The country’s agriculture sector has been lagging behind due to lack of private sector engagement in agriculture commercialisation. Though the government has been talking about mechanisation and commercialisation of agriculture through the private sector’s engagement since long, there has been dismal progress on this front. Pushpa Raj Acharya of The Himalayan Times caught up with Pradip Maharjan, Executive Director, Agro Enterprise Centre at the Federation of Nepalese Chambers of Commerce and Industry to know more on the constraints of private sector engagement in agriculture and the role that it could play in enhancing the country’s agriculture sector.

The country has been relying on subsistence agriculture. Why has the private sector been hesitating to get involved in the agriculture sector for its commercialisation?

The Agro Enterprise Centre (AEC) was established in 1991 under a joint initiative of the government, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the United States Agency for International Development (USAID) to encourage the private sector in agriculture. Since its establishment, AEC has been closely working with the government to create a favourable environment for the private sector’s engagement in agriculture sector. In 1995, the government had introduced the Agriculture Perspective Plan (APP) — a 20-year vision document for agriculture sector development — without proper consultations with the private sector. The APP had not identified any specific role of the private sector. The government, thus, failed to achieve the targeted goals and soon it realised that it cannot do much without the involvement of the private sector. We have started working with the government for policy reform and in many other areas to create a favourable environment to lure private sector players in this sector. We jointly drafted the Agribusiness Promotion Bill, which is crucial to attract private sector investment in agriculture. The Bill was forwarded to parliament about a year back but it has yet to be endorsed.

You mean the government has not introduced laws that are friendly to private sector investment in the agriculture sector?

The government has yet to introduce laws to attract private sector investment in agriculture sector. The aforementioned Agribusiness Promotion Bill included the provision of contract farming. Without the provision of contract farming, we cannot imagine attracting private sector investment in agriculture. To run a small scale agro processing industry it requires production in at least 10 hectares (200 ropanis) of land. But we all know that land fragmentation and domination of small holder farmers are the major obstacles for the mechanisation and commercialisation of agriculture sector. And it would not be cost effective for private sector to purchase land for farming. In this scenario, contract farming could be the ultimate solution. The draft Bill has provisioned contract farming, which is in practice in many countries including neighbouring India. Contract farming provision ensures supply of raw materials for the agro processing industry. Apart from contract farming, the draft Bill has also provisioned subsidised interest rate for agriculture loan, insurance, mechanisation, incentives for agriculture inputs, and exemption on income tax for agribusiness for a certain period. It has also talked about incentives on exports, among others. Once the law is enacted, the government will have to amend the Income Tax Act and Export and Import (Control) Act, among others, that contradict the provisions of the Agribusiness Promotion Bill for its proper implementation. On the other hand, productivity of agriculture sector has been plummeting over the years which is mainly due to youth migration and cheaper imports. In this situation, we have to go for massive mechanisation and commercialisation. Otherwise cheaper imports from India and other countries will gradually ruin our agriculture base.

Import of agricultural commodities has been rising because we cannot produce sufficient amount to meet our demand. On the other hand, imported commodities are also cheaper than domestic products. How can the country be competitive in production of agricultural goods in this scenario?

Recently, the government has introduced some programmes to help the country be self-reliant on certain agriculture products as import of agricultural commodities has increased in a rampant manner. The government has announced the Prime Minister Agriculture Modernisation Project, which will be implemented from next fiscal 2016-17. This project has envisioned achieving greater scale of production with higher efficiency. Through this programme, the government has envisaged to develop pocket areas, blocks, zones and super zones, which require at least 10 hectares, 100 hectares, 500 hectares and 1,000 hectares of land, respectively, to obtain the government’s incentive. The government has aimed to develop production area and processing plants simultaneously, and announced a raft of incentives for both. Now the government needs to amend the Land Use Act based on the National Land Use Policy, 2012. Due to lack of relevant law, haphazard settlements and land plotting have been encroaching the arable land. Similarly, the government should also focus on infrastructure development like building irrigation facilities and agriculture roads. It should also reduce local taxes, and provide appropriate incentives on fertilisers and access to finance. Another area that the government needs to focus on is establishing internationally accredited laboratories to certify our agricultural goods.

It seems the government has been promoting cooperatives rather than the private sector in agriculture. What is your take on it?

The government, private sector and cooperatives should work together to develop the country’s agriculture sector. The government should support in infrastructure development, cooperatives in production sector and the private sector in value chain development like in setting up processing factories, storage facility development, agri-markets development and in exports. But the cooperatives have also been working on market development and establishing processing plants in a small scale which is not sufficient to lower the cost of agriculture commodities. The Agriculture Development Strategy (ADS) has specified the role of private sector in agro processing and market development because processing and market development need to be done in a mass scale to enhance competitiveness. As the cooperative movement has organised producers (farmers), it would be easy for them to work with farmers to boost production. If cooperatives concentrate on production, the private sector will take a lead in processing and market development that can transform the country’s agriculture sector. We have a lot of hope for transforming agriculture sector through effective implementation of ADS. The country’s agriculture sector has a huge scope and we can expect more engagement of the private sector in agriculture in next 10 years. There is good return on agriculture as compared to other sectors, This might be the reason why China’s computer giant Lenovo Group entered the agriculture sector recently. We can reap benefits of our ecological diversity to develop various high-value agricultural products and the private sector should keep an eye on it.