Challenges in the Nepalese agriculture sector

Nepalese agriculture primarily consists of small family farms, which are mainly subsistence oriented and yet not capable of supporting the adequate subsistence of the farm families. Food grains dominate the agricultural products with paddy being the primary crop all over the country. Despite more than 70 percent of the workforce being involved in the sector, agriculture in Nepal produces only about one third of the gross domestic product and till this date food self-sufficiency is not ensured. The greatest challenges faced in development of agriculture in Nepal are low productivity rates, traditional farming mechanisms, lack of commercialization and industrialization. Nepalese agriculture production had a virtual stagnation with 2.7 to 2.8 percent average annual growth rates for the past two decades. This is one of the reasons why poverty in Nepal is mostly an agricultural phenomenon.

Fragmentation of agricultural land is a major challenge to the commercialization and development of Nepalese agriculture. The average holding size of a farm is 0.8 ha. Almost half of the total farms have less than 0.5 ha of land, while those with less than 1 ha of land constitute nearly three-fourths of all holdings. And the average holding size of Nepalese farms is getting smaller with time. Between 1961 and 2001, the average holding size has declined by 28 percent.

A small segment of Nepalese agriculture has been commercialized and diversified. This segment of Nepalese agriculture, however, is unable to scale up or grow because of the lack of industrialization of the sector. One of such sectors is the dairy products. Until a few years back Nepal used to have ‘Milk Holidays’ due to lack of enough milk processing enterprises. The situation forced dairy farmers to shift to other occupations or raise cross breed cows with lower milk yields. Now with the operation of two private sector enterprises and a public enterprise on milk processing, Nepal is facing a milk deficit of over 300000 liters every day. To fulfill the deficit, importing at least 10000 cows of improved breed is necessary. However, India restricts export of such cows. Talks on senior government level could resolve the issue. If allowed, the import could directly benefit dairy farmers as well as help save the country more than NRs. 10,000,000 everyday.

Several other constraints impede growth in agriculture. Nepalese agriculture still remains heavily dependent on the rainfall for irrigation as the required infrastructures for irrigation are yet to be built. This dependence on rainfall has adverse effects on the consistency of production. Nepalese agriculture is also heavily inclined to water intensive crop agriculture in a situation of inadequate irrigation facilities. Only about one-fifth of irrigable land has access to year round irrigation.

Lack of proper collection centers and storage houses for agricultural products is another major impediment to growth of Nepalese agriculture. Lack of proper storage facilities is forcing farmers to sell their products at random prices (sometimes even lower than the production costs). They are forced to do so due to the fear of damage of products in the absence of proper storage facilities.

The government’s policy of subsidizing fertilizers used in agriculture has resulted in unavailability of fertilizers on time. The shortage has forced farmers to rely on black markets for timely fertilizers. Black markets however impose an exorbitant cost on the farmers due to high prices and inferior quality of the fertilizers.

Agro-climatic diversity offers Nepal hills special comparative advantage in high value agriculture. However, taking advantage of such potential is limited by high transactions costs stemming from poor connectivity, deficiency of economies of scale, grades and quality compounded by weak agricultural R&D capacity.[http://samriddhi.org/userfiles/research%… ]