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CHAPTER-2
DEVELOPMENT OF CEMENT INDUSTRIES IN NEPAL
Historical Background of Cement Industries
Origin of Cement Industries
Cement Manufacturing Process
Types of Cement
Global Scenario of Cement Consumption
Cement Industries in Nepal
Growth of Industries in Nepal During Successive Plan Periods
Present Situation of Cement Industries in Nepal
Outlook of Nepalese Cement Market
Future Prospective Este
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CHAPTER-2
DEVELOPMENT OF CEMENT INDUSTRIES IN NEPAL
2.1 Historical Background of Cement Industries
Cement is, literally, the building block of the construction industry thus
cement industry has much strength to be considered. Almost every building,
bridge, road airport and irrigation cannel constructed relies on cement for its
foundation. There is also a strong reputation behind the cement industry.
Cement is a solid material and consumers rarely have complaints about the
product. The cement industries have opportunities as well. One such
opportunity is the cement industry's efficiency. The cement industry has
recently streamlined its production efforts by using dry manufacturing process
instead of wet. The cement industry depends on construction jobs to create a
profit and it heavily relies on weather. About two-thirds of cement production
takes place between May and October. Cement producers often use the
winter months to produce and stockpile cement, to meet demand, which is
considered as a weakness of the industry. The cement industry greatly relies
on constructions work. Due to financial crises, the current economy of the
world has lessened the number of construction jobs, which in turn hurts the
cement industry.
2.1.1 Origin of Cement Industries
Cement is an important raw material for any construction work. Cement and
concrete similar to the kind used today developed by the ancient roman by
mixing slaked lime with volcanic ash. James Frost, who was born in England,
set up a plant making Roman cement at Harwich in 1807. He began
experimenting with formulations for artificial cements that would provide a
cheaper alternative to Roman cement. He appears to have produced
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prototype cement at Harwich in 1810. In 1811 James Frost patented hydraulic
cement by the calcinations of the mixture of limestone and clay and Aspden
improved the process by raising the temperature. However, it was not until
1822 that he was granted a patent for what he called "British Cement.” In
October 1825, he leased land at Swanscombe, Kent, and set up a plant to
manufacture both Roman cement and the new product. In this way the
cement was introduced in 1825 i.e. 185 years ago. The new product was
named Portland because the material of that cement had born the color of
the natural stone quarried from the isle of Portland (a peninsula on the south
coast of Britain.)1
In 1838 a young chemical engineer, Isaac Johnson, burned the cement raw
material at high temperature until the mass was nearly vitrified producing the
modern Portland cement. In 1898 Atlas Portland Cement Company according
To Lewis improved the design by using what is called a rotary kiln, this
improvement was a big revolution in the cement industry. In 1899 Atlas
Cement Company improved the technology of the rotary kiln and fuel
economy by replacing fuel oil with powdered coal dust.
After 1900 there was rapid growth in both rotary kiln and auxiliary equipment
technology in the United States. Coal grinding mills were developed and coal
burning in cement kilns became the predominant combustion process in the
industry. All the equipments related to cement production crusher, raw mill,
belt conveyors, bucked elevators were improved. Improvement in the
following fields pertaining to cement manufacturing from material science
technology has been an ongoing process for 200 years.
2.1.2 Cement Manufacturing Process
The manufacturing process of cement consists of mixing, drying and grinding
of limestone, clay and silica into a composite mass. The mixture is then heated
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and burnt in a pre-heater and kiln to be cooled in an air-cooling system to
form clinker, which is the semi-finished form. This clinker is cooled by air and
subsequently ground with gypsum to form cement. Technically, cement is
made by heating calcium carbonate (limestone) with clay to 14500C in a
process whereby a molecule of carbon dioxide is liberated from calcium
carbonate to calcium oxide. The calcium oxide is then blended with some
other materials which results a hard substance, called ‘clinker.’ Then clinker is
mixed and blended with small amount of gypsum in a process which
ultimately generates a powder that commonly called ordinary Portland
cement.
Cement is the glue that holds the concrete together, and is therefore critical
for meeting society's needs of housing and basic infrastructure such as
bridges, roads, water treatment facilities, schools and hospitals. Concrete is
the second most consumed material after water, with nearly three tonne used
annually for each person on the planet.2 There are three types of processes to
form cement-the wet, semi-dry and dry processes.
In the wet/semi-dry process, raw material is produced by mixing limestone
and water (called slurry) and blending it with soft clay. In the dry process
technology, crushed limestone and raw materials are ground and mixed
together without the addition of water.
2.1.3 Types of Cement
There are different varieties of cement based on different compositions
according to specific end uses, namely, ordinary Portland cement, Portland
Pozzolana cement, white cement, Portland blast Furnace slag cement and
specialized cement. The basic difference lies in the percentage of clinker
used.
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(i) Ordinary Portland Cement (OPC)
OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent
gypsum and other materials. It accounts for 70 per cent of the total
consumption in the world.
(ii) Portland Pozzolana Cement (PPC)
PPC has 80 per cent clinker, 15 percent Pozzolona and 5% gypsum and
accounts for 18 per cent of the total cement consumption. It is manufactured
because it uses fly ash/burnt clay/coal waste as the main ingredient.
(iii) White Cement
White cement is basically OPC - clinker using fuel oil (instead of coal) with an
iron oxide content below 0.4 per cent to ensure whiteness. A special cooling
technique is used in its production. It is used to enhance aesthetic value in
tiles and flooring. White cement is more expensive than grey cement.
(iv) Portland Blast Furnace Slag Cement (PBFSC)
PBFSC consists of 45% clinker, 50% blast furnace slag and 5% gypsum and
accounts for 10% of the total cement consumed. It has a heat of hydration
even lower than PPC and is generally used in the construction of dams and
similar massive constructions.
(v) Specialized Cement
Oil Well Cement is made from clinker with special additives to prevent any
porosity.
(vi) Rapid Hardening Portland Cement
Rapid Hardening Portland Cement is similar to OPC, except that it is ground
much finer, so that on casting, the compressible strength increases rapidly.
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(vii) Water Proof Cement
Water Proof Cement is similar to OPC, with a small portion of calcium stearate
or non- saponifibale oil to impart water proofing properties.
The Portland cement contains 60% lime 25% silica and 5% alumina. Iron oxide
and gypsum make the rest of the material. The gypsum regulates setting of
the cement. The lime comes from material such as limestone, oyster cells,
chalk and a type of clay that is called Marl shale. Silica is provided by the sand
and blast furnace slag and alumina and iron oxide is supplied by iron ore,
pyrite and other materials.3 Most cement plants are located near the
limestone quarries, deposit of clay and other raw materials. Trucks and other
conveyer belts haul the limestone and other raw materials to the plants.
2.1.4 Global Scenario of Cement Consumption
The demand for cement is a derived demand, as it depends on real estate,
industrial and construction activities. Since growth is taking place all over the
world, in these sectors, the global consumption is also increasing. During the
period from 2006 to 2008, total cement consumption grew from 2,568 million
tonne to 2, 8572 million tonne, at a Compounded Annual Growth Rate of close
to 7%.
The rapid increase in global cement consumption is led by increasing demand
for infrastructure in emerging economies, with Asia accounting for 66% of the
global demand. China was the world’s largest consumer of cement in 2008
and accounted for 48.73% of total cement consumption. Studies4 have shown
that there is a direct linkage between cement consumption and global macro-
economic growth and contraction. This was also evident during the oil shock
of early 1970’s and 1979-80 and also during the East Asian crisis in late 1990s,
when the world cement consumption witnessed a sharp decline.
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Amongst all the economies under consideration, Nepal has the lowest level of
per capita cement consumption. Even though, the per capita cement
consumption in the country has increased from 28 kg in 1980-81 to around 80
kg in 2009-10, it is still relatively low compared to other major economies.
Average cement consumption in Saudi Arabia is at around 1,245 Kg, in Japan
at 491 Kg, and in United States at around 285 Kg. In comparison to BRIC
economies Nepal has the lowest level of per capita cement consumption with
China’s per capita consumption at around 1,040 Kg, 271 Kg in Brazil, 378 Kg in
Russia and 135 Kg in India. This low per capita cement consumption in Nepal
and the process of catching up with international averages along with rapid
economic growth and increased focus on infrastructure development is
expected to drive future growth in the industry, also making it an attractive
sector for international investment.5
2.2 Cement Industries in Nepal
The use of cement in Nepal as binding material came into effect from the
beginning of early 1950s. Early users of cement were dependent on imports
from India to meet their needs. The history of cement industry in Nepal dates
back to 1970 when Himal cement factory established. The cement was mostly
imported from India China, South Korea, North Korea, Burma, Indonesia,
Thailand, Japan, Hong Kong and many other countries before the
establishment of Himal cement factory in the Kathmandu valley in 1972. The
restoration democracy in 1990 gave the first initial thrust to the cement
industry in Nepal and the industry started growing at a fast rate in terms of
production, manufacturing units, and installed capacity.
Construction is an integral part of human civilization and it is an index of
nation’s progress. Cement, has a strategic position in the industrial
development. The cement industry occupies a position of predominant role as
one of the basic infrastructure industries essential for the development of the
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country. In fact cement production, consumption and its growth rate together
with the level of import and export can be taken as yard sticks among the
other parameters to assess the economic development of a country. The
progress of country is directly related to the extent of constructional activities,
which in turn means use of cement. Cement industry, therefore, is one of the
most important industries for the economic and social development of the
country.
Geographically and ecologically Nepal has great diversity, therefore balanced
development in all geographical areas is very difficult. In order to overcome
this problem investment has to be made in accordance with a plan prepared
by central planning body. If it is left to the private sectors, then profitable, low
investment, low risk and minimum gestation period industries will certainly be
developed, but it will be no in the interest of the country as a whole. So to
achieve regional economic balance, price stabilization, equitable distribution
of income, mobilization of resources, greater employment opportunities and
balance of payment government should intervene directly or indirectly in the
business.
Keyns in his epoch-making book emphasized the importance of public sector
as a major factor in national production and as a source of employment. He
also remarked that ‘I conclude that the duty of ordering the current volume of
investment cannot be safely left in private hands.’6 Planning in an
underdeveloped country can be effective when the economy is under the
control of the public sector.
In Prof. Dobb’s view an economy where initiative in investment and
development vest with private firms and individuals with their eyes upon
market and profit margin, the mere existence of a plan paper may mean
remarkably little. The state may able to influence the situation in various
ways, through monetary policy, fraction and few controls. But there are
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indirect instrument and in the circumstances of the under developed
countries weak and brittle instrument at that to provide lover and impetus to
development, a substantial volume of state investment is necessary and with
it a substantial public sector, nationalized industries and public services. The
profit of this public sector can provide financial means for the extended
investment such investment can be directed towards the key point in the
economy.7 In this regard Laxmi Narayan writes that in developing countries
public enterprises are largely a necessity not a matter of choice.8
Nepal began the process of economic and social development in spite of the
lack of modern institutions and infrastructures in early 1950s after the
attainment of democracy. The actual process of industrialization in Nepal had
started after six year of the attainment of democracy (1956 A.D.) from which
it started to lunch periodic plans.9 `In the fifty four years since the first five
year plan was executed, up to now ten successive plans have already been
implemented and eleventh plan is running. A cursory look at these plans
shows that the major focus has been laid on agro sector, industrial sector and
in the field of infrastructure development.
2.2.1 Growth of Industries in Nepal During Successive Plan Periods
Before the attainment of democracy (1951), there was Rana regime in Nepal.
Virtually, Ranas were not in favor of the socioeconomic development so they
did not taken any initiation for the industrial development in the country but
to create some belief in people they have established some industries during
late period of their regime. Therefore, Nepal began the process of economic
and social development in spite of the lack of modern institutions and
infrastructures in early 1950s after the attainment of democracy. The actual
process of industrialization in Nepal had started after six year of the
attainment of democracy from which periodic plans were started to launch.
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Five-year plans of Nepal generally strove to increase output and employment,
develop the infrastructure, attain economic stability, promote industry,
commerce, and international trade, establish administrative and public service
institutions to support economic development and introduce labor-intensive
production techniques to alleviate underemployment. The social goals of the
plans were improving health and education as well as encouraging equitable
income distribution. Although each plan had different development priorities
and the allocation of resources did not always reflect these priorities. The first
four plans concentrated on infrastructure--to make it possible to facilitate the
movement of goods and services--and to increase the size of the market. Each
of the five-year plans depended heavily on foreign assistance in the forms of
grants and loans.
First five year plan (1956-57 to 1960-61)
The First Five-Year Plan (1956-61) allocated about Rs. 576 million for
development expenditures. Transportation and communications received top
priority with over 36 percent of the budget allocations. Agriculture, including
village development and irrigation, took second priority with about 20 percent
of budget expenditures and manufacturing sector was on third priority. The
plan states that the government would monopolize those industries which
promised greater public welfare and investment on them were unattractive to
private sector provided the feasibility reports on them gave green signals.10
During this plan period seven public enterprises were established. For
establishment of cement industries no actions were taken during this plan
period.
Interim period (1961-62)
The Parliament of Nepal, which had been established under the 1959
constitution, was suspended in 1961 thus the Second Plan failed to materialize
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on schedule. Then Nepal adopted party less Panchayat system in Dec. 1961 by
banning all political parties and with the adoption of this system the whole
year was spent to achieve stability in political system. In this period only a
review of first plan was made and emphasis was given to complete those
industries which could not completed during the first plan. In this period
industrial enterprise act 1961 was adopted on the same line and basis as per
first plan.
The construction of east-west high way was started during this plan period
which has necessitated large volume of cement in the country therefore; His
majesty’s of government (now called government of Nepal) has taken
initiation for the establishment of cement industries in the country. For this
purpose government had initiated to the private sector for the establishment
of cement industries through different policies. During this period three public
enterprises were established but from the government side no cement
industries were established.
Second three-year plan (1962-63 to 1964-65)
Due to the political change of 1961 a new plan was not introduced until 1962.
Therefore, this plan covered only three year period starting from 1962 to
1965. The Second Plan had expenditures of almost Rs. 615 million.
Transportation and communication again received top priority with about 39
percent of budget expenditures. Industry, tourism, and social services were
the second priority. Although targets again were missed, there were
improvements in industrial production, road construction, telephone
installations, irrigation, and education. However, only the organizational
improvement area of the target was met. In the second plan the role public
enterprise is augmenting the internal resources needed for economic
development of the country was accepted for the first time.
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In this plan emphasis was given to the expansion of national production, the
maintenance of economic stability, the expansion of economic activities and
to attain the social justice.12 A feasibility study committee was formed to
study and recommend for establishment of Himal cement industry in the
Kathmandu valley in this plan period. Eleven public enterprises were
established among which three were manufacturing but no cement industries
were came into existence during this plan.
Third Five Year Plan (1965-66 to 1969-70)
The Third Five-Year Plan increased the involvement of local bodies in the
development of industries. It also focused on transport, communications, and
industrial and agricultural development. Total planned expenditures were
more than Rs. 1.6 billion. The third plan emphasized the need to involve both
private as well as public sectors in industrialization process of the country. The
private sector had given emphasis because they had taken interest during
second plan. The industrial objectives of the plan were: increasing industrial
production by proper utilization of available capacity, promoting industries of
daily necessities, promoting export oriented industries and emphasizing
industries using locally available materials and industries that produce basic
materials for development.13 During this plan twelve public enterprises were
established but no initiations were taken for the establishment of cement
industries.
Fourth Five Year Plan (1970-71 to 1974-75)
The Fourth Five-Year Plan increased proposed expenditures to more than Rs
3.3 billion. Transportation and communications again were the top priority,
receiving 41.2 percent of expenditures, followed by agriculture, which was
allocated 26 percent of the budget. In this plan, public sector was given a kind
of leadership in the development of industries in Nepal. It was felt the private
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sector could not set up all basic and feasible industries capable of making
special contribution to the industrial development of the country.14
The government itself thus attempted to establish paper, fertilizer and
cement industries with the aim of gradually selling them to the private sector
in future.15 It also attempted to establish other industries which could not
attract investment from the private sector despite several initiatives and
facilities provided to them. With these above proclaimed objectives, initiatives
were taken to establish twenty seven public enterprises during this plan
period. Himal cement industry Ltd. (the first cement industry of Nepal) with
capital worth of Rs. 20 million and annual production capacity of 120000
Metric tonne of Cement in collaboration with NIDC and West Germany
situated in Chobar of Kathmandu valley was established in 1972 during this
plan period.
Fifth Five Year Plan (1975-76 to 1979-80)
The new industrial policy formulated in 1974-75 by HMG has guided the
planning commission in planning fifth plan. According to the industrial policy
1974, the industry had been defined as an undertaking in the form of sole
proprietorship, partnership, cooperative, private and public limited company
of cooperation duly registered to carry one industry like manufacturing,
tourism, service assembling or transit and recreation.16 The industrial policy of
1974 aimed at achieving the following objectives.17
(i) To bring about both quantitative and qualitative improvement in
industrial production and productivity.
(ii) To create more industrial employment opportunities for absorbing the
excess labour force engaged in agriculture.
(iii) To mobilize local capital, skill and resources to the maximum.
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(iv) To be self-reliant in essential goods of daily consumption and
construction materials within the shortest possible time.
(v) To minimize regional economic imbalances.
(vi) To improve the balance of payments position by restoring the
increased export and import substitution.
Guided by above industrial policy 1974, the Fifth Five-Year Plan had set six
objectives which were exactly in consonance with the aim of the industrial
policy of the government and to achieve these objectives this plan proposed
expenditures of more than Rs 8.8 billion. For the first time, the problem of
poverty was addressed in a five-year plan, although no specific goals were
mentioned. Top priority was given to agricultural development and emphasis
was placed on increasing food production and cash crops such as sugar cane
and tobacco. Industries utilizing local resources and helping for the national
development were also given priority in this plan.
For the establishment of cement industry His majesty’s government
conducted a feasibility study by Japan international co-operation Agency
(JICA) in 1978 and the agency has recommended to establish a cement
industry at Jaljale, Sindali in the Udayapur district of Nepal based on adequate
limestone deposit in this region. Five public enterprises were established in
this plan period among them one was cement industry i.e. Hetauda Cement
Industry Ltd. established in 1976, one of the major public enterprise of Nepal.
Sixth Five Year Plan (1980-81 to 1984-85)
The Sixth Five-Year Plan also emphasized an industrial development as to
previous plan and proposed an outlay of more than Rs22 billion as a plan
expenditure. The objectives of industrial development of sixth plan were:18
to create favorable environment for the attraction of industrial
investment.
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enabling the transfer of unemployed agriculture workers to the industrial
sector.
to create an industrial base for utilizing local capital, labour, technology
and raw materials.
to develop the export promoting and import substituting industries
producing essential consumer and basic goods.
In order to achieve these objectives of industrial development the policy
framed include consolidation of similar public enterprises, liquidation, fixation
of minimum rate of return, allocation of financial subsidies by the government
decision on the basis of loss incurred and selling of shares for public
participation. This plan also aimed to review the performance of old
industries, improving the capacity utilization of the existing industries, selling
the financially distressed public enterprises to the private sector, making
inter-regional coordination more effective, developing quality management,
constancy service and preparing long term industrial plan.
This plan emphasized the establishment of industries by the government if
they require huge investment, complicated technology and of national
interest. Therefore the government has taken initiation to establish large scale
cement and limestone industries in the eastern and mid development regions
of the nation. For this purpose budget was also allocated to establish
limestone industry at Lamosanghu in Dolakha district of mid development
region and cement industries at Jaljale in Udayapur district and Parewadin in
Dhankuta district of the eastern development region.19
Except to the industries requiring huge investment and complicated
technology and fulfilling national interest all other were kept open to the
private sector in this plan. But before implementing the sixth plan the
industrial policy of 1974 was amended and new industrial policy 1981 was
enacted that has directly affected the objectives of the plan. The top priority
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of this plan was on agriculture and increasing social services were on second.
The budget share allocated to the development of industries was less than
that allocated in the previous plan. According to the guideline given by sixth
plan and industrial policy 1981 eleven public enterprises were established
during this plan period.
Seventh Five Year Plan (1985-86 to 1989-90)
The Seventh Five-Year Plan proposed expenditures of Rs. 29 billion. It
encouraged private sector participation in the economy and local government
participation. The plan targeted increasing productivity of all sectors,
expanding opportunity for productive employment and fulfilling the minimum
basic needs of the people. For the first time since the plans were devised,
specific goals were set for meeting basic needs. The availability of food,
clothing, fuel wood, drinking water, primary health care, sanitation, primary
and skill based education and minimum rural transport facilities was
emphasized.
The seventh plan recommended suitable reward and punishment on the basis
of performance evaluation of the public enterprises after giving proper
autonomy and also marked low rate of return on huge investment public
enterprises. The plan specified the following major objectives and policies.20
Objectives
So long as the private sector if not prepared to produce necessary import
substituting goods and under taken the expansion of the infrastructure,
government corporation will be developed as a major medium for producing
such goods and services.
The government corporation will supply the essential goods and basic services
to the people.
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Encouragement should be given to private sector participation in the
management and investment of Government Corporation and gradually
transfer of ownership to them will be affected.
Steps to mobilize resources from the private sector will be intensified and the
participation of the private sector in the government corporation, through
saving generation, will be encouraged.
Policies
Amalgamation of similar type of corporation.
Liquidation or privatization of sick corporations.
Clear cut responsibility and accountability of the chief executives.
Quality control of the products of monopoly type corporations.
Floatation of shares of corporation to mass.
Depending upon the nature of the public enterprise, especially on the basis of
whether it was established to earn profit or to run at break-even point or to
run purely or subsidy a set of functional objective will be developed and the
government enterprises would be classified accordingly.
Because of the political upheavals in mid-1990 to some extent, this plan was
affected and some of its programmed tasks were postponed to the next plan.
According to the guidance of the objectives and policies eleven public
enterprises were established in this plan. The Udayapur Cement Industry Ltd.
was established in 1987 during this plan period.
Eighth Five-year Plan (1992-93 to 1996-97)
People's democratic movement in 1990 established a parliamentary
democratic system in Nepal, and gave more priorities to the rural and regional
development through more decentralization and empowerment of local
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bodies. Policies, which aim to the empowerment of the local people and local
government in the development process, were formulated in order to balance
the regional development.
With the fall out of the party less Panchayat system and establishment of
multi-party government in 1991, a comprehensive set of reforms affecting all
sectors of the economy was initiated under the eighth five-year plan because
the new government wanted to reform in all aspects of socio-economic field.
Eighth Five Year Plan (1992-1997) was designed with emphasis on three-core
objectives:
(a) sustainable economic growth, (b) poverty alleviation, and (c) reduction of
regional imbalances.21 Reduction of the regional imbalances through creating
the physical infrastructures in the rural and backward regions had been
emphasized in the plan. Expansion of the road networks, rural electrification,
establishment of the health post and schools in rural village, extension of
infrastructure and service facilities in the rural areas, establishment of rural
development banks, and natural resources conservation through the
extensive community forestry were some important achievements during this
period.
`In this plan Nepal's public enterprises (PEs) were slated for privatization,
government monopolies in hydroelectric power, telecommunications, and
transportation were opened to private investment, customs were
streamlined, and the country declared open for foreign investment. So in
eighth plan more emphasis was given to the privatization of sick public
enterprises. The new government, highlighting the necessity of privatizing
mentioned that “although the establishment of public enterprises has greatly
assisted in the country’s industrial and professional development and help to
prepare the necessary institutional base, the enterprises themselves couldn’t
succeed. To accelerate the pace national development, it has became
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necessary to increase efficiency in all areas through proper and efficient
management. Together with this it has became necessary to bring about
change in the structural framework of the corporation in order to enhance the
standard of the service render by them.”22 Most of the public enterprises
were running in losses and they were suffering by overstaffing problem and
government intervention too, thus government has adopted the aim of
privatizing public enterprises. Therefore, during this plan period only one
public enterprise was established but in the private sector two cement
industries namely Butawal Cement Mills Pvt. Ltd. and National Cement Pvt.
Ltd were granted permission for the establishment.
Ninth Five-year Plan (1997-98 to 2001-2002)
The Ninth Five Year Plan (1997-2002) was designed with the aim to reduce the
level of poverty in order to empowered people economically and socially by
integrating the common people in the main stream of the development
process in the country.23 Balanced regional development was seen as an
important aspect of poverty alleviation in the country. This plan highlighted
four core objectives for regional development. Ninth Plan also focused on
regional development through the three tiered hierarchy of areas for
development i.e. Development Region, Sub-region and Districts and
formulated 13 different policies to fulfill these objectives. One of the
important aspects of this plan was to define and formulate different.
The objective of public enterprises and privatization policy of ninth plan would
be to increase people welfare by enhancing the competitiveness and
operational efficiency of the public enterprises and privatize those public
enterprises which are not necessary to be kept in the government sector.
From the early 1990s, there have been planned campaigns to reform and
privatize the PEs. By the beginning of the Ninth Five-Year Plan 16 PEs, over
half industrial PEs, had been handed over to private owners, and four have
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been shut down. A list of 30 PEs (13 in the industrial sector) was scheduled for
privatization during the Ninth Five Year Plan, but, in fact, only one i.e. Nepal
Tea Development Corporation has been privatized. The slowdown of the
reform is attributable to both the outbreak of the Maoist insurgency in 1996
and a growing resistance to the privatization program from many sides, but
particularly from workers' unions who perceive jobs as threatened.
The Ninth Five-year Plan had opened the way for the private sector to invest
in hydropower development and manufacturing industries considering that
the increasing demand for energy and products could not be fulfilled by the
government sector alone. For this purpose, the government had proposed
weaning itself away from the unnecessary administrative and other burdens.
Besides that, the Ninth Plan had also emphasized on attracting the private
sector in development activities. Because of these government policies
Butawal Cement Mills Pvt. Ltd. and National Cement Pvt. Ltd were established
and several private entrepreneurs have applied for the establishment of the
cement industries in the country in this plan period and they were granted
permission during the same plan period.
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Table No. 2.1
Permission Granted Cement Industries in the 9th Plan
(1997-98 to 2001-02)
S.N. Name of Industries Address
1 Surya Cement Pvt. Ltd. Duhabi, Sunsari
2 Balaji Cement Udhyog Naubise
3 Dyansty Industry Pvt. Ltd. Krishnanagar
4 Kanak Cement Pvt. Ltd. Makwanpur
5 Mittal Cement Industry Pvt. Ltd. Chandragadi
6 Kasmos Cement Industry Pvt. Ltd. Naktajhim
7 Buddha Cement Pvt. Ltd. Kapilbastu
8 Pashupati Cement Pvt. Ltd. Jayamari
9 Laxmi Cement Industry Pvt. Ltd. Udayapur
10 Vijaya Cement Pvt. Ltd. Bahadurgunj
11 Chitwan Cement Udhyog Pvt. Ltd. Nawalparasi
12 Jagadamba Cement Industry Pvt. Ltd. Gonaha
13 Narayani Cement Udhyog Pvt. Ltd. Lipanimal
14 Manakamana Cement Pvt. Ltd. Udayapur
15 Buddha Cement Industry Pvt. Ltd. Kamariya
16 Krishna Cement Co. Pvt. Ltd. Pasauni, Bara
17 Brija Cement Industry Pvt. Ltd. Gonaha
18 Bishwokarma Cement Pvt. Ltd. Birgunj
Source : Ministry of Industry and Commerce, Department of Industry
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Tenth Five-year plan (2002-2003 to 2007-2008)
The tenth Five Year Plan (2002-2007) has focused on the balanced regional
development through the utilization of potential resources in different
regions. It has also focused on poverty alleviation by providing financial and
employment opportunities to people. This plan concentrate on introduction of
a comprehensive agricultural development program after conducting a study
of the overall agricultural sector to raise agricultural productivity and support
small and cottage industries. Three core regional strategies have been
prepared in order to reduce regional imbalances. The core strategies are
concerned with:
People's participation in the social and political decision making processes.
Development of the inter-regional economic relations through the
infrastructure development.
Resource allocation in view of reducing regional imbalance.
This plan had also opened the way for the private sector to invest in the
manufacturing industries considering that the increasing demand of the
construction and consumable products. Due to opened economic policy of the
government the following cement industries were granted permission for
establishment during this plan period. Similarly, the following cement
industries which were granted permission in the ninth plan were came into
existence in this plan period. Este
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96
Table No. 2.2
Establishment of Cement Industries During 10th Plan (2002-03 to 2007-08)
S.N. Name of Industry Commissioning Year
1 Maruti Cement Industries 2004
2 Mittal Cement Industries 2007
3 Cosmos Cement Industries 2005
4 Jagadamba Cement 2005
5 Bishwakarma Cement 2004
6 Bijay Cement 2006
7 Brij Cement 2003
8 Supreme Cement 2005
9 Siddhartha Cement 2003
Source : Ministry of Industry and Commerce, Department of Industry
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Table No. 2.3
Permission Granted Cement Industries During 10th Plan (2002-03 to 2007-08)
S. N. Name of Industry Location
1 Jaya Bageshwori Cement Industry Banke
2 Jayakali Cement Udhyog Pvt. Ltd. Gonaha
3 Sagarmatha Cement Pvt. Ltd. Makwanpur
4 Shuva Shree Jagadamba Cement Pvt. Ltd. Parsa
5 United Cement Pvt. Ltd. Naubise
6 Nigale Cement Pvt. Ltd. Dhankuta
7 Sourya Cement Pvt. Ltd. Panchawati
8 Lotse Cement Pvt. Ltd. Udayapur
9 Sangrila Cement Pvt. Ltd. Geta, Dhangadi
10 Dynasty Industry Nepal Pvt. Ltd. Rupandehi
11 Sonapur Cement Pvt. Ltd. Bisouri, Dang
12 Maiher Cement Pvt. Ltd. Gonaha
13 Unitake Cement Pvt. Ltd. Simara
14 RMC Cement Pvt. Ltd. Simara
Source : Ministry of Industry and Commerce, Department of Industry
2.2.2 Present Situation of Cement Industries in Nepal
The cement was mostly imported from India China, South Korea, North Korea,
Burma, Indonesia, Thailand, Japan, Hong Kong and many other countries
before the establishment of Himal cement factory in the Kathmandu valley in
1972. After the establishment of this industry the import rate of cement in
Nepal decreased substantially because its production capacity initially was 160
tonne per day and subsequently a new Chinese plant with the production
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capacity of 200 tonne per day was added making total capacity of 360 tonne
per day. Then two additional plants, one at Makawanpur, Hetauda Cement
Industries Limited with the production capacity of 750 tonne per day and
other at Udayapur, Udayapur Cement Industries Limited, with the production
capacity of 800 tonne per day were added to the state cement manufacturing
capability. Himal Cement Company was dissolved in 2002 due to
environmental cause.
Any country’s economic development and prosperity is judged by how much
cement it consumes. Nepal’s per capita consumption of cement is amongst
the lowest in the world. The following table shows the per capita consumption
of cement of some countries as of may 2005.24
Table No. 2.4
Per Capita Consumption of Cement in Some Countries (F.Y. 2005)
S.N. Country Per capita consumption of cement
1 Nepal 80 kg
2 India 135 kg
5 Pakistan 131 kg
6 USA 385 kg
7 Korea 1271 kg
The per capita consumption of cement is the highest in Korea and in Nepal
the per capita consumption of cement is lowest which clearly indicates the
economic condition of the nation. Growth of the cement industry is one of the
important indications of country’s infrastructure and its economic
development on an extensive scale. In Nepal cement industry has recorded
continuous growth since beginning of 2000. The list of the existing and
expected cement industries in Nepal is given in the following chart.
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Table No. 2.5
Existing & New Plant Location and their Related Cement Capacities
(F.Y. 2009-10)
Source : Market Visit and Holtec database
At present most of the manufacturing industries are running in losses because
of the complicated bureaucratic structure, political interference, lack of
professionalism, experts and competence. The performance of public
enterprises weakened over the 2007-08 fiscal year, as 15 companies suffered
losses leading to a decline in the volume of combined profits. Only a very few
corporations are in a position to pay revenue to the government. Majority of
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them are hard pressed to sustain even everyday financial position and lack
professional competence.
The annual demand for cement in Nepal is about 2.5 million tonne but
domestic cement companies meet only about 20% of this demand. The
remaining 80% arrives as clinker and cement from India. Nepal has total
limestone reserves of 1 billion tonne with proven reserves of 210 million
tonne. The abundant reserves mean that the country could not only meet
domestic demand, it would be able to export cement.
According to the record of the department of industry the number of cement
industries which were granted permission to operate before 2009 was about
50 of which only 25 cement industries were came into existence for the
production of cement in various fiscal years. Among them 17 cement
industries are in operation. The name of cement industries which were came
into existence before 2009 are as under:25
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Table No. 2.6
Cement Plants in Nepal (F.Y. 2009-10)
S.N Plant Location Establish-ment
Capacity (TPD)
Type Remarks
1 Udayapur Cement Industries Gaighat 1987 800 M.B.
2 Maruti Cement Industries Phulbari 2003 600 C.B.
3 Mittal Cement Industries Chandra Nagar 2005 200 C.B.
4 National Cement Morang 2004 100 C.B.
5 Hetauda Cement Industries Hetauda 1976 750 M.B.
6 Cosmos Cement Industries Nakatajhij 2003 300 C.B. Closed
7 Narayani Cement Lipanimal 2006 600 C.B.
8 Krishna Cement Pasauli 2005 100 C.B. Closed
9 Bishwakarma Cement Birganj 2004 500 C.B. Closed
10 Ambe Cement Liwani Birta 2004 600 C.B.
11 Om Cement Tandi 2006 75 C.B. Closed
12 Shalimar Cement Birganj 2005 150 C.B.
13 Shree Cement Parsa 2002 200 C.B. Closed
14 Butwal Cement Parasi 2004 300 M.B.
15 Dynasty Cement Krishan Nagar 2004 200 M.B Closed
16 Buddha Cements Kapil Bastu 2005 50 C.B. Closed
17 Shree Pashupati Cement Jayamadhi 2004 300 C.B.
18 Bijay Cement Bahadur Ganj 2005 150 C.B.
19 Chitwan Cement Tilakpur 2007 100 C.B.
20 Jagadamba Cement Gonaha 2003 900 C.B.
21 Brij Cement Gonaha 2003 900 C.B.
22 Supreme Cement Kamariya 2003 200 M.B.
23 Siddhartha Cement Rupandehi 2004 350 C.B.
24 Reliance Cement Rupandehi 2005 200/500 C.B.
25 Nepal Ambuja Cement Rupandehi 2006 150 C.B. closed
Source: Cement manufacturers association.
C.B.: Clinker Based M.B.: Mine Based.
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Despite the fact that the number of domestic manufacturers has increased in
recent years and they are gradually substituting imports however; Indian
cement is still occupying a very important market share in Nepal - nearly 60
percent. The Indian brands of cement have good acceptance in the Nepali
market. This makes it difficult for the Nepali manufacturers to compete with
them. Moreover, Nepali cement units are dependent for the main raw
material - clinker and gypsum - on the same Indian companies that are selling
cement in Nepal.
The installed capacity of Nepalese cement industries is much higher than the
existing domestic demand, but the actual production is nearly 40% of their
installed capacity. Though there is competition in the market with the
imported Indian cement, the Nepal-made cement is still cheaper. Since the
Nepali government still has a policy to support the domestic industry through
various means therefore, there exist opportunities for the Nepali cement
manufacturers to substitute the Indian cement by their product provided they
are able to establish and maintain their quality image and price
competitiveness. Most importantly, the growth prospects for this industry are
satisfactory as the product is used primarily in development, constructions
and every government that comes to the power in the country has to focus on
development and construction.
Most of the private sector cement units in Nepal are dependent on clinker
supplied by the large cement manufacturers of India. In case the government
raises the import duty on clinker and gypsum and reduces it on cement, it will
be extremely difficult for the Nepali cement manufacturers. Another threat is
due to the overdependence of Nepali manufacturers on the Indian companies
for clinker - the main raw material. They are also the suppliers of cement to
Nepali market. If the Indian clinker suppliers form a cartel and increase the
price of the clinker or decide to stop clinker supply so as to remove the Nepali
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competitors, the Nepali cement companies may have to close down. Equally
important is the possibility of excess capacity created by the frequent entry of
new manufacturing units into this industry attracted by the present
opportunities. Since, the new unit can be based on clinker which can be
imported; the entry barrier in the form of huge initial capital investment
required for mine-based units will not be there. This may intensify the
competition among the domestic manufacturers and can affect the
profitability.
2.2.3 Outlook of Nepalese Cement Market
At present, the country’s cement demand is around 2.5 million tonne.
Nepalese industries produce nearly two million tonne cement and remaining
is imported from India. Nepal had imported 586,294 tonne of cement and
649,244 tonne of clinker – raw material used to make cement – from India in
2009-10. Domestic limestone mine-based cement industries fulfill only 15 per
cent of demand means most of the cement industries import large bulk of
clinker from India. Out of 22 cement industries operating in the country
around 16 are dependent on clinker imported from India, though the country
has vast limestone mines.
The demand of cement in Nepal is being met by internal and external sources.
Indian cement producers cover wide range of cement market in Nepal. The
internal sources of cement in Nepal are cement grinding units (Gus) and
cement producing industrial units (IUs) which are also known as integrated
units. In Nepal, the overall market leader is Jaypee (an Indian cement
producer) with 11% market share and other Indian cement industries have
occupied about 11% cement market of Nepal. Names of Indian cement plant
exporting cement to Nepal are given in the following.26
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Table No. 2.7
List of Indian Plants Exporting Cement to Nepal (F.Y. 2009-10)
(Figure in million metric tonne per Year)
Plant Cement
ACC, Chaibasa 0.021
ACC, Kymore 0.010
Birla Vikas, Satna 0.034
Santa Cement, Satna 0.014
JK Lakshmi, Sirohi 0.006
Maugar Cement, Satna 0.067
Ultra Tech, Hirmi 0.003
Ambuja, Farakka (GU) 0.001
Jaypee, Rewa 0.110
Jaypee, Bela 0.099
Lafarge, Arasmeta 0.002
Lafarge, Jojobera (G) 0.010
Binani Cement, Sirohi 0.008
Prism Cement, Satna 0.032
Total 0.417
Plant Clinker
Birla Corp. 0.01
Maihar Cement 0.08
Binani Cement 0.04
The actual production data of existing cement industries both integrated and
clinker based as shown in economic survey report 2006-07 is 613,643 tonne.
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Production is estimated as per capacity utilization. The annual capacity
utilization of the integrated and clinker based cement plants are as under.27
Table No. 2.8
Capacity Utilization of Existing Cement Producing Industries
Year Capacity utilization (%)
2000-01 41
2001-02 45
2002-03 46
2003-04 39
2004-05 49
2005-06 40
2006-07 NA
2007-08 NA
The demand of cement in the country is being met through domestic
production as well as from imports. Nepal has always been net cement
importer. In the past cement was imported from East- Asian countries and
India. However, in the recent past, the import has been predominantly from
India. The domestic production was dominated by the public sector till 2002.
After 2002 the private sector is dominantly gaining ground in the share of
domestic production of cement and market.
Among the various cement industries of Nepal two public limited companies
dominate the cement market in Nepal i.e. Udayapur Cement Industry Ltd., and
Hetauda Cement Industry Ltd., with market shares at 15% and 12%,
respectively. Nepali local grinding units (GU's) collectively; service the
maximum portion of the cement market. Out of total consumption, about
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77% were supplied by Nepalese GUs and IUs production houses while the rest
23% were met through the India imports. The market shares of various players
in Nepalese cement market for 2009-2010, are given in the following chart.
Table No. 2.9
Market Shares of Major Players (F.Y. 2009-10)
S.N. Major players in the market Market Share
1 Nepalese Gus 40%
2 Nepalese IUs 37%
(a) Udaypur Cement Industry 15%
(b) Hetauda Cement Industry 12%
(c) Other IUs 10%
3 Indian Players 23%
(a) Jaypee (Indian Cement) 11%
(b) Century 4%
(c) Prism 2%
(d) Birla 2%
(e) ACC 2%
(f) Others 2%
Total 100%
Source : Ministry of Industry and Commerce, Department of Industry.
Most the privately owned, operating cement industries are clinker based, i.e.
these cement industries import clinker from India and grind in their grinding
plants. In other words these industries import cement clinker from India and
produce Precast Prestressed Concrete (ppc) by grinding the clinker along with
gypsum (about 3–5%) depending on the requirements of the cement
consumers. PPC is the dominant cement type in Nepal. The clinker imported
by the local units from India are also primarily PPC therefore, in order to be
competitive in the market, and have reasonably good realization, these plants
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also import fly ash at a lower cost (compared to clinker) There are only two
government owned plants, i.e. Udayapur Cement industry Ltd. and Hetauda
Cement industry Ltd. and they produce only OPC. The Current product mix in
Nepalese cement is shown in the following chart:
Table No. 2.10
Type of Cement Product in Nepal
S.N. Type of Cement Market share
1 OPC 20%
2 Blended cement (PPC, PSC) 80%
Source : Cement Manufacturers’ Association
The cement industry in Nepal seems already crowded with two state-owned
and 16 private sector units in the market. But a look through the trends
indicates that there is still space for some additional factories in this sector.
Nepal is rich in non-metallic resources especially limestone deposits which is
the basic raw material for the cement production. At present, there is high
potentially to invest in cement industries therefore, the number of cement
industries in Nepal is increasing year after year. The estimation of future
capacity additions have been made based on interaction with cement
manufactures and importers by the cement manufacturer’s association of
Nepal on the basis of permissions granted by the department of industry
under the ministry of industry. According to the Cement Manufacturers
Association, Nepal’s cement manufacturers would add about 2 million tonne
to current production capacities over the next three years. The following Table
shows the expected new capacity addition in cement production over the next
three years in Nepal.28
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Table No. 2.11
Expected New Capacity Addition in Nepal (F.Y. 2009-10) ( Mtpa)
S. N. Plant Location Type Cement Capacity
Commissioning year
1 Shivam Cement Makwanpur IU 0.29 FY-10
2 United Cement Dhankuta IU 0.13 FY-11
3 K.P. Cement Dhading IU 0.06 FY-10
4 Suvashree Jagdamba
Cement
Parsa GU 0.09 FY-10
5 Butwal Cement Dhankuta IU 0.06 FY-11
6 Ghorahi Cement Dang IU 0.30 FY-10
7 Dang Cement Tulsipur IU 0.33 FY-11
8 Sonapur Cement Dang IU 0.13 FY-11
9 Dynasty Cement Kapilbastu IU 0.11 FY-10
10 Agni Cement Rupandehi GU 0.09 FY-10
11 Goenka Cement Rupandehi GU 0.09 FY-11
12 Sunval Cement Sunval GU 0.30 FY-12
In Nepal the mineral based industries are among the top known industries to
contribute towards the increment of Gross Domestic Production. Currently
the main contributors in this field are (i) Hetauda Cement Industry Ltd. and
(ii) Udaipur Cement Industry Ltd. and (iii) private cement industries. Similarly,
in Nepal ample investment opportunities are available in mineral based
industries because the domestic production fulfills only 40% of the current
demand and the Mahabharat Range of the country provides potential target
areas for exploration of high quality limestones. The high purity limes tonne of
chemical grade also show good market in the Indian Sub-Continent Such
opportunities having much promise and worthy of considerations.
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Reference
1. Francis A J, The Cement Industry 1796-1914, David & Charles, 1977, ISBN 0-7153-7386-2, pp 61 ff.
2. World Business Council for Sustainable Development (WBCSD) 2002.
3. Pasley C W, Observations on Lime, Calcareous Cements etc, 1838, appendices 14-16.
4. K E Daugherty, University of Pittsburgh, in a research paper found that cement consumption has a higher degree of correlation with the gross national product per capita than any other of the indicators examined.
5. United States Geological Survey.
6. J. M. Keynes, The General Theory of Employment, Interest and Money Mac. Million 1961, P. 320.
7. M.M., Dobb, Economic Growth and Underdeveloped Countries as Quoted by A. K. Singh, Personnel Management in Public Enterprises, Mitta Publication. Delhi, 1985.
8. Laxminarayan Principles and Practices of Public Enterprises Management, S. Chand and Company Ltd., New Delhi, 1982, P. 1.
9. National Planning Council -Three Year Plan, HMG, Kathmandu Nepal.
10. Corporation Coordination Council, Profile of Public Enterprises in Nepal, HMG of Nepal Kathmandu, June, 1978, P. 3.
11. National Planning Council, Three Year Plan. HMG of Nepal Kathmandu, Nepal.
12. Yadav Prasad Pant, Planning Experience in Nepal, Sahayogi Prakashan, 1975, P. 30.
13. ISC, Development of an Institutional Infrastructure for Industry in Nepal, Kathmandu, UNIDO, 1977, P. 334.
14. National Planning Commission, Fourth Plan 1970-75 H. M. G. Nepal, Kathmandu, 1972, p. 198.
15. Ibid.
16. Ministry of Industry and Commerce, Industrial Policy, 1974, HMG- Nepal, Kathmandu, 1974, P. 4-6.
17. Ibid.
18. National Planning Commission, Sixth Plan (2037-42) Memo Graphed, Kathmandu, Ashad, 2037, P. 1- 4.
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19. National Planning Commission, Sixth Plan 1981-86 H. M. G. Nepal, Kathmandu, 1981, p. 192.
20. National Planning Commission, Seventh Plan, HMG Nepal, 1985.
21. National Planning Commission, Eighth Plan, HMG Nepal, 1992, P. 691.
22. Ibid.
23. National Planning Commission, Approach to Ninth Plan, HMG Nepal, (1997-2002) P. 12.
24. “Scope of Cement Industries in Nepal” By Sudhir Thapa Published in Nation Stride towards Prosperity Engineers’ Version. 2005.
25. Department of Industry, Under Ministry of Industry, Nepal Government.
26. Ibid.
27. Economic Survey 2006/07, Government of Nepal, Ministry of Finance.
28. Market Visit and Ministry of Industries, Nepal as provided by the Cement Manufacturer’s Association of Nepal.
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