cement story

By Sagar Tamrakar

CEMENT
INDUSTRY
in Nepal

N
epal is enriched with large and small deposits of good cement
grade limestone 1. The limestone deposits occur within the
sequence of the Lesser Himalayas 2 extending from the east to
west. Limestone is by far the most important mineral resource in
Nepal, followed by magnesite, marble, lead and zinc. So far, this is
also the most economically viable mineral resource. A total of
about 1,250 million tons of cement grade limestone is estimated
to exist in the country and the existence of at least 224 million
tons have been confirmed through drillings and dedicated
surveys. Even when only a few deposits are being exploited for
commercial production of cement and allied products, limestone still tops the list
of the most exploited mineral resources in Nepal.
Despite the abundance, domestic adds, “With inadequate infrastructure and
cement production only accounts for 40 frequent power crisis in the industries,
percent of total consumption in Nepal, forget exporting, even self dependency in
informs Tej Kant Jha, general manager, cement production will remain a dream.”
Udayapur Cement Industries (UCI). He The data from the Department of
adds, “UCI alone has been fulfilling 25 Industries does confirm that cigarettes
percent of the total domestic market and beer are the only merchandise whose
demand. All other Nepali cement total capacity utilisation exceeds 50
manufacturers contribute about 15 percent.
percent of the demand. Imported cement, With the resolution of conflict, a big
mainly Indian, fulfill the remaining 60 boost in this industry is likely. The
© the boss photo file/Ajaya Joshi

percent. But Ramesh Kumar Aryal, general government has promised to invest a lot
manager, Hetauda Cement Industries (HCI) in infrastructure development –
chooses to differ. He comments, “In the particularly roads, in addition to housing
latest scenario, imported cement supplies construction and expansion of corporate
70 percent of the market demand.” production facilities. But private sector
Needless to say, a good market for cement investment in the cement industry
exists within and outside the country. Aryal according to the Department of Industries
1
calcareous sedimentary rock composed of mineral calcite (CaCO3) which upon
calcination yields lime (CaO) for commercial use.
2
range of mountains southwards the range of snow capped mountains extending
2400 km east-west along the Himalayan range.

2 the boss 15 Sep - 14 Oct 2007

 Limestone deposit map

1. Nigale
2. Sindhali
3. Katari
4. Chobhar
5. Bhainse
Source: Mineral Resources Division,
6. Okhare
Department of Mines and Geology, July 2003
7. Rossi
8. Jogimara
9. Narpani Cement grade limestone
10. Gandari reserves in Nepal and
11. Surkhet usage
(Chaukune) Bagmati Zone
12. Diyari Gad
13. Bhumeshwar Lalitpur District
14. Chauraha Chobhar: Himal Cement
15. Kajeri (Halchaur) Company (a 130,000-Mt/yr
16. Chuladhunga cement plant but has closed
17. Ghyampethumka down with 15.3 million mt of
18. Waling
proven reserves)
19. Beldanda
20. Kakaru Dhading District
21. Sarada Jogimara and Beldanda areas:
22. Lakharpata Hetauda Cement Industries,
23. Supa Tribeni Cement and
24. Balthali
Annapurna Cement
25. Nandu
26. Bhatte Danda
27. Mane Narayani Zone
28. Nigure Makawanpur District
29. Lamatar Bhainse-Dobhan, Majuwa and
30. Halesi Okhare: Hetauda Cement
31. Kurichaur Industries (a 260,000-Mt/yr
32. Badhare Khola cement plant with 18 million
33. Kerabari
34. Bhardeo
mt of proven reserves of
35. Majuwa limestone)
36. Bhartapur
37. Khanchikot Sagarmatha Zone
38. Sabdu Udayapur District
39. Mauwa Khola Sindali: Udayapur Cement
40. Tamor River Industries (a 270,000-Mt/yr
41. Tankuwa Khola
cement plant with 70 million
42. Dhankuta Khola
43. Khalung Khola mt of proven reserves)
44. Neupane
45. Salendanda Koshi Zone
Dhankuta District
Nigale, unexploited
Proven reserve: 10 million mt

Bheri Zone
Surkhet District
Chaukune, unexploited
Proven reserve: 31.5 million mt
Source: Ministry of Industry,
Department of Mines and Geology, Kathmandu

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 cement story

CASE
ANALYSIS
does not indicate the expected boost but limestone from other mines to produce Udayapur Cement Industries
rather a decline. Companies register but quality cement.” general manager
fail to operate either due to government Tej Kant Jha
indecisiveness and negligence or their Grade of Cement
Factory-running scenario
own inabilities. Jha comments, “Even after Grade of cement only indicates the
The factory is profitable and expanding in
approval from the Ministry of Industry, compressive strength of cement (not terms of capacity utilisation, production and
Commerce and Supply, new projects are concrete) at 28 days. But cement turnover. Capacity utilisation has risen over 42
still lost in a bureaucratic maze trying to continues to increase in strength beyond percent from around 35 percent in the previous
coordinate with agencies like the 28 days, with not much difference in long four years. Promotion of staff, which had been
Department of Road, Department of Forest term strength. pending since 10 years, have been made. All
and other related departments,” and adds, Required compressive strength of
the factory staff have been made permanent.
“Mineral regulation will be efficient if such various grades of Ordinary Portland The total employee count of the factory is 602
hindrances are removed once the Cement (OPC) with 184 in the administrative section and 418
Department of Mines and Geology leases 33 Grade 43 Grade 53 Grade
in technical division.
the land for exploitation.” Aryal further Age Minimum compressive strength in
Newton per square millimetre Capital investment
suggests, “The government should offer The financing of the industry was covered
Three days 16.0 23.0 27.0
time bound license to private companies by Japanese OECF assistance of Rs 9.84 billion
Seven days 22.0 33.0 37.0
so that they are motivated to operate granted to the government during its
28 days 33.0 43.0 53.0
within the time frame,” and emphasises, establishment. The assistance is provided by
“The government should support the Annual total cement production and the government to UCI as a loan. Also, the
company by eliminating hassles.” capacity usage percent government has equity share of 450 million
rupees in the industry. The industry is paying
700 – 644325 back the loan with annual interest rate of five
Market Research 610044 613643
Cement Production (million metric ton)

The market for Nepali cement is very 600 – percent. With the rise of foreign currency
good. All the cement stock sells easily for exchange rate of the Japanese yen, the amount
500 – payable is also rising. Had the exchange rate
they are good in quality and competitively
400 – been constant, the loan would have been
priced as well. Jha says, “The limestone cleared by this time.
quality is also superb. Calcium oxide (CaO) 300 –
content ranges from 43 to 53 percent 200 – 151681 Total mineral reserve
and Magnesium oxide (MgO) content is UCI has limestone reserves for 150 years at
100 – 49% 39.72% 41.71%
less than three percent. Therefore, the rate of producing 800 metric ton (mt) of
cement quality is the best in market.” The 0– clinker a day. The factory is capable of producing
standard content of CaO in cement grade Fiscal 1986/87 2004/05 2005/06 2006/07 277,200 mt cement per year. Annually, 330,000
Year
limestone is 42 percent and MgO is five mt of limestone is required. The total estimated
Annual Cement Production reserve of the limestone mine is 72 million mt
percent. The ratio of CaO and MgO needs Capacity Usage Percent *
which is in Sindhali area of Udayapur district. It
to be maintained to enhance the binding * Proportion of production with respect to total capacity of industry.
is 27 kms from Jaljale plant site. Besides this,
power of cement. About HCI, Aryal says, Productivity Index clay, silica sand, iron ore and gypsum are required
“The quality of limestone in all the mines 2005/06 2006/07 for cement production. Except clay and silica
is of cement grade except that of Bhainse. 404.69 424.93 sand, other raw materials are imported from
Bhainse limestone has to be mixed with Source: Ministry of Industry, Department of Industries India. Essential utilities also include fuel (coal,
furnace oil), electricity and water.
Cement prices per bag in Kathmandu Valley
Cement Brand Factory Price Transportation cost Total price Factory capacity and production
Gaida cement 380 90 470 The estimated total production capacity of
Nepali

Shakti cement 400 60 460 the factory is 277,200 mt of cement per year.
Siddhartha cement 380 60 440 This capacity was only met in the fiscal year
Trishakti cement 385 65 450 2001/2002. The production was 45 percent of
Gorkha cement 380 65 445 the total capacity in 2006/2007. Records of the
Bishwokarma cement 385 65 450 previous three years show that the capacity
Jagadamba cement 390 65 455 utilisation then was only around 35 percent.
Nirman cement 380 65 445
Satana cement 440 65 505 Taxation
Indian

Buland cement 440 65 505 The government charges five percent

L & T 43 grade 435 65 500 excise duty on imports such as gypsum, coal
L & T 53 grade 465 65 530 and iron ore. The government charges excise
Lafarge cement 430 65 495 duty of Rs 5.25 per bag and VAT at 13 percent.
Reliance cement 375 65 440
ACC cement 430 65 495 Demand and supply
(Source: July 2007 Survey, Udayapur Cement Industries) With full capacity utilisation, UCI can
4 the boss 15 Sep - 14 Oct 2007
contribute in supplying about 60 percent of the
market demand. We have not been able to reach
this target though. There are certain constraints
in our inability to utilise our full potential; these
include frequent power failure, load shedding,
lockouts, strikes and machinery breakdown.
Measures to curb low output
To improve output, many changes have
been made. A separate transformer for UCI has
been installed. This minimises power failures
to a great extent. An adequate spare parts
reserve has also decreased the negative effect
of machinery breakdown.
Foreign cement encroachment
Market research tells us that consumers
go for Indian cement only when they do not
find Nepali cement. We have always been trying
to increase the production to cover larger
proportion of the market and lessen the
encroachment of Indian cement. But the
aforementioned constraints pull us back. Also,
due to leakage in the borders, Indian cement
enters the market at cheaper prices.
Declining cement production
Political instability, formation of trade
unions, frequent change in management and
incompetent managers are the mains reasons
for the decline. Political instability has created
a sense of insecurity for foreign investors.
Private investment has also been grossly
discouraged. Just as schools have been declared
peace zones, effort should also be made to
declare industries as peace zones.
Environment protection
measures
To be environmentally friendly in
compliance with the mineral law, we have
advanced machinery control. Modern machines
with electrostatic precipitator (ESP) greatly
reduce environment hazards. This technology
collects dust that otherwise spreads in the
atmosphere creating air pollution.
Contribution to national
economic growth
UCI paid electricity bills of 150 million focused on economic growth but political
rupees, loan payoff of 200 million rupees, VAT stability.
of 87.5 million rupees and excise duty of 10.5 Another drawback in our system is late
million rupees to the government this fiscal decision making. According to one door policy,
year. These revenues grow with the growth investors long to invest but lack of prompt
of cement production. And as a commodity, decisions at bureaucracy levels disinterests
cement definitely contributes to national them. In countries such as China, India,
development. Thailand, Pakistan, Bangladesh and others, once
the license is approved for foreign projects
Self dependency in cement according to the one door policy, then and there
Nepal has more than enough mineral they sit together and decide everything. Here,
resources to be self-dependent in cement. even after licensing, different departments keep
Political instability is the major drawback in hindering the operation.
exploiting this rich resource. Also, the Poor labour laws are another drawback. The
industrial policy must be updated from time Ministry of Labour and Social Welfare is focused
to time. Currently, the policy must be revised only on overseas labour law. The ministry is least
to attract foreign investors. Foreign investors concerned about formulating appropriate labour
are not sure when and if they will be able to laws in the country. Ministers should know their
reap returns. Primary goal should not be ministries well before they take office.
advt...
Webster Uni-
versity
H 09
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 cement story
CASE
ANALYSIS
Hetauda Cement Industries
general manager
Ramesh Kumar Aryal
Factory running scenario
The factory has not been able to utilise its
full production capacity. The output is only
around 40 percent of the installed capacity.
This inability does not arise from problems
with the plant but with short running hours.
This fiscal year, the factory production lagged
for four months since August due to scarcity of
limestone. We excavate limestone from mines
at four different locations – Bhainse, Majuwa,
Okhare and Jogimara. Some of them are hard
to access due to poor road network whereas
some have strong opposition from local
communities that are demanding higher
facilities, way beyond our strengths. Bhainse
mine is easily accessible but because of poor
limestone quality, we cannot solely depend
on it. Disturbances from local communities
EVOLUTION IN
CEMENT USAGE
Panchakanya Group has taken the
initiative to introduce a new product in the
field of concrete construction, ie, Ready Mix
Concrete (RMC). RMC is relevant for big
construction works that are presently taking
place 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
6 the boss 15 Sep - 14 Oct 2007
stand out as a major hindrance. These
disturbances, though present, were not as
intense in the past. This problem can be partially
solved by fulfilling their demands. But again,
the factory is closed now not because of raw
material but power crisis – low voltage and
irregular power cuts. In addition, some
machines are not running well. Even with all
these setbacks, we have produced 43 percent
of total capacity in this fiscal year. HCI has been
making profits for the past three years. If all
impediments are managed, production
strength will be even more than the capacity
utility realised in previous years. Our debt is
gradually being paid back.
Capital investment
The government initially supplied
Hetauda Cement Industries with a loan of 10
billion rupees that it received from Asian
Development Bank. The government has
divided this sum into two dividends. HCI pays
interest rate of 10.5 percent and nine percent.
The payback to government this year is 120
to 130 million rupees. The industry has equity
shares of six different ministries.
Total available reserve of
mineral resources
The total reserve of mineral resources is
enough for about 20 years in the future, but
the same mine extensions can supply
limestone for more periods of time.
mind for quite sometime because
there is a real need for it. But since
this is a new product, people are
only slowly getting used to it.
Nevertheless the response has
been very good, and we have been
encouraged. The most difficult
thing has been to convince people
on prices. It sounds a little costly,
but at the end of the day, it is more
cost effective. It eliminates storage
space requirement at the
construction site and makes
construction more efficient. In
addition, it prevents noise and dust
pollution. The general customers,
contractors and even engineers do not
understand this. Many contractors and
labourers feel that this product is displacing
them, but this is not the reality.
RMC is important in the valley because
Kathmandu is an earthquake prone area. We
were also the first to launch TMT steel bars
in the country. But just good steel is not
enough for construction. Good engineering
and something good to concretise should also
go hand in hand. This is why the idea of RMC
struck us.
Factory capacity and production
The total installed capacity at the factory is
750 tons or 16,000 bags of cement per day. The
annual production becomes 5.2 million bags of
cement. Our production target is 60 percent of
the total capacity, ie, 3.1 million bags of cement
per year. But due to various factors mentioned
above, production met only 67 percent of the
target. The production this year has been 2.3
million bags. This is the data of Ordinary Portland
Cement (OPC). Some years ago, HCI had been
producing Portland Slag Cement (PSC). The
production of PSC ceased due to poor
supplement of slag, the raw material that comes
from steel industries. Even India is having a
difficult time getting slag.
Profits
The 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 within
the range of Rs 100 to 130 million, although
exact figures are yet to be calculated.
Challenges and plans
Power cuts is the enduring problem. We
asked for a double circuit line so that we could
get power 24 hours a day. They say that power is
limited with the fluctuation of the Kulekhani
power plant. Load shedding, voltage drop and
frequent tripping of power all add to our woes.
Frequently tripped power supply even damaged
Production capacity
With the two factories, we can produce 400
cubic metres of RMC per day, ie, we can cater to
40 small houses a day. Transit mixers that deliver
RMC have capacity ranging from three cubic
metres to six cubic metres. Three cubic metres
cover 300 square feet area of construction. We
have 12 transit mixers at present.
We have factories in two locations, Jadibuti
and Thankot so that we can cater to the needs
of customers. We are equipped with a lot of
transit mixers and other infrastructure.
Clientele
Major clients are general households. They
are the main sufferers during construction
because of space, time, cost and other hassles.
Secondly, we are targeting big project sites.
We have set an understanding with some of
the big contractors, consultants, and we are
trying to work closely with building contractors
including MK Nirman Sewa and Alliance
Insurance, to name a few. We believe that this
product will pick up market demand quickly.
With the rise in building multi-storey houses
in the valley, the demand of RMC will also rise.
RMC placement technology
We have different grades of RMC. RMC
grade is chosen as per the requirement of the
structure of the building. RMC is delivered by
transit mixers and placement is done by cranes
and/or pumping units. RMC can be pumped up
to 30 metres height. In inaccessible gullies,
the kiln and other machineries. Efficiency of the
machineries drops drastically by irregularity in
power supply. HCI pays the highest amount for
electricity in the area, so we demand special
attention of continuous power supply to the
factory. HCI is helpless in getting adequate power
supply. NEA maintains that the whole industrial
corridor in the area suffers the same problems.
We are calling on all top users of electricity in
the area to shed load in a systematic way in
order to get rid of irregular power tripping.
Research must be carried out to find
optimum sources of power, be it coal or other
fuels; only this can improve efficiency and
reduce costs.
Demand and supply
HCI along with other cement industries in
our country fulfill only about 30 percent of the
market demand. We have huge reserves of
cement grade limestone but production is still
very low and consumers have to depend on
cement from India. Government should
seriously update its policies and bring the
reserves spread throughout the country into
good use.
Foreign cement encroachment
The import of Indian cement has never
affected HCI’s market. Indian cement come into
use only after HCI runs out of stock. HCI has
maintained its production standard, and this is
the fact why Indian cement cannot compete with
RMC delivery is done using wheel barrows.
Pros and cons for contractors and
labourers
Some labourers and contractors may be
displaced. That is the reason why we did not
launch this everywhere. It has been launched
on need basis. But it also speeds up
construction work and helps in bringing more
construction projects. The contractors have
more jobs to take. Therefore, they need to
change their mindset.
Difference from other mortars
RMC is a proven technology. We are using
the aggregate, sand or water that is tested. We
use good quality cement, aggregate, double/
our product. HCI has been using the limestone
reserves with 43 to 53 percent CaO content
which is not found in Indian cement industries.
Even if Indian cement is introduced at cheaper
prices, people’s first priority will be quality
Nepali cement. Nepalis have a good concept
of maintaining standard in building houses as
Nepal is a highly earthquake prone country.
Declining cement production
Declining cement production is directly
proportional to power crisis. Other requisites
do not have many serious effects as most are
imported without much difficulty.
Contribution of the private sector has been
improving gradually although some registered
parties have still failed to operate. Private
companies in Butwal and Arghakhanchi
districts have started cement production via
limestone exploitation, which until now was
only done by state owned industries. This
trend should continue to lessen the import
of clinker from India. The time bound licensing
strategy will definitely yield much in the field
of cement in Nepal.
Environmental protection
measures
HCI has been using ESP equipments to
produce cement in environmentally
responsible manner, but the equipment have
worn down and operate now at 50 percent
efficiency. The retrofitting of this equipment
triple washed sand, water and chemicals that
strengthen bonding. We provide a guarantee
certificate. These are the parameters that
ordinary mortars cannot guarantee.
Cement brands used
We mostly use Udayapur cement. Some
local cement is under test. Main objective is
to promote Nepali cement. In case of scarcity,
we use Indian brands like Ultratec and JP.
Market Competition
There is no competition in the market,
but there is a lot of pain to start something
new. We bear all the pain to educate the
customers and one fine day someone else may
take the advantage once the market is built.
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is quite costly. Therefore, we are planning to
introduce another technology for minimising
pollution. We are preparing documents to get
reverse air bag house (RABH) equipment which
is more effective. It is eco-friendly, easy to
handle and equipped with recycling of dust
which otherwise would go to waste.
Along with this, we are planning minor
modifications in the overall machinery to
improve efficiency and production. Past records
have demonstrated that we can exceed
production of 20,000 tons per month.
OUT OF THE BOX
AVOID HAZARD
The hype of earthquake along the
Himalayan range was hot last month. It was an
irrational rumour but seismologists from
around the world have investigated and
predicted high Richter scale earthquakes along
the Himalayan range in near future. In Nepal,
main cities are located in the high earthquake
hazard zones. The government has also been
making the people aware of the probable
hazard. The government has formulated certain
guidelines for construction of earthquake
resistant buildings and made people follow
them. The major component in construction
is concrete that includes cement, sand,
aggregates and water. Following are the tips
on selection of building materials provided by
Structural 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 for
cracks.
• Just the quantity of cement does not
increase strength; the water-cement ratio
should also be optimum.
NOTE:
• You can replace switch, bulb, finishing, but
not the structure (cement, sand and
aggregate). The cost of structure is only 30
to 40 percent of total cost.
• For good quality of construction you have
to pay only 10 to12 percent more.
• After addition of water, concrete and/or
mortar should be placed at position within
three hours.
• More water does not give the compaction
and leads to porous and weak concrete.