The domestic cement industry of Nepal is worried about the proposed entry of offshore cement giants that the domestic players will be swamped when these well capitalized foreign firms begin production. With this phenomenon, the expansion drive of domestic players also got shattered.
The big firms such as Dangote Cement of Nigeria, Hongshi and Huaxin of China and Reliance Cement of India, have already received permit to start their operation in Nepal. The expected ‘Foreign Direct Investment (FDI) from those firms amounts to 1.45 billion dollars and proposed output stands at 22,000 tons per day.
“Before this incident, all the local factories were on an expansion drive, which could be achieved through the economies of scale and amid massive foreign investment,” President of the Cement Manufacturing Association of Nepal (CMAN), Dhurba Thapa said.
Cosmos cement, Agni cement and Arghakhanchi Cement are among the domestic cements manufacturing industries that are seeking to expand their capacity. But, even with the expansion, the domestic industries don’t seem as match for offshore firms planning to enter Nepal.
On the other hand, domestic cement manufacturers claim that they have been able to fulfill 80 % nation’s requirement with capacity utilization of only 50-60% and also claim that existing capacity of domestic plants exceeds actual demand. “So, we don’t see space for foreign investors in domestic market unless they displace the domestic industries,” CMAN says.
However, according to foreign investors, the unexplored potential demand for cement is huge followed by the need of infrastructure development after devastating earth quake in coming years.