Introduction

Cement is an inorganic, non-metallic substance with hydraulic binding properties and is used
as a bonding agent in building materials. In construction and civil engineering term, cement is
used to bind structural members for construction of buildings, pavements, bridges, tunnels,
roads and highways. Cement has been categories as the first fundamental constructive
material. In the modern society, cement is one of the most reliable and important constructive
material. The industry involve activities like extracting lime stone form reserve, carrying to
factory, processing raw material, making cement clinker, making cement dust, getting final
cement, packing, storing, selling to distributors. Government of Nepal has classified cement
industry as a large scale industry because it requires capital more than 100 million rupees.
There is need of several skilled, unskilled and semi-skilled labors and administrative work
force to produce market and sell the final commodity. Various distribution channels are used
in order to achieve end result. Currently there are 42 cement manufacturing industries in
Nepal.
Key players of cement industry in Nepal are Jagadamba cement,Heutauda cement, Ambe
cement, Bishokarma cement, Shivam cement and Argakhanchi cement. Jagadamba is the only
company in Nepal which produces Portland Slag Cement and also has 6 different product
lines. Jagadamba has dominant market share in Nepal followed by Hetauda cement, Amba
cement, Shivam cement and Argakhanchi cement. Despite of cut throat competition basic
fundamentals is diriving the market i.e cement sells. There is huge demand of cement in
Nepal. The demand and sales cycle fluctuate by quarter to quarter. Numbers of new
companies are also emerging like Yeti cement, Mangalam cement, Bishal cement. It is
encouraging to find out that around 4000 people are employed directly or indirectly form
factory workers to dealers to top level executives.
Cement is an integral part of construction and hence has utility of one or two times for a
particular individual. It is a bonding material manufactured with fairly uncomplicated
manufacturing process. More than 90% raw material of cement is lime stone and balance
10% are also very common additives like gypsum, (plays role of retarder which helps
regulate initial setting time of cement) clay, silica etcwhich are used to balance quality
requirement of lime stone. Cement is a capital intensive industry which means that in order to
produce the product huge capital investment is required and once it has reached its optimum

production capacity in order to increase its production new investment have to be made.In
Nepal, manufacturers offer two major types of product lines. They are:

1. Ordinary Portland cement (OPC): Mostly OPC cement is produced is produced, offered
and used in Nepal. It might have been because OPC is the most common type of cement in
general use around the world. Constitute ingredients are concrete, mortar, stucco and most
non-specialty grout. During manufacturing process a fine powder produced by grinding
Portland cement clinker (more than 90%), a limited amount of calcium sulfate (which
controls the set time) and up to 5% minor constituents. All 42 companies in Nepal offer OPC
cement which is widely used for construction of buildings of industrial institutional,
residential as well as commercial type. Any cement manufacturer has to obtain a Nepal
Standard certificate. OPC is preferred to use in huge apartments, skyscrapers, hydroelectricity
dams where external environment is challenging. Leading manufacturing can be taken as
Hetauda cement, Jagadamba cement, Bishokarma and Shivam Cement. This type of cement is
highly used in Nepal.

2. Portland Pozolana Cement (PPC): PPC cement is manufactured by intergrading Portland

Clinker and Pozzolanic material like fly ash and volcanic powder. Since it uses very unique
ingredient volcanic ash it has higher resistance to chemical agents present in surrounding
atmosphere. Off late many Nepalese companies are also offering PPC cement. PPC cement
also has to be recognized by Bureau of Nepal Standards. This particular type of cement is
found to be used in RCC works like column, beam, and slab foundation in residential and
commercial buildings. It also imparts more durability to the structure .Nowadays almost all
cement manufacturers produce PPC cement.

PESTLE Analysis of Cement Industry in Nepal

Forces and condition outside the organization that affects the performance and outcome of the
business organization is the External environment of the business organization. The control of
external environmental factors is out of the hand of business organization. Analysis of
external environment depicts the opportunities and threats to business organization. External

environment consist of different factors such as political, economic, socio-cultural,

technological, legal and environmental. In short we can say as PESTLE Analysis
Political Analysis:
Politically, it will not be wrong to say that Nepal is in the state of the transition phase. So the
political instability seems to be normal during this period. All the sectors in the economy are
more or less affected by it, and cement industry also cant remain unaffected. The first role of
Government is to act as a supplier of infrastructures. Nepalese Government acts as a liberal
and facilitator after the market liberalization in1990s. Similarly, Nepal falls between
collectivism and individualism but more inclined towards individualism. However, according
to World Bank Report of Regional program for Enterprise Development FNCCI, the
inappropriate government policy and policy implementation are the biggest problems facing
business in Nepal. Bureaucratic burden including corruption and time delays, administration
of income regulations, VAT regulations, customs and import regime and enforcement of laws
are the major political problems in Nepal. While, regulations regarding labor, price and new
venture, ownership, and unclear policy are the policy in Nepal.
In the present context, New constitution is drafted reshaping the industrial environment. This
may hinder the congenial business environment in coming days. These conditions signal for
the volatile business environment which also affects the smooth operations of business
including cement industries.
Economic Environment
The current growth rate of GDP is 0.77% and per capita income is $760. This signifies that
the status of our economy is not pleasing. The PCI of $760 for a year is so low that people
even face difficulties to manage the essential goods. The GDP (PPP) is $70.09 billion. The
industrial production growth rate is 2.6%. The exchange rate of the country is 102.4 per $.
The balance of trade is (77663) million NPR. The overall Balance of Payments (BoP) has
remained in surplus of Rs. 35.07 billion till the first eight months of current fiscal year
2014/15. Likewise, the current account remained in surplus by Rs.11.65 billion during this
period. Increased imports of goods and services, declined export income and grants and
stunted growth of remittance inflow have attributed to lower surplus of current account than
previous year.

Nepals economic growth over the last decade has not been satisfactory. Although the growth
rate recorded over 5.0 percent in fiscal years 2007/08 and 2013/14, growth in other fiscal
years hovered around 3 to 4 percent. The countrys economic growth rate in last decade
averaged just 4.1 percent at basic prices. The average growth rates of industry under nonagriculture sector in the same period stood at 3.2 percent. Countrys pace of urbanization has
been rapid as a result of geographical, demographic, and economic sector fluctuations. The
number of municipalities totaled 191 including 58 the existing municipalities, and 113
declared in the current fiscal year. Nepal's urban population has reached 38.26 percent of the
total. Contribution of urban areas to GDP of 58 municipalities stood at 33.1 percent while that
of Kathmandu Valley alone is estimated at 23.4 percent. Nepalese economy is passing
through structural changes. Contribution of agriculture and industry sectors to GDP has
continued to decline while that of services sector is increasing. Per capita GDP at current
prices has reached Rs. 74,992 in FY 2014/15. The growth rate is very low in comparison to
population growth rate.
Consumer Price Index (CPI) based annual inflation rate that stood at 8.9 percent in the first
eight months of FY 2013/14 slid a little resting at 7.0 percent in corresponding period of the
current fiscal year. Because of such economic scenario of Nepal, the industrial growth has
been slowed since last few years. Hence, it can be said that cement industry also has to face
serious economical threats if the circumstances remains stagnant.

However, there are silver linings in the dark cloud too. The purchasing power and the
disposable income of urban people have increased substantially. Nepal is still an undeveloped
country where economic growth very slow. There is a huge opportunity that domestic cement
industries will be able to cater demand for physical infrastructure development. GON has
emphasized on the developmental projects which plants positive impact on manufacturing
industries. Private sectors are also encouraged to meet the economic target of the country.
With the promulgation of new constitution, developmental activities are believed to be
smoothening. Many projects of national and international repute are shaping up like Pokhara
regional Airport, Nijgadh International Airport, Kathmandu-Nijgadh fast track, West Seti
Hydroelectricity, Hetauda Kathmandu Tunnel, expansion and upgrading of national highway.
Furthermore, country is prepared to make reconstruction in amount turnover 620 Billion US$
due to recent April 25 earthquake. 700,000 houses are estimated to be damaged. Majority of

amount is going to be spent on reconstruction. This is opportunity for cement industry to pace
facilitate reconstruction of houses and physical infrastructures. On the other hand, foreign
direct investment worth 1.2 Billion US$ has been approved form Chinese and Nigerian
companies to establish a joint venture cement plan in Nepal. The future of cement industry is
in prosperous outlook in Nepal and the use of cement will increase substantially. Substituting
imports by maintaining quality of produced goods, reducing high unemployment rate by
creating industrial employment, making industrial products qualitative to compete with the
158 international markets, and creating investment-friendly environment for attracting
desired investment remains a challenge.
Socio-cultural analysis:
The demand for cement in Nepal is increasing annually with the construction of dams,
bridges and housing projects which contributes to 85% of the total consumption. Increase of
10-15 percent year on year was reported by the cement industries. The significant rise in the
demand is encouraging other companies to diversify into cement manufacturing which
existing companies have also been increasing their production. According to 2011 census,
Nepal had a total population of 26.6 million. Male were 48.6% and female were 51.4%.
Though the male and female population is almost half but male employees are found in a
higher number than female employees. Most of the cement industries are found in terai areas
so people from terai areas got an employment opportunity. Nepal is a country of young age
people. So young age group of employees are found in Nepalese cement industries. Family as
a social institution significantly affects the purchase decisions in Nepal. Consumption of
cement has been increasing due to increasing migration of population from hills and
Himalayas to terai. The demand for cement is also affected by the social class. Upper and
middle class people demand for higher level of cement for the construction of building as
compared to lower class. Lower class people consists of half of the Nepalese population due
to which the demand for cement is not very high. Religion also affects the productivity and
management of cement industry. Hindu people follows high level of rituals and norms for
marriage ceremony, death rituals and for other functions which also affects the productivity.
with the increase in the establishment of cement industries and rise in the capacity of
production, there are several issues both positive and negative that are being
faced by the local people living around the processing and manufacturing areas.
For instance, the wastages and emission coming out from Himal Cement Industries Limited
situated in the outskirts of Kathmandu valley led to the decrease in fertile land and polluted

water resources. The air near the area was thick with coal dust, soot and limestone particles
which led to air borne diseases. The issues were so serious that it led to the close down of
Himal Cement Industries Limited in 2002. Nepalese cement industries lack an expert for the
feasibility study, Industry analysis and regular research is found lack. Nepalese people have
an attitude of bholi which also effects in the production of cement. Socio- cultural values
influence cement industry in the following ways:
1.
2.
3.
4.
5.

Management practices
Work attitudes
Entrepreneurship
Change management
Business ethics

Technological environment analysis

The Government of Nepal plans to study and possibly acquire new technologies from the
cement industry of world. The government is discussing technology transfer in the field of
energy conservation and environment protection to help improve efficiency of the Nepalese
cement industry. Due to lack of sufficient level of capital, Nepalese technology is based
mainly on manual technology. Mechanized technology is also used in cement industries.
Global companies transfer technology under agreements for foreign direct investment.
Technical assistance also transfer new technical skills in cement industries in Nepal. Sales of
equipment and machines by foreign manufacturers also help transfer of technology in Nepal.
Techno ware, human ware, info ware are found lack in Nepalese cement industries. R&D is
essential for the development of technology. R&D investment is not sufficient which is one of
the cause of the failure of Nepalese cement industries. Solar power is increasingly being used
as new technology. They are using foreign labour for highly skilled jobs. Government of
Nepal has formulated information technology policy 2000 which enhances the internet
facilities, promote e- commerce, e- education, e- health and transfer of technology to rural
which ultimately enhances the productivity and management of cement industry.

Legal Analysis :

Talking about legal analysis of cement industry, all cement manufacturer is required to obtain
a Nepal Standard Certificate and there is no provision to certify cement higher than 33 grade.
Due to lack of certification provision for higher grade cement, our country has been
importing cement although there is sufficient production capacity to meet countrys demand.
Recently, Nepal Bureau of Standards and Metrology is preparing to amend the certification
provisions that were set in 1995, which will pave the way to certify 43 and 53 grade cement.
This amendment process was initiated a few years back but NBSM has been delaying it. The
amended provision needs to be approved by Nepal Quality Standardisation Committee led by
the vice chairman of National Planning Commission and the final authority lies with the
Nepal Council for Standardisation led by the industry minister. Once the amended
certification provision is approved by the industry minister it will become law.

This move by the government is expected to expand capacity utilization of the cement
factories in the country because they will be able to supply cement for development projects.
Though Nepali cement plants have been producing higher grade cement than what NBSM
certifies. Yet, till date they cannot label it as 43 grade or 53 grade because NBSM does not
have any provision to certify cement higher than 33 grade. As donor funded development
projects demand higher grade cement (43 or 53 grade cement) but the NBSM is not equipped
with the necessary laws to certify higher grade cement even though many factories have been
producing them.

Environmental Analysis:

The main environmental issues associated with cement production are consumption of raw
materials and energy use as well as emissions to air. Cement manufacturing requires huge
amount of non renewable resources like raw material and fossil fuels. It is estimated that 56% of all carbon dioxide greenhouse gases generated by human activities originates from
cement production. Raw material and Energy consumption result in emissions to air which
include dust and gases. The exhaust gases from a cement kiln contains are nitrogen oxides
(NOx), carbon dioxide, water, oxygen and small quantities of dust, chlorides, fluorides, sulfur
dioxide, carbon monoxide , and still smaller quantities of organic compounds and heavy
metals. Toxic metals and organic compounds are released when industrial waste is burnt in
cement kiln. Other sources of dust emissions include the clinker cooler, crushers, grinders,
and materials-handling equipment. These emissions are not only deteriorating air quality but
also degrading human health. Emissions have local and global environment impact resulting
in global warming, ozone depletion, acid rain, biodiversity loss, reduced crop productivity.
Cement manufacture contributes greenhouse gases both, directly through the production of
carbon dioxide when calcium carbonate is heated, producing lime and carbon dioxide and
indirectly through the use of energy, particularly if the energy is sourced from fossil fuels.