Agricultural scenario: Negligence and problems

Despite government’s plans and policies requiring banks to provide an easy loan to farmers, only 22 percent farmers have taken any type of loan of which only 8 percent have taken it from financial institutions

Despite its great potentiality, agriculture is one of the most neglected areas by the government. Although the agriculture budget is not low its output as shown in the GDP is not encouraging, indicating weak implementation of the budget. Every year 4-5 per cent of the budget goes to agriculture. Development partners spend about the same volume of additional expenditure on agricultural projects. However, the GDP share of agriculture is declining every year.

In 1974-75 agriculture contributed 69 per cent to the GDP that has gradually declined to a current 31.2 per cent in 2015-16. As a result, many youths from rural farmer families have migrated, first to urban Nepal and then for foreign employment. The Census 2011 shows one in every four households has at least one absentee migrant  aged 15-24 years. Has agriculture lost its relevancy? With the pace of modernization all developed countries have undergone transition from agriculture as the main national production to industry or services. If we analyze the GDP compositions it could lead to similar conclusions. However, it is not a reality. Still a large proportion of households generate their major income from agriculture and such households have increased in the past decade as per the agriculture census. Census shows that in 2011 about 70.6 per cent, that is 3.8 million, households depended on agriculture and such households have increased every year with 10.1 per cent increment in the last one decade.

It shows that agriculture is at our heart, but due to decades of negligence the productivity has dwindled. Agriculture is facing multifaceted problems. Our farmers use traditional tools. Less than 1 per cent farmers had tractors in 2011. Irrigation facility is a government’s liability. In most parts of the country farming depends on rain water. Currently government claims 52 per cent cultivated land uses irrigation. However, only 16 per cent of it is getting the government’s irrigation facility and the rest has managed by using hand pumps or tube-wells.

There are two major institutional hurdles to agriculture improvement: agriculture market and bank credit. The market being far it is almost impossible for farmers to reach it with their limited capacity. So the middlemen take large intermediate benefits. Second is the institutional absence. Ginger is an example. In 2011, Nepal produced 216 thousand tons of ginger which was the third largest production after that of India and China. Experts say that for this success it was the commitment and efforts of farmers without any contribution from the government.

Dried slice of ginger is in high demand in Europe, Japan and America. EU alone annually absorbs 800 thousand tons of dried ginger. Seven tons of wet raw ginger can produce one ton of dried slice. So the demand is very high. Naturally large numbers of farmers were attracted to ginger farming. But they are facing severe problems in the last few years. Most of our farmers are exporting raw ginger to India as it is much easier for our farmers to reach Indian markets.

After 2013, as ginger farming grew highly in northern India it imposed several restrictions on Nepali products. As a result, in 2012-13 while Nepal exported ginger worth Rs1.3 billion to India, in 2014-15 we exported only  Rs 461 million and now in 2016 only Rs 300 million as per the Trade Promotion Center. Government never tried to solve the hurdle raised by India. Quarantine test labs were lacking at the borders. India accused Nepali farmers of chemical pesticide and fertilizer use that they deny. Besides this, raw ginger rots if kept for more than three or four days so farmers have to sell it quickly. A ginger dryer plant is expensive, and there is only one such plant at Surkhet in the country on private initiative that cost Rs 20 million. The same is the story of apple farming of Mustang and Jumla and coffee of Gulmi.

The second big hurdle for farmers is the access to bank loans to buy seeds, fertilizer and tools. Despite government’s plans and policies requiring banks to provide an easy loan to farmers, only 22 percent farmers have taken any type of loan of which only 8 percent have taken it from financial institutions like banks and cooperatives and the rest from money lenders. This is a pitiful situation of institutional provisions where there are unnecessary paper hassles and collateral complexities for the less educated poor farmers. It also shows that the government is not able to reach needy farmers.

One necessity of agriculture is insurance. In 2013, the government announced crop and livestock insurance. The government provides 50 percent subsidy on insurance premium for crops and livestock. However, the scheme has not yet become popular. Though livestock insurance is not new in Nepal, crop insurance is very new for private companies. Weak information system and documentation have created difficulties. It is hard to determine whether the crop losses are from factors outside the farmers’ control or they failed to get good harvest using quality inputs like seeds and fertilizers and appropriate planting timing. Insurance companies do not have proper network in rural areas; therefore, they are facing difficulties in selling agricultural insurance to rural farmers. As agricultural products vary from place to place the attached risks vary accordingly, making it difficult to assess the risks.

Satyal is Professor of Statistics at Tribhuvan University