Construction Sector Faces Crisis Due to Soaring Material Costs, Warns Federation President

Kathmandu. President of the Federation of Contractors' Association of Nepal, Nicolas Pandey, has stated that the country's construction sector is in serious crisis due to the excessive price increase in construction materials.

Speaking at a meeting of the Infrastructure Development Committee of the Federal Parliament, President Pandey warned that the construction sector would completely collapse if the government does not adjust prices in time.

President Pandey mentioned that the prices of petroleum products and other construction materials have increased unexpectedly due to the Middle East war and global inflation. 'There is a clear provision in Section 55 of the Public Procurement Act 2063 that prices of construction materials will be adjusted if they fluctuate by more than 10 percent,' Pandey said, 'but due to the non-implementation of this mandatory legal provision so far, construction works have reached a standstill.'

Informing that the construction sector contributes about 13 percent to Nepal's Gross Domestic Product, Pandey said that the crisis in this sector will affect the entire economy. According to him, about 60 percent of the development budget is channeled into the market through the construction sector.

'The construction sector provides direct and indirect employment to about 2 million laborers. If this sector stops, those millions of laborers will face starvation,' he said. Pandey also presented the fact that the construction sector is like a large 'startup' and has made more than 32,000 Nepali citizens self-employed.

Pandey informed that due to the slowdown in construction work, cement and iron rod industries are currently operating at only 20 to 25 percent of their capacity. He pointed out that construction entrepreneurs are unable to pay installments and interest on loans taken from banks, leading to an increase in 'bad loans' in the banking sector, which could lead to a financial crisis.

Pandey stated that many projects are becoming 'sick' due to the lack of price adjustment and proper provision for contract extension. 'There are many contracts whose deadline expires by the end of Asar, but it is not possible to proceed with the work without price adjustment. This will cause even greater financial loss to the state,' he said.