Construction material prices surge, Contractors call for ‘Construction Holiday’ as projects stall

KATHMANDU: A sharp and sustained rise in construction material prices, driven by global geopolitical tensions and domestic market distortions, has pushed Nepal’s infrastructure sector into crisis, prompting contractors to propose a temporary “construction holiday.”

The Federation of Contractors’ Associations of Nepal (FCAN) has warned that development projects across the country are grinding to a halt due to escalating costs of key inputs such as cement, steel rods, and bitumen, alongside fuel shortages, labor constraints, and delayed government payments.

FCAN President Rabi Singh said the situation has become untenable for contractors, urging the government to declare a temporary halt on non-essential construction works until market conditions stabilize. “The price escalation is abnormal and unsustainable. Without policy intervention, continuing construction work is economically unviable,” Singh stated.

Prices Spike Across Core Materials

According to FCAN, bitumen prices have surged from Rs 85 per kg to Rs 130, while steel rods have climbed from Rs 72 to Rs 85 per kg. Cement prices have also increased by Rs 20 to Rs 50 per bag in recent days. Just a week ago, OPC cement was priced at Rs 680 per bag and PPC at Rs 780; both have now risen to Rs 700 and Rs 800 respectively.

Contractors allege cartel-like behavior among suppliers. Singh accused cement and steel producers of deliberately curtailing supply to inflate prices, stating that “war is being used as a pretext for hoarding and black marketing.”

Fuel, Labor Shortages Compound Crisis

The situation has been exacerbated by diesel shortages—considered the backbone of construction operations. Restrictions imposed by Nepal Oil Corporation and district administrations on fuel distribution in drums have directly impacted projects in remote regions.

At the same time, labor shortages have intensified. With Indian migrant workers not returning due to elections and regional instability, and domestic workers engaged in agricultural activities, the construction sector has faced a significant workforce gap for the past two months.

Payment Delays and Shrinking Capital Spending

Contractors have also raised concerns over delayed government payments, which have further strained liquidity. According to FCAN, Nepal’s capital expenditure has been limited to around 19–20 percent, reflecting weak budget execution and worsening cash flow for contractors.

“The government cannot absorb the rising global cost pressures, and contractors cannot operate at a loss. This has created a deadlock,” Singh said.

Global War Impact Driving Costs

The الأزمة is closely linked to rising global oil prices amid tensions involving the United States, Israel, and Iran. Disruptions in crude oil supply chains—particularly shipments from Iran—have increased transportation and production costs, directly affecting construction materials like bitumen.

Industry sources warn that the situation may worsen from April 1 (Chaitra 19), when bitumen prices in the Indian market are projected to rise by INR 10,000 per ton (approximately Rs 16,000). The Indian Oil Corporation has reportedly signaled further upward revisions, intensifying fears within Nepal’s construction sector.

The Nepal Cement Manufacturers Association has also indicated that cement prices could rise by an additional Rs 50 per bag, citing higher diesel costs as the primary driver.

Supply Chain Distortion and Black Marketing

Market distortions are becoming increasingly evident. Contractors report artificial shortages of bitumen, with suppliers allegedly withholding stock and selling at inflated prices in cash-only transactions. “Old stock is being hidden, and materials are sold only to select contractors at higher prices. This is outright exploitation,” said one contractor.

Meanwhile, Nepal Bitumen and Barrel Industry Limited claims it is distributing available stock transparently, though it acknowledges mounting pressure from international price trends.

Oil Corporation Under Financial Stress

The Nepal Oil Corporation has also reported financial strain. Spokesperson Manoj Thakur stated that the निगम is projecting a loss of nearly Rs 4 billion within just 15 days despite maintaining regular supply.

“We are meeting market demand for fuel and LPG, but the निगम remains under heavy financial pressure,” Thakur said, adding that strict monitoring has been enforced to prevent hoarding and black marketing.

Despite a decline in domestic fuel prices compared to last year—petrol now at Rs 172 per liter and diesel at Rs 152—market prices of goods and services have not adjusted downward, raising concerns about inefficiencies and price transmission failures in the economy.

Policy Crossroads for Government

With infrastructure projects—from national pride projects to local developments—facing severe disruption, contractors warn that failure to address price volatility and supply constraints could derail Nepal’s development targets.

FCAN has proposed limiting construction activities to urgent and emergency works until stability returns or the government introduces mechanisms to compensate for cost escalations.

The الأزمة highlights a broader structural vulnerability in Nepal’s infrastructure ecosystem—high dependence on imported inputs, weak market regulation, and delayed fiscal execution—now exposed by global geopolitical shocks and domestic inefficiencies.