter regulations, and
responsible mining practices.
Ongoing Developments

Nepal has witnessed significant cement exports over the past

seven months of the current fiscal year. According to the
Department of Customs, the country exported Rs 106 million
377 thousand and cement worth Rs 60 million 656 thousand,
totalling 151,158 tonnes of clinker and 153,493 tonnes of
cement. This demonstrates the industry’s potential to contribute
significantly to the country’s economy.
Two prominent Nepali cement manufacturers, Palpa Cement and
Arghakhanchi Cement, have successfully ventured into the
Indian market since July 2022. The government’s budgetary
export exceptions in the current fiscal year facilitated this
expansion. Palpa Cement exports its renowned ‘Tansen’ brand
cement, while Arghakhanchi Cement supplies the
‘Arghakhanchi’ brand. These Nepali cement brands have gained
traction in various markets across India, showcasing the quality
and competitiveness of Nepali cement products.
 Source: Field Survey 2019
Initially, concerns arose regarding the sale of Nepali cement in
India due to the Bureau of Indian Standards’ decision to stop
issuing the IS mark to Nepali cement. The IS mark serves as
certification, verifying that the cement adheres to the established
Indian Standard. However, it has been reported that two Nepali
cement companies have obtained the IS mark, with others
awaiting certification.
In response to the certification challenges, the Cement
Manufacturers Association of Nepal expressed surprise at the
Indian government’s decision and emphasised that Nepali
cement exceeds the quality of Indian cement. The association
claims Nepali cement strictly adheres to stringent production
parameters, including lower magnesium oxide content and
limitations on the percentage of fly ash mixed in cement. This
quality comparison highlights the industry’s commitment to
producing high-quality cement that meets international
standards.
To support and encourage cement producers to expand their
exports, the Nepali government has announced an 8 per cent
cash subsidy for cement manufacturers who export their
products. This incentive aims to stimulate further growth in the
industry while boosting the country’s export revenue. However,
speculation exists that Indian cement manufacturers influenced
the Indian government’s decision to halt imports of Nepali
cement to safeguard domestic factories.
Conclusion

In conclusion, the cement industry in Nepal faces challenges

related to energy efficiency, raw material availability,
environmental concerns, and fair trade practices. However,
ongoing developments include successful exports to India and
the government’s support through cash subsidies. Overcoming
these challenges will be crucial for the industry’s sustainable
growth and contribution to Nepal’s economy while maintaining
environmental sustainability.
Reference
https://kathmandupost.com/money/2024/01/01/nepali-
producers-await-india-s-nod-to-export-cement
https://myrepublica.nagariknetwork.com/news/tapping-the-
potential-of-nepal-s-cement-industries/
https://www.nrb.org.np/contents/uploads/2021/05/2078.01.25-
Final-Draft-of-Cement.pdf