Nepal | October 01, 2020

Agriculture mechanization: Rental market

Krishna Sharma
Share Now:

The functioning of the rental markets also depends on the presence/absence of other supporting or enabling factors such as extension services and so on. Access to extension may help the farm households to increase cropping intensity and diversify crops cultivation which in turn may necessitate the use of pump-sets

Illustration: Ratna Sagar Shrestha/THT

Since the 1990s, the Government of Nepal has been implementing national agricultural policies to reduce poverty and induce sustainable economic growth through commercialization and competitiveness in agriculture. Some of the policies adopted by the government are: Agriculture Perspective Plan (APP), Agribusiness Promotion Policy (AgPP), Agriculture Development Strategy (ADS), and Agriculture Mechanization Promotion Policy (AMPP). While APP, AgPP and ADS are concerned with the overall agriculture development, the AMPP specifically focuses on the promotion of mechanization of agriculture in Nepal.

In view of the out-migration of labour from Nepal, mechanization can be the only solution to retain small and marginal farmers in the agrarian sector. The government policy on its own may not however be able to bring all the cultivated area under mechanization.

It is not possible to provide subsidized capital goods to all the farmers. In fact, given the small size of operational holding, it makes no sense for all the farmers to possess such machinery.

Even with subsidy, farmers may not be interested to invest on capital goods due to the indivisibility characteristic of these goods. However, the presence of the rental markets plays a crucial role in overcoming the challenge posed by indivisibility of capital goods. These markets, while allowing the owners to sell the excess capacity also contributes towards fulfilling the objective of mechanization without all the farmers, especially the marginal and small, having to own the capital goods.

In this way, rental markets, which have emerged spontaneously as a response to mis-match in the ownership of these goods, have complemented the policy of promoting mechanization.

In absence of these markets, a substantial part of cultivated area would have remained beyond the scope of mechanization even in presence of government policy of promoting mechanization.

Given the perceived benefits of the rental markets of capital goods, the objective should be to ensure that these markets survive and do not suffer from any imperfection.

One of the possible sources of imperfection could be the limited availability of the capital goods. As the number of capital goods available in villages is limited, the farmers who do not own them may not get their services when they need especially during the peak season. This may affect their farming activity and ultimately the performance in terms of productivity and generation of farm income.

The other source of imperfection could be higher level of rental rate. The government may take necessary steps in order to ascertain that the rental users of the capital goods are not exploited by a few owners.  The government may facilitate the formation of farmers’ group and entrust the responsibility of regulating the rental rate of the capital goods on these groups.

Such an arrangement will allow the rental rate to be decided keeping in view the agro-economic conditions of the area within the jurisdiction of a farmers’ group. Further, in order to increase the availability of the capital goods and thereby to prevent the rental rate from being exorbitant, the government may consider increasing outreach of the subsidy programme on the capital goods.

The functioning of the rental markets also depends on the presence/absence of other supporting or enabling factors such as extension services and so on.   Access to extension may help the farm households to increase cropping intensity and diversify crops cultivation which in turn may necessitate the use of pump-sets.

Similarly, access to credit may also help to own and hire the capital goods. In other words, for smooth functioning of the rental markets, it is important that the complementary factors are also available. It has however been noticed that the extension service in the country is in a very dismal state. Most of the farmers, especially, the marginal and small, do not even know who the extension worker is in their locality.

The government has an important role to play in improving the delivery of extension services. Improvement in the access to these enabling factors and other basic infrastructure may further improve the extent of the rental markets and mechanization and thereby can play a crucial institutional support for promoting the growth of the agriculture sector of the country.

At a time when the government of Nepal is planning for the consolidation of land holding in the plains through different measures (such as declaration of special pocket zones) to overcome the problems caused by small and fragmented land holding, it is important to note that rental markets, by allowing the small farmers to use the capital goods and by increasing the extent of mechanization have emerged as a substitute of such land reform measures.


A version of this article appears in print on December 11, 2017 of The Himalayan Times.

Follow The Himalayan Times on Twitter and Facebook

Recommended Stories:

More from The Himalayan Times:

In Pursuit of Onions!

Kathmandu, September 28 People queuing without maintaining safe distancing to buy onions at NRs. 60 per kg at the Nepal Food Corporation at Thapathali in Kathmandu on Monday. Photo: Naresh Shrestha/THT Read More...

Body of missing youth found partly devoured by tiger in Rautahat forest

RAUTAHAT: Security personnel in a search operation found body of a youth who had gone missing in a forest in Chandrapur Municipality-6 of Rautahat district. The Nepal Police and Armed Police Force personnel found the body partly devoured by a wild animal in Tildhare forest, four kilometres south Read More...

Symbolic street-drama in support of Dr Govinda KC

KATHMANDU, SEPTEMBER 30 Shilpee Theater performs a symbolic protest street drama on Wednesday in support of Dr Govinda KC, the 63-year-old orthopedic surgeon who is on his fast-unto-death hunger strike at Teaching Hospital, seeking reforms in the medical sector for the 19th time. Photo: Skanda Ga Read More...

Man United beat Brighton again, Calvert-Lewin hat-trick

LONDON: Manchester United earned their second win over Brighton & Hove Albion in five days as they booked a place in the League Cup quarter-finals with a 3-0 win at the Amex Stadium on Wednesday. It was much more comfortable for United than Saturday's dramatic last-gasp 3-2 league Read More...

SC hearing against Gautam’s nomination to NA begins

KATHMANDU, SEPTEMBER 30 Constitutional bench of the Supreme Court today began hearing in the case filed against Nepal Communist Party (NCP) Vice-chair Bamdev Gautam’s nomination to the National Assembly. Lawyers representing petitioners, Senior Advocate Dinesh Tripathi and Advocate Badri Raj Read More...

Swindling racket busted, eight members arrested

KATHMANDU, SEPTEMBER 30 Police have nabbed eight persons who were involved in swindling money from people on the pretext of exchanging foreign currency at a rate lower than the market rate. The police came to know about the large scale business of the racketeers and their notorious history fol Read More...

National Examinations Board (NEB) Nepal

Govt still undecided on Grade XII examinations

KATHMANDU, SEPTEMBER 30 Though various alternatives for conducting the stalled exams have been recommended, the government has failed to take a decision to hold Grade XII examinations. The National Examination Board had suggested the government if holding examinations inside classrooms was not Read More...

UN Resident Coordinator Julliand completes her tenure

KATHMANDU, SEPTEMBER 30 Outgoing United Nations Resident Coordinator Valerie Julliand completed her tenure in Nepal today. She has been appointed by UN Secretary General as UN Resident Coordinator for Indonesia. Julliand has termed the relationship between the Government of Nepal and the U Read More...