Defer plans to build home until supply normalizes: Cement producers

Say price will come down by around 10 percent once supply disruption ends

KATHMANDU, Jan 20: Cement producers have suggested to people to defer their plan of building new homes until the supply becomes normal so that they can benefit from drop in prices of major construction materials.

They said price of construction of construction materials will come down by as much as 20 percent once supply becomes normal.

Normalcy in fuel supply will not only cut transportation fare for supply of cement, which went up by up as much as three times, but also bring down cost of production due to drop in fuel prices in the international market.

Speaking at an interaction on 'Resilient Reconstruction and the Role of Cement Factories' organized by Nepal Republic Media, Bishnu Prasd Neupane, managing director of Jagadamba Cement, suggested people to wait for some time to reap benefits from fall in cement prices. He also said end users can benefit from plunge in crude oil price in the international market.

Similarly, Tara Prasad Pokharel, general secretary of Cement Manufacturer's Association Nepal (CMAN), asked customers not to pay more than the transportation cost, which can be a maximum of Rs 150 per bag at this time, and a profit margin of maximum of 20 percent for dealers on top of factory prices.

Retail price of cement has increased by more than 50 percent. Retailers attribute the rise to high transportation cost due to scarcity of fuel.

Use of diesel-run generators increases price of cement by around Rs 80 per bag in current oil prices. "Price of diesel is expected to come down to Rs 60 per liter from existing Rs 75 per liter. It will obviously lower our cost of production," Pashupati Murarka, promoter of Arghakhanchi Cement and also the president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said.

Smooth power supply from national grid can help to cut cost of production significantly.

Dhruba Thapa, chairman of CMAN, said price of cement has increased in the market due to transport syndicate. "We are forced to accept prices quoted by truck associations. Also we are not allowed to use our own trucks," he said, adding that truck associations have increased fare by as much as three times citing fuel scarcity.

"The country is becoming self-reliant on cement with production capacity of 160 million bags annually. The main challenge at present is to cut cost of production and make our product cheaper than Indian cement. This will help us to find new markets in India," said Thapa.

At present, there are 47 cement producers in the country including clinker producers. Similarly, around half a dozen cement companies are in the pipeline. They are producing around 90 million bags annually.

According to cement manufacturers, cost of limestone can be reduced by Rs 500 per tons from existing Rs 1,500 per tons by putting a ban on transport syndicate and controlling miscreants who extract 'protection money' from manufacturers starting from limestone mines to the plant.

They have also expressed dissatisfaction over government's policy of customs tax waiver on import of cement particularly for mega projects. "Waiver of customs duty means imported cement will be cheaper by Rs 185 per bag compared to Nepali cement," said Neupane.

Cement manufacturer say the facility has been misused very often as cement imported by the projects are been sold in the open market. This practice contradicts with the government's policy of giving priority to Nepali products even if they are expensive by 15 percent.

Murarka said the government does not allow Nepali companies to produce cement above 33 grades but allows import of cement above 33 grades.

Cement manufacturers say consultant of big projects prefer cement of higher grades. That is why they favor imported cement over Nepali cement, they added.