The Nepali cement industry has weathered two difficult years marked by subdued demand and operational challenges. However, demand has shown signs of recovery in the second half of the current fiscal year, and manufacturers are optimistic that the upcoming fiscal year will bring further improvement. Their optimism is fueled by government data pointing to growth in the construction sector and the government’s announcement, through the new budget, to build urban roads using concrete—a longstanding demand of the industry. In an interview with New Business Age, Raghunandan Maru , President of the Cement Manufacturers Association of Nepal, provides a candid assessment of the industry’s current status, including capacity utilization, pricing controversies, regulatory hurdles, and the strategic steps needed to ensure the industry’s long-term sustainability. Excerpts:
Q: The past two fiscal years have been challenging for the cement and steel industries, as reflected in data and market trends. With the government forecasting a rebound in the construction sector, what does this mean for the cement industry in the coming years?
A: The past two years have indeed been difficult—not just for cement, but for the broader construction sector, including related materials like steel. Indicators such as company profitability and overall financial performance have reflected this downturn. The primary cause, in our view, has been the government’s failure to execute its capital expenditure plan. For various reasons, capital spending fell short, and that had an immediate and direct impact on our industry.
That said, we have started seeing early signs of recovery in cement demand this fiscal year. Encouragingly, the 2025/26 budget includes a policy from the Ministry of Urban Development to build urban roads using concrete—a long-standing demand of the industry. It now appears that the government is beginning to act on the front. If implemented effectively, this policy could significantly boost cement demand. We are optimistic about the outlook.
Q: What is the current state of Nepal’s cement production capacity and consumption? What challenges does the industry face in terms of operations and investment?
A: Nepal currently has an installed production capacity of about 25 million tons per year. However, actual consumption has remained just 7 to 8 million tons annually over the past few years. For this year, we estimate consumption will reach around 8 to 8.5 million tons. This means capacity utilization is still below 50%, likely close to 40%. That is the stark reality facing the industry today.
At one point, there were around 62 cement plants in operation, including both clinkerization and clinker grinding units. Today, only 42 to 43 of those are operating—some of them having only recently resumed operations—while 18 to 19 plants have shut down. Cement is a capital-intensive industry. More than Rs 300 billion has already been invested. Given this level of investment and the role the industry plays in national development; I believe the government must take the cement industry more seriously.
Q: You mentioned that 62 cement factories were established for a market like ours. Does this not suggest an oversupply issue relative to domestic demand?
A: It is important to understand why so many factories were set up in the first place. In previous years, the sector was seen as highly promising. Investors were encouraged by the government’s ambitious plans for major infrastructure projects like Arun III, Budhi Gandaki, West Seti and the Kathmandu-Tarai Expressway, all of which were expected to generate substantial demand. Also, the quality of Nepali cement opened doors for exports to neighboring India. Recognizing this potential, the government even announced an export subsidy about three to four years ago. Although the subsidy has largely remained a promise and no reimbursements have been made, the policy announcement itself gave investors confidence and helped drive large-scale investments into the sector.
Q: It has been three years since Nepali cement industries began exporting. However, India imposed restrictions that were only recently lifted. Given these challenges developments, what is the current export potential for Nepali cement?
A: Many cement industries were established with the Indian market in mind. As I mentioned earlier, Nepali cement has strong potential, not just in India but also beyond. If Nepali trucks are allowed to transport cement up to 150–200 kilometers into Indian territory, I believe we can export substantial volumes to India. There is also significant potential to export to Bangladesh. This is because neighboring Indian states, such as Bihar and Uttar Pradesh, lack their own limestone reserves, and transporting cement from other parts of India increases logistics costs. In the cement sector, logistics can determine competitiveness. Nepal, on the other hand, has both the production capacity and raw material reserves, particularly, limestone, to support exports. If leveraged effectively, we could export cement worth Rs 120-150 billion annually. Cement exports could play a key role in narrowing Nepal’s trade deficit.
Q: What steps need to be taken to facilitate cement exports to India? What can the government do?
A: There are several urgent steps the government must take. First and foremost is delivering on the export subsidy. Without it, Nepali producers cannot compete with Indian cement on price. Margins in the industry are razor-thin, so timely disbursement of subsidies is essential to maintain exporter confidence. The funds must be credited directly to the accounts of cement manufacturers and exporters. This should be the government’s top priority. Second, regulatory barriers need to be removed. A major hurdle we faced for about a year and half was the issue with Bureau of Indian Standards (BIS) certification. This severely disrupted cross-border trade.
Third, as I mentioned earlier, we need access to Indian markets beyond border towns. If Nepali trucks are permitted to deliver cement up to 200 kilometers into states like Uttar Pradesh, Bihar and West Bengal, export volumes could rise significantly even with the added costs of loading and unloading. Bangladesh also presents a substantial export opportunity.
Q: There is currently a mismatch between market demand and Nepal’s cement production capacity. If demand fails to catch up, what does the future look like for this industry?
A: If demand does not improve soon, we could see the closure of many plants. The sector is under serious strain—and so are the banks that have financed it. If conditions worsen, many of these loans could become non-performing assets (NPAs). This alone should be reason enough for the government to intervene.
We face numerous procedural hurdles in operating our plants. For example, 38 files related to the mining rights for cement production have been stuck at the Department of Forests for over two years. Nearly 99% of Nepal’s limestone mines are within forest areas. This means that usage rights require clearance from both the Department of Forests and the Department of Mines and Geology. This overlapping jurisdiction creates confusion and delays. A single-window clearance system is urgently needed—one that allows entrepreneurs to proceed step-by-step without procedural bottlenecks.
Currently, obtaining or renewing usage rights for mining land can take anywhere from 18 months to three years. This is unsustainable. Even though mining licenses are issued for 15 to 30 years, the usage rights must be renewed annually. Unfortunately, the process is far too complex and bureaucratic. This has left many industrialists frustrated and demoralized. Across all sectors, around 58 files, 38 from cement alone, are currently stuck in various government departments. This backlog points to a systemic failure that demands immediate correction.
Another major issue is land acquisition. Cement manufacturing is highly capital-intensive, requiring hundreds of bighas of land for factories and mines. But existing land ceiling laws make it difficult to acquire land at the required scale. We urge the government to allow exemptions for cement projects based on legitimate need. If a project fails, investors should be allowed to liquidate land assets. This flexibility is critical to attract large-scale investment in the sector.
There is also the issue of environmental clearances. If we purchase land and complete an Initial Environmental Examination (IEE), only to have it later rejected, our entire investment in land becomes a sunk cost—a major risk for entrepreneurs. Mining operations alone require thousands of ropanis, but once the land ceiling is reached, even land meant strictly for mining cannot be acquired. This makes no sense. We need a separate legal framework tailored to the specific needs of extractive industries. The current regulatory framework is impractical and outdated. If not overhauled soon, it will continue to choke industrial growth and discourage further investment in one of the country’s most important sectors. The government must act swiftly to streamline procedures, remove unnecessary bureaucratic barriers, and provide the clarity and support needed for the cement industry to thrive.
Q: When demand drops, manufacturers usually compete by lowering prices. But in December and January, cement producers raised prices by up to Rs 200 per sack—seemingly through cartel-like practices. Shouldn’t producers also be held accountable for such actions?
A: Unhealthy competition among cement producers has certainly had an impact. This is not a new phenomenon. In fact, in previous years, we were sometimes forced to sell cement at Rs 100 to Rs 150 below production cost. Why? Because without sales, we couldn’t maintain cash flow. If our sales dried up, banks would blacklist us the very next day. We have been through that, we do not want to repeat it. But it is not entirely in our control. Cement prices have always followed a seasonal pattern in Nepal. They typically drop by Rs 100 during monsoon and rise by a similar margin in winter. This fluctuation has been consistent for the past decade.
Construction associations have accused us of arbitrary price hikes. We have even explained our position before the Public Accounts Committee of the House of Representatives. Our response was simple: if you claim cartelization, show us the evidence. Cartelization implies a fixed, industry-wide price. But that is not the case here. Each company sets its own prices based on individual cost structures and margins. We even invited the committee members to visit our factories. If they found everyone selling at the same price, then they could accuse us of collusion. But that is not the reality; pricing varies from one manufacturer to another. As for the claim that prices rose by Rs 150 or Rs 200 per sack, that is a misunderstanding. We were previously selling at a loss of Rs 150 per sack just to keep operations going. The recent adjustment is a market correction, not an arbitrary spike. Again, as I mentioned earlier, a seasonal fluctuation of Rs 70 to Rs 100 is completely normal and has long been accepted within the industry.
Q: Shivam Cement is regarded as the market leader in the country. What is your current market share? How was your performance during the recent slowdown?
A: We have never chased market share as our primary goal. Our core focus has always been quality. Our motto is “No Compromise on Quality”, and we have remained true to it. That is why Shivam Cement is one of the most trusted and preferred brands in the market. Our emphasis on quality has built our reputation among consumers. Financially, the first quarter of 2024/25 was not particularly strong. But since then, our performance has steadily improved. Today, we are in a stable financial position. Over the past five to six years, we have consistently delivered value to our shareholders, and we are confident this momentum will continue.
Q: There has been a prolonged standoff between cement producers and the Nepal Electricity Authority (NEA) over the use of dedicated and trunk lines. The NEA claims unpaid dues, while producers demand proof. Why has this not been resolved?
A: Let me put it this way—imagine you flew Kathmandu to New Delhi in economy class, completed your trip and returned. Then, three and a half years later, your travel agent sends you a bill claiming you actually flew business class and now owe the fare difference. Naturally, you would ask for proof. That is exactly our position with the NEA. If we used a dedicated power line, show us the evidence. We made the same request with then Executive Director Kulman Ghising. We said: “If there is evidence, we are willing to pay—even though, legally, we are not obligated.”
Why aren’t we obligated? Because using a dedicated line requires a formal agreement. Still, in the national interest, we said: “Fine. Show us the proof, and we will settle the bill.”
Q: What is more ironic is that the NEA itself published a public notice in 2015, stating that it was unable to provide dedicated lines. Yet three and a half years later, we received a demand letter for tens of millions of rupees for using those same lines. How is that fair?
A: Now that the NEA has a new Executive Director, we are hopeful the issue will be resolved. The Pushpa Kamal Dahal-led government even formed the Lal Commission to investigate the matter. The commission worked for three to four months and produced a report, recommending that its findings be made public. We asked to see the report, but it was never released. All we have ever asked is: even if our concerns are overlooked, at least consider the commission’s findings.
Q: Coal is one of the main raw materials in cement production. What is the current status of coal imports and challenges involved?
A: Coal is indeed a key input for our industry, and we rely entirely on imports. Over the past year or so, a so-called “green tax” has been imposed on coal. This tax may have been inspired by environmental practices in some Western countries, but in Nepal’s context, it makes little sense. In Nepal, coal is not just fuel—it is also a critical raw material for cement production. Imposing a green tax under the current circumstances is deeply misguided. I strongly urge the government to review and remove this tax immediately.
Q: Where do you see the cement industry in five years? Will it grow, or will factories shut down if the current challenges persist?
A: I am optimistic. I believe the cement industry, and the construction sector as a whole, has a promising future. Large infrastructure projects planned over the coming years are expected to bring economic stability, which will naturally encourage more investment. Of course, controlling unnecessary expenses is critical. Some recent policy changes have pushed expenses higher, and we hope the government addresses these issues. The government’s focus on highway concretization is particularly encouraging. If implemented properly, it will greatly increase cement demand. Currently, Nepal imports Rs 9 billion worth of bitumen annually. Reducing the dependency and promoting domestic alternatives like cement will benefit both the economy and local industries. But stability is the key. Many roads built today deteriorate within just one to three years. Achieving long-term stability will help overcome these recurring issues and drive substantial progress.
Q: Nepal has a three-tier government system—federal, provincial, and local. The private sector often complains that this structure creates multiple layers of taxation and administrative challenges. What specific problems are industries facing?
A: For instance, the provincial industry ministry cannot issue industrial licenses. The provincial forest minister lacks the authority to grant forest usage rights. Similarly, the provincial home minister does not have the power to coordinate industrial security measures, such as deploying police or administrative staff. The absence of these essential powers at the provincial level has raised serious questions about the effectiveness of provincial governance.
Local governments impose taxes on industries to fund their operations. This results in double taxation—one at the local level, another at the federal or provincial level—placing a heavy financial burden on businesses. Resolving this issue is critical not just for the cement sector, but also the entire industrial ecosystem. I believe the government is now beginning to take these concerns seriously.
(This interview was originally publihsed in July 2025 issue of New Business Age Magazine.)
