There is a good market for Nepali cement in neighbouring Indian cities, especially within a 100-kilometre radius from the Nepal-India border.

Nepal relied heavily on imports for its cement needs for many years. But the rapid expansion of domestic production in recent years has changed the situation. Nepal can now not only fulfil its internal demand but is also well-positioned for exports. The commendable achievement of the private sector in orchestrating this transition deserves due recognition.

In October 2022, Arghakhanchi Cement pioneered cement exports to India with an inaugural shipment of 1,400 sacks of Pozzolana Portland Cement (PPC). Cement exports to India have surged exponentially over the past two years, offering respite to cement producers grappling with the economic downturn. The inclusion of cement in the list of products with export potential in the Nepal Trade Integration Strategy (NTIS) 2023 underscores its promising prospects. The government's decision to offer an 8% cash subsidy for cement exports has further incentivized our export endeavours.

The latest data of the Department of Customs shows Nepal exported 2.07 million tonnes of PPC cement valued at Rs 1.49 billion in the first nine months of the current fiscal year. This marks a significant increase from the previous fiscal year when Nepal exported 607,073 tonnes of cement worth Rs 358.95 million. Furthermore, the export of cement clinker, a vital raw material material for cement production, has also witnessed a rise. In the first nine months of the current fiscal year, Nepal exported 439,105 tonnes of clinker worth Rs 1.47 billion, compared to 396,950 tonnes worth Rs 420.35 million in the last fiscal year.

At present, six industries are involved in cement exports, with a few also exporting clinkers. Nepal has demonstrated potential in both cement and clinker exports. Given the scarcity of grinding facilities across the border, there is an opportunity for clinker exports as well. There is a good market for Nepali cement in neighbouring Indian cities, especially within a 100-kilometre radius from the Nepal-India border. Nepali cement is gaining traction in neighbouring Indian cities such as Patna, Darbhanga and Muzaffarpur in Bihar, as well as in various cities in Uttar Pradesh like Gorakhpur, Lucknow and Bahraich.

With Nepal's population standing at 30 million, and given the proximity of the majority of cement factories to the Indian state of Uttar Pradesh, a market of equivalent size to Nepal is up for grabs for Nepali cement manufacturers if they can penetrate just 100 kilometres into India’s most populous state. This sizable market signals significant potential for cement exports to India. Considering India's annual cement consumption capacity of 500 million tonnes, capturing a share of 1-2% of this market would represent a noteworthy achievement for Nepal. Nepali cement producers have the potential and capacity to capture this market share. 

The export potential of cement outstrips that of all other Nepali export goods combined. With an impressive value addition of over 80%, cement exports not only help reduce trade deficit but also create employment opportunities.

The primary raw material for cement production, limestone, is scarce in the bordering Indian states of Bihar, Uttar Pradesh, West Bengal, and Uttarakhand. As a result, cement industries there need to source limestone from more distant states like Chhattisgarh and Madhya Pradesh, which are farther away from the states bordering Nepal. Given Nepal's abundant limestone deposits, importing cement from neighbouring Nepal becomes a logical choice for these industries, as it can significantly reduce transportation costs. For example, Gorakhpur, a city in Uttar Pradesh where Arghakhanchi Cement has exported its product, is just 100 kilometres away from the plant site in Siyari of Rupandehi.

The export potential of cement outstrips that of all other Nepali export goods combined. With an impressive value addition of over 80%, cement exports not only help reduce trade deficit but also create employment opportunities. Nepali cement stands out in the market for its superior quality as Nepali producers adhere to stricter production parameters compared to those in India. This has resulted in repeat orders and satisfied consumers which distinguish Nepali cement from many Indian brands. However, ensuring consistent quality for both local and export markets remains paramount.

Export revenues are expected to reach Rs 5 billion this fiscal year, with further growth anticipated. Although Nepali cement brands have a competitive edge over Indian brands in the neighbouring markets, factors like tariff and non-tariff barriers may impede exports in the coming days. Also, Nepali cement manufacturers have to obtain an Indian quality certification - IS mark - to export to India. This certification process has been slowed down of late.

Encouragingly, recent initiatives such as the Adani Group's establishment of grinding facilities near the border signal growing export prospects for clinker. Additionally, Chaudhary Group's exports under the ACC brand underscore Nepal's expanding presence in the Indian market. Although there are challenges, there is optimism in the industry regarding future export opportunities. 

(Murarka is a director of Arghakhanchi Cement)