India has imposed an 'unannounced embargo’ on Nepal’s export of cement made from clinker produced by Chinese-invested industries. Industrialists have reported that this restriction has prevented the export of cement made using clinker from Chinese-invested companies like Hongsi Shivam Cement and Huaxin Cement to India.

Entrepreneurs have voiced concerns that, despite the government's subsidies aimed at promoting cement exports, no action has been taken to address the export barriers. Industrialists noted that India has rejected the import of cement made from Chinese clinker, citing quality standards as the reason.

Hari Gautam, senior vice president of the Birgunj Chamber of Commerce Industries, explained that the Indian side has hindered the export of cement by delaying the approval process for cement produced by industries with Chinese investment, citing various pretexts. He emphasized that India requires compliance with BSI ISI quality standards for cement exports, which has stalled exports.

Despite the government's policy of offering up to 8% subsidies on cement exports and concessions on electricity, the Indian policy has effectively halted exports. "Exports couldn't proceed after the cements were stopped over quality standards," remarked one industrialist.

Problems in exports began when India started categorizing investments from Nepal and China in terms of import permits. Entrepreneurs argue that, although the government announced an export policy, it has failed to facilitate its implementation. With limited domestic demand, industrialists looking to sustain their businesses by exporting cement to neighboring Indian states claim the government has not provided the necessary support.

An official from the Indian Consulate in Birgunj stated that they have adopted a policy to facilitate cement exports from Nepal. "We have granted concessions to industries with Nepali investment to export. However, we do not have a policy to promote industries funded by foreign investments," the official noted.

While some industries with their own clinker plants manage to export, the quantities are limited. Grinding industries that rely on purchasing clinker from others are more severely impacted by this issue.

Due to intense competition in the domestic market, the plan to keep the industry running by exporting cement to India has not succeeded. Out of 11 such industries in the Bara-Parsa corridor, only four are still operating.

Ashok Kumar Baidya, an industry owner, revealed that although Shalimar Cement in the corridor managed to export 100 units, the absence of timely government subsidies has impeded further exports. "Even the few industries that managed to export didn't receive subsidies on time. After the export, there should be an arrangement for the payment to be credited to the industry's account. We haven’t received subsidies for two years. How can we continue exporting under such conditions?" Baidya questioned.

With reduced exports to India and stiff competition in the domestic market, sales have plummeted, forcing most industries to halt production. Many have shut down entirely. "To mitigate the pressure from banks and worker expenses, some have resorted to operating at reduced capacity," an industrialist said.

The Downward Spiral

The Bara-Parsa industrial corridor was once considered a 'hub' for cement production, with industries meeting domestic demand by importing clinker from India. Today, most of these industries have shut down. Those still operating are producing at reduced levels.

Anil Kumar Agarwal, president of the Birgunj Chamber of Commerce and Industries, was forced to close Sri Cement Udyog due to mounting losses. "Selling cement at prices below production costs can't sustain a business. It’s better to shut down the industry than to incur continuous losses," he explained.

International Cement, Krishna Cement, RMC Cement, Shree Cement, Ambe Cement, and Advance Cement in the Bara-Parsa Corridor have all ceased operations in the last four years. Star Cement had closed even earlier. Currently, only Jagdamba, Shalimar, Narayani, and Vishwakarma cements continue to operate in the corridor, according to industry owners.

Satish Chachan, managing director of Narayani Cement Industry in Birgunj, noted that while the government included cement in the list of exportable products, the lack of diplomatic initiatives to resolve export barriers has limited exports. Chachan believes that the domestic cement industry could have tapped the potential of markets in Bihar, Uttar Pradesh, and West Bengal, but this opportunity remains underutilized.

The government's policy to promote clinker production aims to make the cement industry self-reliant. However, without concessions on capital, interest, electricity tariffs, technology imports, and with high customs duties on clinker imports, the domestic clinker industry raised its prices after imports ceased. This situation led to a price surge, with cement prices in the domestic market reaching Rs 950 per bag. Attracted by the high returns, foreign companies with significant investments entered the market. Chachan believes the decline of grinding units began with this increased competition, as production exceeded domestic demand.

Sandeep Agarwal, another industrialist, pointed out that when domestic demand is 8 to 9 million tonnes, but production reaches 20 million tonnes, large investment industries adopt strategies to lower prices, forcing smaller industries out of business. He also noted that the market downturn caused by the COVID-19 pandemic, combined with a slump in the real estate and construction sectors, has further exacerbated the situation.

Birgunj Chamber of Commerce and Industry President Agarwal criticized the government's indifference towards protecting industries with both domestic and foreign investments. He stated that the closure of cement manufacturing industries, which relied on importing clinker, has led to a loss of Rs 10 billion in investments.