The state-owned Udayapur Cement Industry Limited is on the verge of shutting down due to a lack of financial resources. Company officials say the industry can only continue operating if the government provides additional funds; otherwise, it may be forced to close entirely.
The company’s financial troubles have worsened over the past four fiscal years due to a sharp decline in production. With little to no income, it has been unable to repay its debts, including Rs 3.37 billion owed to the government out of its total liability of Rs 5 billion. Additionally, the company’s licenses for limestone and red clay mining—essential raw materials for cement production—have been canceled due to non-payment of renewal fees.
"We have not even been able to pay employee salaries since mid-November," said Hari Prasad Adhikari, the industry’s manager. "Currently, we are producing only a limited amount of cement to pay workers’ wages."
In the fiscal year 2021/22, the company produced 2,172,419 bags of cement, but production fell drastically to just 547,629 bags in 2023/24. As of March 7 of the current fiscal year, production stands at only 152,544 bags. Similarly, the industry, which produced cement worth Rs 1.31 billion in 2021/22, has managed only Rs 91 million in production as of March 7 this fiscal year.
The slowdown in Nepal’s construction sector over the past three years, mainly due to the government’s inability to spend its capital budget and a slump in real estate activity, has affected the demand for cement. As a result, Udayapur Cement, like other cement industries, is struggling to maintain production.
At present, the company’s capacity utilization has dropped to just 4.27 percent. Due to financial difficulties, the company attempted to secure a Rs 110 million loan from the government, but the Finance Ministry has yet to approve it. In an effort to raise funds, the company is also trying to recover a Rs 120 million loan it had given to Biratnagar Jute Mill two decades ago.
"If the Finance Ministry does not approve the Rs 110 million loan and the Biratnagar Jute Mill does not repay its debt, we have no other options," Adhikari said. "If we receive funds from either source, we can restart production within 15 days. If the government provides the Rs 110 million loan, we will follow a one-year repayment schedule. Otherwise, the industry cannot continue operations."
The company also faces an employee retirement liability of Rs 700 million. Meanwhile, due to halted production, it has been unable to take advantage of rising cement prices, which have now reached Rs 700 per bag.
Adhikari further noted that the company is struggling to compete in the market due to rising coal and diesel prices. "We need Rs 1 billion to purchase 500 tons of coal. Without financial support, we have no choice but to stop operations," he said.
The government had pledged a Rs 160 million loan to the industry, of which Rs 50 million has been spent. However, the Finance Ministry has not approved the disbursement of the remaining Rs 110 million.
Additionally, outdated machinery and a shortage of skilled workers have further impacted the company’s performance. While its current daily production capacity stands at 800 metric tons, a plan to increase it to 1,100 metric tons remains stalled due to a lack of funding.
Limestone License Canceled
The Department of Mines and Geology has canceled Udayapur Cement Industry’s limestone mining license after the company failed to pay the Rs 8 million renewal fee. As limestone is a key raw material for cement production, the cancellation poses a significant challenge for the company.
Dinesh Nepali, Director General of the department, confirmed that the license was revoked due to non-payment of the renewal fee on time. The company stated that it was unable to pay due to financial difficulties.
