build vibrant economic growth platform where financial benefits can be derived from

Kathmandu

Being an agrarian economy where agriculture accounted for 28.89 per cent of the national GDP in 2016/2017 and employs two-third of the country’s population, Nepal has a long way to go in terms of elevating the present agricultural sector to ensure sustained economic growth and food security. The agricultural sector needs serious reformative measures to tackle multifaceted problems such as low productivity, dependency on traditional method, unavailability of irrigation facility, inaccessible market platforms and lack of commercialisation which have  dwindled the output of agriculture and weakened food security by increasing the import of food materials.

It is also important to note that the GDP share of agriculture is declining every year, and government needs to reposition its outlook on the highly neglected agricultural sector and ameliorate the agricultural practices through economic incentives and opportunities that guarantee healthy revenue generation. Like industry and service sectors, the agricultural sector has to be transformed into vibrant economic growth platform where people can derive financial benefits from agricultural activities.

Every year, 4-5 per cent of the fiscal budget goes to agriculture and other non-governmental development agencies also spend exponential amount of resources on agriculture but despite such investments and engagements, Nepal is still struggling to address the perennial problems surfacing now and then. Poor implementation of budget programmes and lackadaisical execution of policies are the major hurdles Nepal needs to overcome if it is determined to speed up the growth of agricultural sector.

Ongoing programmes

For the fiscal year 2017/ 2018, the government has allocated the total budget of Rs 40 billion for agricultural sector and Ministry of Agricultural Development (MoAD) has mainly focussed on the implementation of the 10-year Prime Minister Agriculture Modernisation Project under which the ministry has continued the operation of 2,100 pockets and 150 blocks for development and commercialisation of agricultural practices. Under this project, the government has also established agricultural super zones in Jhapa, Kavre, Bara, Kaski, Dang, Jumla and Kailali.

However, following the federal structure, 15 per cent of the budget has been transferred to the sub-national government to carry out agriculture related work. MoAD has already transferred Rs 2.18 billion to 756 local levels to establish 11,241 new pockets and 128 new blocks but only 68 local levels have initiated such activities. Likewise, special crops development and production programme, farmers’ market infrastructure development programme, fishery development programme, one-ward-one-technician programme, small irrigation projects, among others have been handed over to the local units. Also, the government plans to mobilise budget in the areas prioritised by the Agriculture Development Strategy (ADS).

While majority of the agricultural works are being carried under the authority of sub-national governments, it is important to note that all local levels do not possess the technical knowledge, experience and manpower to carry out the programmes stated. Although decentralisation provides larger scope for the betterment of the sector, the local governments must have the expertise to implement the budget programmes. Dr Dilli Ram Sharma, Director General of Agriculture Department says, “Major works carried out by the department have been transferred to local levels without proper training and capacity development. As a result, only 10 per cent of the local levels have been successful in implementing the budget programmes under the agricultural heading. In the earlier system, agriculture related works were conducted under a team of experts but the local levels are not yet equipped to form teams and mobilise manpower.” In the absence of  technical expertise and knowledge, the sub-national governments are struggling to make sense of the agriculture programmes and their implementation. He adds, “It was necessary to transfer the responsibility to local levels but that should have been done gradually; this direct handover process has created confusion among the local bodies. It will take two to three years for local levels to build proper mechanisms to execute agricultural activities.”

Despite the government’s effort, Nepali agricultural practices still rely on traditional subsistence farming rather than a commercial one. Since agriculture is more of a rural centric occupation it is highly neglected in terms of availability of irrigation facility, market access and use of modern technology. Irrigation is still a government’s liability and farmers are bound to yield to timely monsoon for good harvesting. As a result, despite large investments and efforts, the agricultural sector suffers from the problem of low productivity.

Prevailing rudimentary practices

In Nepal agricultural practices are guided by feudalistic structure of ownership and production. With a large number of youth leaving villages for employment abroad, the shortage of manpower in rural areas is jarring. Farmers are forced to sharecropping the land using family labour which is not profitable and feasible for high production. A large portion of cultivable lands are left fallow in the absence of adequate manpower as the agricultural practices are labour centric dependent on manual work.

Another obstruction in the modernisation of agriculture is the inaccessibility of market for farmers. Majority of farmers do not have direct access to the market and they are heavily dependent upon middlemen for selling their products/produce. Due to such dependency, farmers fail to get the right price for their products and incur loss every year. Moreover, even if farmers had access to the market, the rates and marketing of the products is controlled through syndicate and cartel. Farmers therefore succumb to traders’ unfair pricing. While farmers are congregated in rural vicinity, the markets are located in urban areas and this gap has restricted efficient mobility of agricultural products. If the government reduces this gap and ensures that the farmers get fair price for their product, the agricultural sector would be a vibrant one.

Another major problem for farmers is the access to bank loans to buy seeds, fertilisers, tools and other necessary products. Even though the government has issued plans and policies requiring banks to provide easy loans to farmers, only one fourth of the farmers have taken loans out of which less than 10 per cent opted for financial institutions like banks and cooperatives; the rest relied upon money lenders. Ramesh Pandey, a farmer from Dolakha shares, “Most farmers in my village take loans from money-lenders because it is easier and efficient and does not involve tedious paperwork.” The banking system must be accessible to farmers to increase their engagement.

Since the agricultural sector is also vulnerable to natural calamities such as flood, landslides, soil erosion; insurance coverage is necessary to secure investments. Even though the government announced crop and livestock insurance in 2013, many are unaware about the government scheme of 50 per cent subsidy on insurance premium for crops and livestock. It is because insurance activity in the country are urban centric and has very poor outreach in rural areas. Farmers are often viewed as ‘weak’ target group for providing financial services, thus, BFIs are reluctant to increase their investment in the agricultural sector notwithstanding the monetary policy for 2017/2018 which states that BFIs have to allocate 10 per cent of their credit lending to the agricultural sector.

If only rudimentary agricultural practices are reformed and the private sector is encouraged to increase their investment by creating ample investment opportunities, agricultural sector can leapfrog over perennial hurdles and contribute in national economy on a large scale. Agriculture expert, Dr Dev Bhakta Shakya shares, “This sector is progressing but we still have long way to go in terms of commercialising agriculture through modern practices. The government has come up with new programmes but these programmes are rarely implemented in their full capacity. We need to set up modern institutions to expedite the implementation of agricultural programmes.”

Other issues at hand

Use of Information and Communication Technology (ICT)  is a significant tool to advance agricultural trends but Nepal seems to be lagging behind in employing ICT to enhance agricultural development. Even though farmers have access to information via radio and television, there is still a huge gap in terms of disseminating information through mobile applications, SMS sytems, cellular phones and other web platforms.

Sibjan Chaulagain, Managing Director at ICT for Agri says, “We provide SMS service to farmers through which they can make price inquiry, and receive weather forecast and other agriculture related information.  Farmers are eager to reap the benefits of ICT but do not have access and information to such services.” Even though the government has established Agriculture Management Information System (AMIS), to provide services to farmers and the farming communities, with relevant agro-climatic and weather information through the ICT enabled AMIS web portal, it has not been effective in terms of introducing modern techniques in agricultural sector.

Nepal’s economy heavily depends upon the inflow of remittance but recent trends show that remittance has hit a saturation point and is likely to decrease in  the coming years. Therefore, Nepal must look into opportunities to amend its economic priorities to sustain economic growth and strengthen its agricultural sector. The government should aim to commercialise the agricultural sector through proper implementation of its 10-year policy at the local levels and also introduce economic incentives to proliferate the involvement of the private sector.