Local cement manufacturers losing out
KATHMANDU:
Nepali cement manufacturers are yet to fully tap on the potential of massive infrastructure drive in the country, owing to their inability to provide assurances in terms of quality and supply.
Whether for hydropower, road projects or housing sector, the demand for cement has been surging every year. Hydropower developers and engineers said that amid growing demand and huge future requirement for large number of hydropower projects in the pipeline, local manufacturers have been unable to provide assurances of quality and quantity that are required for the projects.
“There are only few Nepali cement brands that meet quality requirement of hydropower projects,” said Khadga Bahadur Bisht, president of Independent Power Producers Association (IPPAN). He added that it is also hard for local producers to meet bulk demand required for projects, which might have propelled big projects to import cement rather than depend on local products.
Normally, projects that are implemented under bilateral or multilateral agreements and large hydropower projects get customs waiver facility to procure construction materials and other goods that are not manufactured in the country. This facility also makes imported cement cheaper in comparison to local products. Under this facility, the government waives Rs 3,750 customs duty, Rs 180 excise duty and 13 per cent value added tax (VAT) on import of per metric tonne of cement.
Road projects and many small hydropower projects that are not given the customs duty waiver are using around half a dozen local brands considered to be of comparatively better quality and strength.
Dhurba Thapa, president of Cement Manufacturers Association of Nepal, claimed that domestic products are competitive in terms of quality but costlier compared to imported brands — the reason, according to him for some developers to import construction materials. “Some projects being carried out under international competitive bidding (ICB) contracts and hydropower projects are importing cement, even though we are capable of addressing their demand,” he asserted.
As per the record of the Department of Customs, the government has issued permission to import various goods, including construction materials like cement and steels for over three dozen projects related to roads, railways, airports, transmission lines and hydropower. Ring Road Improvement Project, Shindhuli-Bardibas road, Chameliya Hydropower Project (30 MW), Upper Tamakoshi Hydropower Project (456 MW), Melamchi Drinking Water Project and Tatopani Dry Port Projects are some of the projects that have received facility of customs waiver.
A senior divisional engineer at the Department of Roads involved in Sindhuli-Bardibas road project that is being undertaken with the support of Japanese government said that they avoided using Nepali cement for some major structures of the project after the manufacturers failed to give quality assurances. “What if the local manufacturer gives sample of full strength cement for lab test and then fails to deliver the same quality in each sack?” he questioned.
When asked about use of cement in the project, Bigyan Shrestha, project chief of Upper Tamakoshi Hydropower, said that they have recommended contractors to use the cement which meet technical requirements. “Before using cement, contractors are required to get the approval too. It’s about quality, not a matter of Nepali or international brand,” he said.
In general, before using any cement brand for project construction, its strength is tested in the lab. With the country requiring massive infrastructure expansion, including in hydropower, roads, bridges and railways, cement manufacturers should forecast the demand and prepare themselves, according to experts.
Though local cement brands are yet to win full confidence of mega projects, the government records show that import of cement under customs waiver facility is declining. Even as a large number of projects are getting customs waiver facility, very few are importing cement as domestic production has gone up in recent years. “Only few projects like Sindhuli-Bardibas road and Jayanagar-Janakpur-Bardibas railway are buying cements from India,” an official at the customs department said.
As per a study conducted on Impact Assessment of Revenue Waiver by the Ministry of Finance, cement worth Rs 1.01 billion had been imported in fiscal year 2011-12. The import amount declined to Rs 854.8 million in fiscal year 2012-13. Based on the list of goods needing to be imported and its approval from Ministry of Finance, the customs department extends the facility to the projects.
Source: THT
