c e m e n t s t o r y

By Sagar Tamrakar

CEMENTINDUSTRYin Nepal

NDespite the abundance, domestic

cement production only accounts for 40percent of total consumption in Nepal,informs Tej Kant Jha, general manager,Udayapur Cement Industries (UCI). Headds, “UCI alone has been fulfilling 25percent of the total domestic marketdemand. All other Nepali cementmanufacturers contribute about 15percent of the demand. Imported cement,mainly Indian, fulfill the remaining 60percent. But Ramesh Kumar Aryal, generalmanager, Hetauda Cement Industries (HCI)chooses to differ. He comments, “In thelatest scenario, imported cement supplies70 percent of the market demand.”Needless to say, a good market for cementexists within and outside the country. Aryal

adds, “With inadequate infrastructure andfrequent power crisis in the industries,forget exporting, even self dependency incement production will remain a dream.”

The data from the Department ofIndustries does confirm that cigarettesand beer are the only merchandise whosetotal capacity utilisation exceeds 50percent.

With the resolution of conflict, a bigboost in this industry is likely. Thegovernment has promised to invest a lotin infrastructure development –particularly roads, in addition to housingconstruction and expansion of corporateproduction facilities. But private sectorinvestment in the cement industryaccording to the Department of Industries

epal is enriched with large and small deposits of good cementgrade limestone1. The limestone deposits occur within thesequence of the Lesser Himalayas2 extending from the east towest. Limestone is by far the most important mineral resource inNepal, followed by magnesite, marble, lead and zinc. So far, this isalso the most economically viable mineral resource. A total ofabout 1,250 million tons of cement grade limestone is estimatedto exist in the country and the existence of at least 224 milliontons have been confirmed through drillings and dedicatedsurveys. Even when only a few deposits are being exploited for

commercial production of cement and allied products, limestone still tops the listof the most exploited mineral resources in Nepal.

1 calcareous sedimentary rock composed of mineral calcite (CaCO3) which uponcalcination yields lime (CaO) for commercial use.

2 range of mountains southwards the range of snow capped mountains extending2400 km east-west along the Himalayan range.

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Limestone deposit map

1. Nigale2. Sindhali3. Katari4. Chobhar5. Bhainse6. Okhare7. Rossi8. Jogimara9. Narpani10. Gandari11. Surkhet

(Chaukune)12. Diyari Gad13. Bhumeshwar14. Chauraha15. Kajeri (Halchaur)16. Chuladhunga17. Ghyampethumka18. Waling19. Beldanda20. Kakaru21. Sarada22. Lakharpata23. Supa24. Balthali25. Nandu26. Bhatte Danda27. Mane28. Nigure29. Lamatar30. Halesi31. Kurichaur32. Badhare Khola33. Kerabari34. Bhardeo35. Majuwa36. Bhartapur37. Khanchikot38. Sabdu39. Mauwa Khola40. Tamor River41. Tankuwa Khola42. Dhankuta Khola43. Khalung Khola44. Neupane45. Salendanda

Source: Mineral Resources Division,Department of Mines and Geology, July 2003

Source: Ministry of Industry,Department of Mines and Geology, Kathmandu

Cement grade limestonereserves in Nepal andusage

Bagmati Zone

Lalitpur DistrictChobhar: Himal CementCompany (a 130,000-Mt/yrcement plant but has closeddown with 15.3 million mt ofproven reserves)

Dhading DistrictJogimara and Beldanda areas:Hetauda Cement Industries,Tribeni Cement andAnnapurna Cement

Narayani ZoneMakawanpur DistrictBhainse-Dobhan, Majuwa andOkhare: Hetauda CementIndustries (a 260,000-Mt/yrcement plant with 18 millionmt of proven reserves oflimestone)

Sagarmatha ZoneUdayapur DistrictSindali: Udayapur CementIndustries (a 270,000-Mt/yrcement plant with 70 millionmt of proven reserves)

Koshi ZoneDhankuta DistrictNigale, unexploitedProven reserve: 10 million mt

Bheri ZoneSurkhet DistrictChaukune, unexploitedProven reserve: 31.5 million mt

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Nepali

India

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does not indicate the expected boost butrather a decline. Companies register butfail to operate either due to governmentindecisiveness and negligence or theirown inabilities. Jha comments, “Even afterapproval from the Ministry of Industry,Commerce and Supply, new projects arestill lost in a bureaucratic maze trying tocoordinate with agencies like theDepartment of Road, Department of Forestand other related departments,” and adds,“Mineral regulation will be efficient if suchhindrances are removed once theDepartment of Mines and Geology leasesthe land for exploitation.” Aryal furthersuggests, “The government should offertime bound license to private companiesso that they are motivated to operatewithin the time frame,” and emphasises,“The government should support thecompany by eliminating hassles.”

Market ResearchThe market for Nepali cement is very

good. All the cement stock sells easily forthey are good in quality and competitivelypriced as well. Jha says, “The limestonequality is also superb. Calcium oxide (CaO)content ranges from 43 to 53 percentand Magnesium oxide (MgO) content isless than three percent. Therefore,cement quality is the best in market.” Thestandard content of CaO in cement gradelimestone is 42 percent and MgO is fivepercent. The ratio of CaO and MgO needsto be maintained to enhance the bindingpower of cement. About HCI, Aryal says,“The quality of limestone in all the minesis of cement grade except that of Bhainse.Bhainse limestone has to be mixed with

Cement prices per bag in Kathmandu Valley

Cement Brand Factory Price Transportation cost Total price

Gaida cement 380 90 470Shakti cement 400 60 460Siddhartha cement 380 60 440Trishakti cement 385 65 450Gorkha cement 380 65 445Bishwokarma cement 385 65 450Jagadamba cement 390 65 455Nirman cement 380 65 445

Satana cement 440 65 505Buland cement 440 65 505L & T 43 grade 435 65 500L & T 53 grade 465 65 530Lafarge cement 430 65 495Reliance cement 375 65 440ACC cement 430 65 495

(Source: July 2007 Survey, Udayapur Cement Industries)

limestone from other mines to producequality cement.”

Grade of CementGrade of cement only indicates the

compressive strength of cement (notconcrete) at 28 days. But cementcontinues to increase in strength beyond28 days, with not much difference in longterm strength.

Required compressive strength ofvarious grades of Ordinary PortlandCement (OPC)

33 Grade 43 Grade 53 GradeAge Minimum compressive strength in

Newton per square millimetre

Three days 16.0 23.0 27.0Seven days 22.0 33.0 37.028 days 33.0 43.0 53.0

Annual total cement production andcapacity usage percent

700 –

600 –

500 –

400 –

300 –

200 –

100 –

0 –1986/87 2004/05 2005/06 2006/07

151681

610044 613643 644325

49% 39.72% 41.71%

FiscalYear

Cem

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Annual Cement ProductionCapacity Usage Percent *

* Proportion of production with respect to total capacity of industry.

Productivity Index2005/06 2006/07404.69 424.93Source: Ministry of Industry, Department of Industries

CASEANALYSISUdayapur Cement Industriesgeneral managerTej Kant JhaFactory-running scenario

The factory is profitable and expanding interms of capacity utilisation, production andturnover. Capacity utilisation has risen over 42percent from around 35 percent in the previousfour years. Promotion of staff, which had beenpending since 10 years, have been made. Allthe factory staff have been made permanent.The total employee count of the factory is 602with 184 in the administrative section and 418in technical division.

Capital investmentThe financing of the industry was covered

by Japanese OECF assistance of Rs 9.84 billiongranted to the government during itsestablishment. The assistance is provided bythe government to UCI as a loan. Also, thegovernment has equity share of 450 millionrupees in the industry. The industry is payingback the loan with annual interest rate of fivepercent. With the rise of foreign currencyexchange rate of the Japanese yen, the amountpayable is also rising. Had the exchange ratebeen constant, the loan would have beencleared by this time.

Total mineral reserveUCI has limestone reserves for 150 years at

the rate of producing 800 metric ton (mt) ofclinker a day. The factory is capable of producing277,200 mt cement per year. Annually, 330,000mt of limestone is required. The total estimatedreserve of the limestone mine is 72 million mtwhich is in Sindhali area of Udayapur district. Itis 27 kms from Jaljale plant site. Besides this,clay, silica sand, iron ore and gypsum are requiredfor cement production. Except clay and silicasand, other raw materials are imported fromIndia. Essential utilities also include fuel (coal,furnace oil), electricity and water.

Factory capacity and productionThe estimated total production capacity of

the factory is 277,200 mt of cement per year.This capacity was only met in the fiscal year2001/2002. The production was 45 percent ofthe total capacity in 2006/2007. Records of theprevious three years show that the capacityutilisation then was only around 35 percent.

TaxationThe government charges five percent

excise duty on imports such as gypsum, coaland iron ore. The government charges exciseduty of Rs 5.25 per bag and VAT at 13 percent.

Demand and supplyWith full capacity utilisation, UCI can

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contribute in supplying about 60 percent of themarket demand. We have not been able to reachthis target though. There are certain constraintsin our inability to utilise our full potential; theseinclude frequent power failure, load shedding,lockouts, strikes and machinery breakdown.

Measures to curb low outputTo improve output, many changes have

been made. A separate transformer for UCI hasbeen installed. This minimises power failuresto a great extent. An adequate spare partsreserve has also decreased the negative effectof machinery breakdown.

Foreign cement encroachmentMarket research tells us that consumers

go for Indian cement only when they do notfind Nepali cement. We have always been tryingto increase the production to cover largerproportion of the market and lessen theencroachment of Indian cement. But theaforementioned constraints pull us back. Also,due to leakage in the borders, Indian cemententers the market at cheaper prices.

Declining cement productionPolitical instability, formation of trade

unions, frequent change in management andincompetent managers are the mains reasonsfor the decline. Political instability has createda sense of insecurity for foreign investors.Private investment has also been grosslydiscouraged. Just as schools have been declared

peace zones, effort should also be made todeclare industries as peace zones.

Environment protectionmeasures

To be environmentally friendly incompliance with the mineral law, we haveadvanced machinery control. Modern machineswith electrostatic precipitator (ESP) greatlyreduce environment hazards. This technologycollects dust that otherwise spreads in theatmosphere creating air pollution.

Contribution to nationaleconomic growth

UCI paid electricity bills of 150 millionrupees, loan payoff of 200 million rupees, VATof 87.5 million rupees and excise duty of 10.5million rupees to the government this fiscalyear. These revenues grow with the growthof cement production. And as a commodity,cement definitely contributes to nationaldevelopment.

Self dependency in cementNepal has more than enough mineral

resources to be self-dependent in cement.Political instability is the major drawback inexploiting this rich resource. Also, theindustrial policy must be updated from timeto time. Currently, the policy must be revisedto attract foreign investors. Foreign investorsare not sure when and if they will be able toreap returns. Primary goal should not be

focused on economic growth but politicalstability.

Another drawback in our system is latedecision making. According to one door policy,investors long to invest but lack of promptdecisions at bureaucracy levels disintereststhem. In countries such as China, India,Thailand, Pakistan, Bangladesh and others, oncethe license is approved for foreign projectsaccording to the one door policy, then and therethey sit together and decide everything. Here,even after licensing, different departments keephindering the operation.

Poor labour laws are another drawback. TheMinistry of Labour and Social Welfare is focusedonly on overseas labour law. The ministry is leastconcerned about formulating appropriate labourlaws in the country. Ministers should know theirministries well before they take office.

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CASEANALYSISHetauda Cement Industriesgeneral managerRamesh Kumar Aryal

Factory running scenarioThe factory has not been able to utilise its

full production capacity. The output is onlyaround 40 percent of the installed capacity.This inability does not arise from problemswith the plant but with short running hours.This fiscal year, the factory production laggedfor four months since August due to scarcity oflimestone. We excavate limestone from minesat four different locations – Bhainse, Majuwa,Okhare and Jogimara. Some of them are hardto access due to poor road network whereassome have strong opposition from localcommunities that are demanding higherfacilities, way beyond our strengths. Bhainsemine is easily accessible but because of poorlimestone quality, we cannot solely dependon it. Disturbances from local communities

stand out as a major hindrance. Thesedisturbances, though present, were not asintense in the past. This problem can be partiallysolved by fulfilling their demands. But again,the factory is closed now not because of rawmaterial but power crisis – low voltage andirregular power cuts. In addition, somemachines are not running well. Even with allthese setbacks, we have produced 43 percentof total capacity in this fiscal year. HCI has beenmaking profits for the past three years. If allimpediments are managed, productionstrength will be even more than the capacityutility realised in previous years. Our debt isgradually being paid back.

Capital investmentThe government initially supplied

Hetauda Cement Industries with a loan of 10billion rupees that it received from AsianDevelopment Bank. The government hasdivided this sum into two dividends. HCI paysinterest rate of 10.5 percent and nine percent.The payback to government this year is 120to 130 million rupees. The industry has equityshares of six different ministries.

Total available reserve ofmineral resources

The total reserve of mineral resources isenough for about 20 years in the future, butthe same mine extensions can supplylimestone for more periods of time.

Factory capacity and productionThe total installed capacity at the factory is

750 tons or 16,000 bags of cement per day. Theannual production becomes 5.2 million bags ofcement. Our production target is 60 percent ofthe total capacity, ie, 3.1 million bags of cementper year. But due to various factors mentionedabove, production met only 67 percent of thetarget. The production this year has been 2.3million bags. This is the data of Ordinary PortlandCement (OPC). Some years ago, HCI had beenproducing Portland Slag Cement (PSC). Theproduction of PSC ceased due to poorsupplement of slag, the raw material that comesfrom steel industries. Even India is having adifficult time getting slag.

ProfitsThe profit was Rs 65.7 million in the fiscal

year 2061/2062, Rs 24.5 million in 2062/2063.The decrease was a result of the insurgency.This year, the factory is at marginal profit withinthe range of Rs 100 to 130 million, althoughexact figures are yet to be calculated.

Challenges and plansPower cuts is the enduring problem. We

asked for a double circuit line so that we couldget power 24 hours a day. They say that power islimited with the fluctuation of the Kulekhanipower plant. Load shedding, voltage drop andfrequent tripping of power all add to our woes.Frequently tripped power supply even damaged

Panchakanya Group has taken theinitiative to introduce a new product in thefield of concrete construction, ie, Ready MixConcrete (RMC). RMC is relevant for bigconstruction works that are presently takingplace in Kathmandu. Pradeep Kumar Shrestha,managing director, Panchakanya Group(Industrial and Trading House) explains:

What is the product?Ready Mix Concrete (RMC) is a very new

concept in Nepal. This product was on our

CEMENT USAGE

contractors and even engineers do notunderstand this. Many contractors andlabourers feel that this product is displacingthem, but this is not the reality.

RMC is important in the valley becauseKathmandu is an earthquake prone area. Wewere also the first to launch TMT steel barsin the country. But just good steel is notenough for construction. Good engineeringand something good to concretise should alsogo hand in hand. This is why the idea of RMCstruck us.

Production capacityWith the two factories, we can produce 400

cubic metres of RMC per day, ie, we can cater to40 small houses a day. Transit mixers that deliverRMC have capacity ranging from three cubicmetres to six cubic metres. Three cubic metrescover 300 square feet area of construction. Wehave 12 transit mixers at present.

We have factories in two locations, Jadibutiand Thankot so that we can cater to the needsof customers. We are equipped with a lot oftransit mixers and other infrastructure.

ClienteleMajor clients are general households. They

are the main sufferers during constructionbecause of space, time, cost and other hassles.Secondly, we are targeting big project sites.We have set an understanding with some ofthe big contractors, consultants, and we aretrying to work closely with building contractorsincluding MK Nirman Sewa and AllianceInsurance, to name a few. We believe that thisproduct will pick up market demand quickly.With the rise in building multi-storey housesin the valley, the demand of RMC will also rise.

RMC placement technologyWe have different grades of RMC. RMC

grade is chosen as per the requirement of thestructure of the building. RMC is delivered bytransit mixers and placement is done by cranesand/or pumping units. RMC can be pumped upto 30 metres height. In inaccessible gullies,

EVOLUTION INmind for quite sometime becausethere is a real need for it. But sincethis is a new product, people areonly slowly getting used to it.Nevertheless the response hasbeen very good, and we have beenencouraged. The most difficultthing has been to convince peopleon prices. It sounds a little costly,but at the end of the day, it is morecost effective. It eliminates storagespace requirement at theconstruction site and makesconstruction more efficient. Inaddition, it prevents noise and dustpollution. The general customers,

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the kiln and other machineries. Efficiency of themachineries drops drastically by irregularity inpower supply. HCI pays the highest amount forelectricity in the area, so we demand specialattention of continuous power supply to thefactory. HCI is helpless in getting adequate powersupply. NEA maintains that the whole industrialcorridor in the area suffers the same problems.We are calling on all top users of electricity inthe area to shed load in a systematic way inorder to get rid of irregular power tripping.

Research must be carried out to findoptimum sources of power, be it coal or otherfuels; only this can improve efficiency andreduce costs.

Demand and supplyHCI along with other cement industries in

our country fulfill only about 30 percent of themarket demand. We have huge reserves ofcement grade limestone but production is stillvery low and consumers have to depend oncement from India. Government shouldseriously update its policies and bring thereserves spread throughout the country intogood use.

Foreign cement encroachmentThe import of Indian cement has never

affected HCI’s market. Indian cement come intouse only after HCI runs out of stock. HCI hasmaintained its production standard, and this isthe fact why Indian cement cannot compete with

our product. HCI has been using the limestonereserves with 43 to 53 percent CaO contentwhich is not found in Indian cement industries.Even if Indian cement is introduced at cheaperprices, people’s first priority will be qualityNepali cement. Nepalis have a good conceptof maintaining standard in building houses asNepal is a highly earthquake prone country.

Declining cement productionDeclining cement production is directly

proportional to power crisis. Other requisitesdo not have many serious effects as most areimported without much difficulty.Contribution of the private sector has beenimproving gradually although some registeredparties have still failed to operate. Privatecompanies in Butwal and Arghakhanchidistricts have started cement production vialimestone exploitation, which until now wasonly done by state owned industries. Thistrend should continue to lessen the importof clinker from India. The time bound licensingstrategy will definitely yield much in the fieldof cement in Nepal.

Environmental protectionmeasures

HCI has been using ESP equipments toproduce cement in environmentallyresponsible manner, but the equipment haveworn down and operate now at 50 percentefficiency. The retrofitting of this equipment

is quite costly. Therefore, we are planning tointroduce another technology for minimisingpollution. We are preparing documents to getreverse air bag house (RABH) equipment whichis more effective. It is eco-friendly, easy tohandle and equipped with recycling of dustwhich otherwise would go to waste.

Along with this, we are planning minormodifications in the overall machinery toimprove efficiency and production. Past recordshave demonstrated that we can exceedproduction of 20,000 tons per month.

RMC delivery is done using wheel barrows.

Pros and cons for contractors andlabourers

Some labourers and contractors may bedisplaced. That is the reason why we did notlaunch this everywhere. It has been launchedon need basis. But it also speeds upconstruction work and helps in bringing moreconstruction projects. The contractors havemore jobs to take. Therefore, they need tochange their mindset.

Difference from other mortarsRMC is a proven technology. We are using

the aggregate, sand or water that is tested. Weuse good quality cement, aggregate, double/

AVOID HAZARDThe hype of earthquake along the

Himalayan range was hot last month. It was anirrational rumour but seismologists fromaround the world have investigated andpredicted high Richter scale earthquakes alongthe Himalayan range in near future. In Nepal,main cities are located in the high earthquakehazard zones. The government has also beenmaking the people aware of the probablehazard. The government has formulated certainguidelines for construction of earthquakeresistant buildings and made people followthem. The major component in constructionis concrete that includes cement, sand,aggregates and water. Following are the tipson selection of building materials provided byStructural Engineers’ Association Nepal.

TIPS ON CEMENT USAGE:• Only high grade cement does not increase

the strength of concrete.• Grade of cement used should be just higher

than the grade of concrete.• Higher grade cement produces more heat

of hydration and increases the risk forcracks.

• Just the quantity of cement does notincrease strength; the water-cement ratioshould also be optimum.

NOTE:• You can replace switch, bulb, finishing, but

not the structure (cement, sand andaggregate). The cost of structure is only 30to 40 percent of total cost.

• For good quality of construction you haveto pay only 10 to12 percent more.

• After addition of water, concrete and/ormortar should be placed at position withinthree hours.

• More water does not give the compactionand leads to porous and weak concrete.

OUT OF THE BOX

triple washed sand, water and chemicals thatstrengthen bonding. We provide a guaranteecertificate. These are the parameters thatordinary mortars cannot guarantee.

Cement brands usedWe mostly use Udayapur cement. Some

local cement is under test. Main objective isto promote Nepali cement. In case of scarcity,we use Indian brands like Ultratec and JP.

Market CompetitionThere is no competition in the market,

but there is a lot of pain to start somethingnew. We bear all the pain to educate thecustomers and one fine day someone else maytake the advantage once the market is built.

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