The Bhutanese Leading the way.
The construction industry in Thimphu is currently experiencing a significant construction boom. As more and more buildings are erected, the demand for materials such as cement, sand, steel and timber has increased dramatically.
However, the demand has caused a shortage of these materials, creating challenges and delays in completing construction projects.
The pandemic forced a lot of construction projects to halt, causing a backlog in the industry. Now that restrictions are lifted, demand for construction materials has soared, leading to price hikes. Contractors are finding it difficult to complete their projects within the allocated budget and time frame.
Contractors complain
Mr. Thinlay Gyamtsho, a contractor, has raised concerns over the shortage of essential building materials such as cement and sand in Bhutan.
In the past, Mr. Gyamtsho used to procure cement from various agencies, including Dungsam, Lhaki, and Penden. However, he claims that all of them are currently running short or having problems with their supply chain. This shortage has resulted in an increase in the price of materials.
“When the materials we need are not available, it affects our work immensely,” said the contractor. “We are unable to continue with our projects, which can lead to delays and ultimately result in financial losses.”
He went on to explain that when they have to purchase materials from India, the prices are comparatively high with added taxes, making it difficult for them to manage their budget.
Regarding sand he said, “If it’s not available in Wangdue, we look for sources from Phuentsholing or purchase from India.” These alternative solutions come at a cost, however, as the increase in transportation expenses drives up construction costs, he added.
Mr. Tshering Yoenten, another contractor shared his experience with the current shortage of cement in the country. According to Mr. Yoenten, the main crisis this year has been the shortage of cement. He explained that when Penden cement closed down, Dungsam cement also shut down, leaving him no other option but to purchase cement from neighboring India. Unfortunately, this turned out to be more expensive due to the added 15% tax, compared to the Bhutanese cement.
Mr. Yoenten claims that they can always make adjustments and source materials from other places, but the rising costs are becoming a major hurdle. While there haven’t been any recent shortages with steel, the manufacturer recalls past instances where they had to purchase it from India with additional taxes.
A contractor of Druk Kar-zey Builder said the main shortage was with sand. The National Resources Development Corporation Limited (NRDCL) which is the main supplier of sand, has reportedly run out of stock. As a result, they have been forced to purchase sand from Phuentsholing, with the added transportation charges leading to a significant increase in the rate.
This situation has raised concerns, as they fear that this could lead to delays in construction projects and disruptions in the pace of development.
Mr. Neten of Neten Construction said when sand from Wangdue is not available, Phuentsholing sand is available but recently even Phuentsholing sand is facing problems. At times they are even asked to purchase sand from Kali-Khola in Dagana, which for them costs more.
Cement companies say producing to capacity
Contrary to the contractors, Mr. Karma Thinley CEO of Penden Cement, said that they don’t have any shortage. On a daily basis within their plan capacity, they supply a minimum of 1,000 metric tonne of cement and sometimes depending on the order they supply up to 2,000 metric tonne. Regarding the prices it may vary depending on the location he says.
He mentions that the construction boom might be till the September month, but after that there would rarely be any construction or buyers. He added that it is a seasonal shortage.
He mentioned that they are also facing challenges related to raw materials and maintenance works as their company has come a long way (50 years). On the maintenance he says that on a daily basis the factory shutdowns for an hour or two and continues the production.
He mentions that they are ready to supply 100 percent of its production within Bhutan, but what about when the construction stops which usually starts from November to February month.
He says that they are not able to export cement to India as promised, which is 65 percent of the production. Rather they are supplying only 20 percent, for which Indian markets are not happy.
He said if they stopped supplying to India, then they would lose their customers from India. He says that during the construction shutdown, they would have no buyers leading to factory shutdown.
He said that the market has to be constantly working, but despite that they are giving priority to the Bhutanese buyers.
He further said that the company is one of the revenue contributors to the government, so ultimately it would have a negative impact.
The Deputy Manager of Dungsam Cement Mr. Kinley, said that as such they are not having any issue with the shortage. Rather they have been supplying 2,000 metric tonne of cement daily. Though their price is high compare to other cement agents he says, others factors like importing the raw materials and increasing transportation charges contribute to it. Depending on the construction location the travel expenses might vary, he added. Sonam Tobgay Dorji owner of Lhaki cement said that they don’t have any shortage. Rather they are having increasing number of customers. They have even increased their production and supply to 350 metric tonne for a day.
NRDCL admits shortage
Mr. Kinley regional manager of NRDCL Wangdue, said that there is sand shortage right now since there was comparatively less flooding last year.
There are three different qualities of sand available namely, River Sand which are directly supplied, Dredged Sand and Stock Sand which are kept in stock and supplied, which this time couldn’t be stocked, he said.
Alternatively, he added that construction people can purchase sand from Phuentsholing and Kali-Khola. Though cost of transportation is high from other sand dealers that’s the only availability.
CAB weighs in
According to an Executive Director of Construction Association of Bhutan (CAB) Mr. Tshering Yoenten, they were told that both the public cement companies have issues. With limited supply in Bhutan contractors purchase cement from India, with added tax, he added.
CAB has requested government to increase or supply the production of the construction materials to Bhutan first especially when there are shortages and if there is remaining items then to supply to other countries.
He further requested the government to not apply taxes on cement when contractors have to purchase from India. During the shortage contractors can bring in the cement and keep in stock.
He says the main issue in construction at the moment is with the increase in cost. Since most of the tenders were bidded from the pre pandemic, but the cost went high after pandemic.
Contractors are not able to complete their project because of rise in cost of materials and other factors such as increase in the fuel price, he added.
BCCI says open sand and timber to private players
The Bhutan Chamber of Commerce and Industry (BCCI) president, Mr. Tandin Wangchuk states that if the NRDCL is not able to supply the local materials, he requested the government that other private sectors be allowed to extract and supply the needed materials.
Mr. Wangchuk believes that if private sectors are allowed to extract and supply materials such as sand and timber, it would not only increase the supply of materials but also create a more competitive market for local businesses, ultimately bringing more opportunities to the market. The request comes after concerns were raised about the NRDCL’s ability to keep up with the demand for local materials.
