The business of construction materials has been in doldrums due to the government's inability to spend development budget.
Businesses have faced a slow down as the government has been able to spend only about 11 percent of the development budget in the five-and-a-half month of this fiscal year.
The consumption of construction materials primarily takes place through public infrastructure projects and private sector (housing business). However, due to rising interest on bank loan for construction, construction of public infrastructure projects has been sluggish.
The government has allocated Rs 380 billion for capital expenditure in this fiscal. However, only Rs 41.68 billion has been spent so far since the beginning of this fiscal year.
President of Federation Of Contractors' Associations Of Nepal (FCAN) Rabi Singh said construction work could not accelerate due to the collapse of the supply chain.
He clarified businesses were facing slowdown as earlier industries' manufacturing cement and iron bars lent construction materials on credit for up to three to four months. The credit has been stopped of late.
"Businesses were provided with construction materials on credit for 4 to 5 months. Now, it is said the provision of credit is hard to implement," President Singh said.
"According to Public Procurement Act, public infrastructure construction can be started with the initial disbursal of 20 percent of mobilization cost out of the total cost of the project."
However, construction contractors have been accused of not utlizing the mobilization amount for designated projects and stalling the projects.
"The mobilization amount is with a bank guarantee. The government will not incur loss by canceling such contracts," Singh said.
"Of late, even banks are not in a position to give loans, and in such situation, contractors can begin work if they receive the 20 percent mobilization amount."
Cement industries, on their part, said they too were not in a position to lend materials to the construction firms on credit.
According to businessmen, the main reason for stagnation of the cement business sector is the lack of spending in the development sector.
Advance Group of Companies Vice President Rajan Jha said that if the government pays proper attention to development and construction sector, the business of construction materials can pick pace.
"The government has not been able forward works of development and construction sectors. It has not released development expenditure," said Jha, a cement businessman. "Even housing sector is in standstill due to bank loans and interest rates."
Businessmen rued that desipte government providing up to 8 percent cash subsidy for cement export, a conducive environment for exports has not been made.
The Ministry of Forests said the royalty on limestone quarrying has been increased by a larger extent, however, exports are not growing as the government is not initiating diplomatic talks for the same.
Manufactures of iron rods are also complaining in the face of slowing construction work. Iron industries claim that most of the industries were running at mere 20 to 25 percent capacity.
"The iron manufacturing industry has been hit hard more in last five months," said General Manager of Panchakanya Group Devendra Sahu Devendra Sahu, "We have been running the industries at 20 to 25 percent capacity."
The government had given a customs exemption to the importers of sponge iron in the last fiscal. The same put into trouble steel manufacturing industries who procure billets, Sahu said.
Affirming that the pace of spending is usually very slow for the first 3 to 4 months, relevant authorities said development works could not be expedited this fiscal due to it being election year.
The Ministry of Physical Infrastructure and Transport is responsbile for spending a large chunk of the development budget. The ministry has a budget of Rs 1 trillion 61 billion for the expansion of roads, bridges and railways this fiscal.
"The ministry has managed to spend 11 percent of the capital expenditure so far", said Shiv Prasad Nepal, joint secretary of the Ministry of Physical Infrastructure and Transport, "Due to the election and other reasons, the expenditure could not take place as per the target."
He claimed that the construction work would accelerate now as the new government has been formed with the conclusion of the election.
