Notes on the markets we work in.

Understanding the difference between Gray and Authorized Products

When the products are purchased through an authorized channel, consumers get genuine products from the company. Authorized products are allocated by the company themselves concerning different countries’ needs and demands.

Let’s dig into what the grey market is. Grey market refers to products that are sold outside of the brand’s permission. When the products are imported from the company itself through legal and formal channels, the distributors have to pay the tax levied on the country being imported. But in terms of grey products, tax is not paid to the country as sellers and retailers directly import from another country. They are brought through different illegal channels to exempt tax, without brands’ permission.

Most of the grey market products are international version products. Importers purchase products without any agreement from the company. So, this can harm the relationship of manufacturers with distributors and also impair product reputation. When we compare the grey market product with authorized products, grey market products’ price is cheaper compared to authorized products. If a warranty is provided with a grey market product, it is from a third party rather than the manufacturer. As a result, it may or may not cover everything covered by the original guarantee. Thus, the greed of a few thousand rupees can cost customers refurbished products or potentially low-quality damaged products.

Then, how are authorized products different from grey products? Authorized distributors pay all the tax levied on the products they import, thus, the consumers are then provided with the VAT bill for the genuine products purchased in Nepal. It is a legal, ethical, and responsible practice.

The authorized distributor also provides after-sales services for the products purchased from them. They offer the service for the damages that have been imposed on the goods purchased that is within the warranty claims, for free. For the damaged parts, the original parts are ordered from the company (abroad) itself, after the issue has been communicated. Additionally, buying from an authorized dealer provides the highest quality because manufacturers nearly always deliver their best products to registered merchants. If you compare prices, you’ll discover that big-box retailers and private party sales are less expensive but don’t be fooled! Even though the price is lower, the quality is often compromised.

Let’s understand how to spot the authorized products from grey products. Steps of identifying genuine from grey products are:

• First, look for a service tag on the back panel of the product or in the settings.
• Secondly, go to the support section of that brand’s page. (like for DELL https://www.dell.com/support/home/en-us)
• Thirdly, enter your service tag on the website.
• Fourthly, look at product details.
• Lastly, verify your product model number & country. If it states your country, it’s authorized. If not, it’s grey.

Additional steps are:

• to look for an official authorized distributor’s holograms like Generation Next Communication.
• to ask for VAT bills after purchase.

With this, buy genuine products from authorized dealers only to get uncompromisable genuine products and after-sales service. Let’s buy genuine cause you deserve exceptional quality.

Article by Kabita Chaulagain | A temporary remedy on paper to a long-rooted planning problem

The government of Nepal has banned the import of luxurious goods, non-essential goods and goods above $600. This includes the ban on mobile phones, laptops, televisions, and other technical devices costing more than $600. There has been a significant trade imbalance in Nepal for many years. The ban on imports was implemented due to the declining foreign cash reserve and to save our country from being the next Sri Lanka.

Restriction on trade that threatens national security is plausible like arms and ammunition, explosives or narcotics. But the recent act of banning the import of goods above $600 is downright impractical as $600 for a technical device like phones, laptops or television is trivial. Though it appears to be assisting in keeping foreign financial reserves in the country, it is not a permanent solution.

Nepal is facing a severe liquidity crunch in the present context. This is also an impact of the election. Some experts believe that the crucial reason LC was banned was to keep money in the nation for prominent politicians’ election campaigns. Another reason is Russia-Ukraine war, has led to severe inflation throughout the globe. Nepal imports crude oil and petroleum hydrocarbons heavily. The inflation of oils has hurt the foreign cash reserve of Nepal even more.

Nepal imports almost 65% of its total imports from India. With the open border with India, the grey products entering Nepal through the illegal channel are already high. This decision of the government leads many self-employed traders to get their work displaced, as the stocks may not be able to hold up to the demand. With this, the sellers might then resort to those illegal channels. This will severely impact the government as a vast amount of tax is being paid to the government for importing. This will also inflate the cost of these products further.

Banning imported goods that are already produced in Nepal does look like an encouraging step for domestic and local manufacturers. But, Nepal’s manufacturing strength does not incline toward technology. Since we are weak at manufacturing cost-efficient high-quality tech products, it looks more efficient to import them. This also helps the traders and middlemen to earn a significant amount of profit, thus, they pay taxes to the government. It’s a win-win situation.

More than 70% of Nepal’s economy is an informal economy. So, the crucial problem here is tax evasion. Instead of restricting imports, the government should focus on strict tax collection and transparency.

Moreover, Nepal will not likely turn into Sri Lanka as Nepal’s foreign debt is 42% (much lower than Sri Lanka’s). With the ease of the Covid crisis and increase in remittance, Nepal will undoubtedly bounce back.

Cement is an essential building block for any infrastructural growth or advancement that happens in a country. Nepal is a developing country and has more demand for cement than ever. With growing infrastructural investments and new projects, the demand for cement has been on an upward trend. The Peak of this came in 2010 and is continuing to this date. Many experts say that the current national production is in surplus as compared to the immediate demand, however, they are confident this demand will grow to keep up with the ever-growing supply. This is the main reason cement industries are still entering the market even in 2022, with large FDIs or local partnerships.

Bhimsaria Group is also associated as notable promoters and shareholders of Nepal’s two largest cement industries, namely Shivam Cement and Hongshi Shivam Cement. They have a combined capacity of 9000 Metric Tons Per Day and growing. Both have plans to expand their plant, Hongshi to have an additional 10,000 Tons Per Day, with construction starting soon.

The list below is a synopsis of the largest cement production brands in Nepal. Since Limestone mines are the most crucial factor for proper production and price, most industries are starting by getting Limestones via outsourced options or have self-owned mines. Most industries are also mixing both self-owned mines and outsourced limestones for better quality. Clinker production means taking the Limestone and crushing it, then heating it to extremely high temperatures until it thermally decomposes. Since Limestones are Calcium Carbonates (CaCO3), it thermally decomposes into Calcium Oxide (CaO) and Carbon Dioxide (CO2). The Carbon Dioxide escapes the kiln but the CaO, along with the other minerals and compounds present is what acts as the Clinker. The Clinker is then ground into fine powder to make cement – the process being Grinding. An alternative is that the clinker is sold as it is to other cement factories if there is a high yield or low direct consumption, such alternative factories then only grind the clinker to make cement.

The scope for Cement Industries is very positive from Nepal’s Perspective. The growing demand and potential possibility for export have made it very favourable for Business Houses to invest in Cement Industries. The primary reason for the lack of production or lack of success for particular plants includes internal problems, poor planning, very high logistics and transport costs, etc. but it is not about the market scenario.

With the growing liquidity crisis in Nepal, we are in a situation where we will have to start exports to sustain the economy. Otherwise, relying on remittance is not a viable solution that will be sustainable for the nation’s growth. Cement is one of the primary independent industries in Nepal where imports have been unnecessary, and can also have a major export contribution. India is one such market where exports can be done, with bilateral understanding and collaboration. The price workings also make it a feasible choice for exports as it can compete with Indian Industries.

Although most of the above industries are focused on making OPC Cement (Ordinary Portland Cement), some are also making PPC Cement (Portland Pozzolana Cement). In the grounded clinkers, 3-5% of Gypsum is added to act as a retarder to make OPC Cement. This is usually the highest grade with respect to the purity of the Calcium. The retarder is necessary so that the setting time of cement is not too fast when mixed with water and so that the workers have ample time to finish the necessary construction.

PPC Cement, on the other hand, contains about 25-30% of Fly Ash – which is a silica-based waste product. This waste is often harmful to the environment and as per research, upon adding Fly Ash to OPC Cement, it didn’t cause any loss in strength to the finished products. Thus, it is a healthy way to recycle waste Fly Ash into something useful as it can increase sustainability and cement production volume.

However, in spite of being a waste product, we are having to purchase large volumes of this from India, paying hundreds of rupees per ton for the waste – as well as much more for the transport of this. This is benefiting no one and rather, this cost can be saved on exports. Grounded Clinkers can be sent to India where a small processing plant in India can mix the fly ash and gypsum, to reduce transport costs for the additives as well as not compromise on employment in either of the countries – hereafter still increasing exports for Nepal. This can be a very healthy outcome for the Nepali Economy as well as cost-effectively producing cement in India. OPC Cement may have a similar price point to the current productions in India, however, Nepali Clinkers can have a large edge over PPC Cement in India.

To conclude, this vast industry is filled with many complications and roadblocks, however, it can be one solution for Nepal’s dying foreign reserves and regenerate the confidence of Nepalis in their citizens, banks, and industries. This would help diversify our dependence on Remittance and Tourism, and have a much more stable economy with larger foreign reserves.

*If there is any information from the above article which needs revision, please help email us at info@bhimsaria.group

On the 5th of April, 2022 – a significant milestone was set for Nepal Customs, Business Houses, SMEs, Transporters, Custom Agents, etc. with the inauguration of the Chobar Dryport Customs. Honourable Prime Minister Sher Bahadur Deuba was the Chief Guest for the event and was the primary facilitator for the cutting of the ribbon for the ceremony. The first container that entered the DryPort Customs contained goods of Generation Next Communication Pvt. Ltd. (Genxt), and it was brought and cleared by Flash Freight Logistics Pvt. Ltd. There were subsequently 2 other containers also brought in by Flash.

Apart from the speech from The PM, Minister Janardhan Sharma also spoke to represent the Ministry of Finance, DG for Customs Kamal Bhattarai and Mr Ganesh Pandey. Several speeches from notable people across Nepal represented their organisations or entities such as FNCCI, Chamber, Kirtipur Municipality, etc.

This DryPort is situated in the previous location of Himal Cement (which shut down in 2002) and is an ideal location for having shipments for Import and Export close to the capital of Kathmandu. It is the first dry port within the borders of Nepal.

It is easily reachable however, the road infrastructure will need development over the coming times to accommodate for the increased traffic and congestion that will arise due to the shipments. Although a railway connecting Raxaul or any other Indian Port would be ideal, the idea is not yet planned due to high infrastructure costs. However, Prime Minister Deuba stated that he is interested in whether Nepal gets suitable funding either as donations or as loans at minimal interest rates.

Bhimsaria Group’s Involvement

Bhimsaria Group has two companies directly involved with the inauguration of this Dry port Customs office. Firstly, it is Genxt (Generation Next Communication Pvt. Ltd.) – the authorised distributor for Apple, Dell, and HP for Nepal (and other brands in many more countries) – whose container was the first to be brought into the premises of this office. The Logistics Partner was Flash Freight, who handled the shipment seamlessly outbound from Malaysia to Nepal.

Secondly, Transecure Telematics was also involved in the ECTS Tracking of the shipment from Kolkata to Nepal’s Borders. Transecure is the sole service provider for Electronic Cargo Tracking Systems for Railway Shipments from Kolkata (CCU Port) and Vishakapatnam (Vizag Port) to Nepal. We are in the works to further strengthen the relations between Nepal Customs and Transecure to increase Cargo Tracking Surveillance to a Door-to-Door Facility.