Commercialization of Agriculture:
Opportunities & Challenges
in Nepal
Sushil Rijal
Executive Board Member and Chairman of
Agriculture Committee
Chamber of Industries, Morang
Major Agro Product of Nepal
 Paddy
 Maize
 Wheat
 Green Tea
 Jute
 Big Cardamom
 Ginger
 Herbs
Overview of the presentation
1. Opportunities in agribusiness
2. Policies and its implications in agriculture
3.
4.
5.
6.
commercialization in Nepal
Constraints in agribusiness promotion in Nepal.
Present status of Agriculture
Suggested recommendations
Way forward
1.Opportunities
Climatic condition suitability
The Country topography and natural resources
 Existence and potential to grow different agriculture crops, livestock
and NTFPs. e.g Sugarcane in Terai Kiwi in mid hills to Tulip in
Jumla.
 Existence of more than 7000 plant species. 750 medicinal and
Aromatic plants of commercial use.
 Nepal a country having topography of all climatic zone from subtropical zone Terai to Temperate zone, the Himalayan range.
 It comprises of Tropical (up to 1000m), Subtropical (from 1000 to
2000m), Temperate (between 2000 and 3000m), Subalpine (30004000m), Alpine (4000-5000m) and Nival zone (above 5000m)
Opportunities
Market Opportunity
A. Domestic market
 Increasing demand for off season vegetable, meat, dairy
and poultry products because of the food habit change and
increase protein intake.
 Food grains, potatoes(2 billions) and onions (0.7 billions)
are imported to meet domestic demand.
 Government giving high priority in addressing food
security and nutrition security.
Opportunities
B. Export Market opportunity:
 Demand of high value organic and specialty product e.g
organic foods and high land coffee in international market.
 Nepal is being recognized as specialty agro product
producing country, e.g Ginger, Orthodox tea and
Cardamom.
2. Agriculture policies/ Favorable
A. National Agriculture Policy 2061:
Increase competitiveness in regional and world markets
developing foundations of commercial and competitive
agriculture.
B. Agribusiness Policy 2063:
 Help to produce market oriented and competitive agriculture
 Promotion of domestic marketing and exports through the
development of agro-industries
 Commercial production area
 Organic production area
 Export area
2. Agriculture policies
Agri mechanization policy 2071
 Subsidy on agri mechanization/machines purchase in hills
and Terai
 Import duty relaxation
 Made provisions for supply of spare parts and accessories
in regular manner.
 Opened avenues to promote agri tools manufacturing
business with incentives.
C. National Seed Policy2056
Seed Vision 2025
Identified the role of private, NGO and public sector for producing
foundation seeds and seed multiplication.
 Recommend rebate on tax and custom of seed business.
 Recommend public, private and NGO for establishing lab and
certification.
D. Fertilizer Policy, 2058:
 Pricing of fertilizer considering market forces.
 Promote private, public and cooperative sector for the production and
trade of fertilizers.
 Cooperative trade on fertilizer.
E. National Tea Policy,2057
 Registration of land for tea garden as an industry.
 Lease government farms to private sector for a maximum
of 50 years.
 Give privilege in reduced import duty in imports of
packing materials.
F. National Coffee Policy, 2060
 Public and private research for coffee.
 Privilege on Land ceiling
 Rebate on custom duty on machinery.
G. Dairy Development Policy,2064
 PPP concept
 Private sector in involvement in Dairy Development
Board.
 Support private sector on production, processing and
trade of dairy industry.
 Bring open policy for developing dairy industries and
pricing of the products.
H. Regulatory frameworks
Acts related to agribusiness promotion/control:
 Industrial Enterprises Act, 2049
 Contract Act, 2056
 Food Act, 2023
 Seed Act, 2045
 Feed Act, 2033
 Pesticides Act, 2048
 Cooperative Act, 2048
3.Constraints in Commercialization of Agriculture
3.1. Production:
Fragmented and small land holding
 High costs of production,
 small scale of production
 poor coverage & low quality of infrastructure
 inadequate public support
 Large proportion of isolated farms.
 Poor and inadequate supply of fertilizers 450K. Mts vs.
150K. Mts and agri inputs
 Agri business became less attractive to the youth resulting
out migration of the youth .
 Cause and result is subsistence farming
3. Constraints in Commercialization
3.2 Marketing Constraints
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Highly fragmented businesses
Poor export infrastructure within the country and in transit
Limited public supports in the exploration of the export market
Traders reluctant to start the export business,
Risks of trade deflections or low quality consignment .
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3.2.1 Export marketing
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Lack of standard laboratories for certification of exportable products;
Insufficient and weak plant and animal quarantine procedures to protect domestic products from
getting transmitted with imported disease;
Weak enforcement have resulted in large scale non-compliance of standards; and
More controlling than facilitating.
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Requirements for grades and standards are ever increasing
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Certain products require health certificates, safety test marks, or standards certification of the
importing country
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Halal Certificate
Product modifications
Labeling, marking, packaging
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Several pesticides are banned
 If not, MRLs are fixed( Maximum Residue Limit)
 tracking the level of pesticides applied to the crops in the field
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Government is made responsible for food and quarantine regulation
3.3 Globalization
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WTO and Agribusiness
Scale sensitivity
Standards (quality, quarantine)
Technology transfer in agriculture
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Plant variety
Biotechnology
Agro-chemicals
Processing techniques
Effects of policy changes abroad
Competitiveness
4. Present Status of Agriculture
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The situation is not very favorable and needs to give very intensive
attention from the GoN to address and correct following challenges
and situation.
Food deficit – Acute food deficit in Far-western 3 districts namely
Bajhang , Bajura and Dadeldhura , Mid-western zone Humla, Jumla
and Kalikot districts.
85 % of agriculture product is still for household consumption only 15
% is for commercial purpose.
Low supply of chemical fertilizers 1,50,000 Tons vs. 400,000 Mts
demand. It is only 21 % of the total demand (MoAD data).
Seed is still sourced from informal source govt. supply is not sufficient
and registration of the new seeds is not in good progress. Hence 85 %
of the seeds are supplied from informal source.
Only 54 % of agriculture land is irrigated and also mainly in Terai. rest
are still based in monsoon rain fall.
Only about 1 percent of farmers own tractors. It is almost no
mechanization in Agriculture.
4.1. Quality standard and regulatory aspects:
 Quality control regulation and statutory law
 Quality control, disease-pest control and quarantine
control, certification
 Support private sector for quality control and
certification of agricultural products.
 e.g. Pest free certificate for Citrus Export to
 China (Garden and pack house)
 Efforts towards getting FMD free certification for
livestock product export.
Government
4.2. Investment and promote investment Infrastructure:
Attract investment in Agriculture by liberal tax policies and bank interest
rate:
4.2.1 Present interest subsidy 6% minimum interest does not opened the
avenues for existing and new coming medium scale agri business because of
limitation of 10 millions and 45 years age bar.
4.2.2 Agri business should be made tax free for at least 5 years of gestation
period.
4.2.3 The bankers are still reluctant to finance agri business because of high
risk. Make agri insurance more conducive to the business by setting up
trustworthy evaluation mechanism e.g involvement of DCCI and
FNCCI/commodity associations
Government
4.2.3 Long-term raw material development plan
a. support measures requiring the agro-industries to plan and
develop supply of raw materials from domestic sources
b. incentives to agro-industries using the domestic raw
materials.
 c. Encourage private investments on local resource-based and
export oriented businesses (far reaching and predictable
measures)
 domestic
 foreign
Government
4. 3. Access to the market
 Ensure preferential access to foreign markets including
India.
 Lower tariffs on key agribusiness inputs like packaging
materials, farm green houses, machineries, implements
and cold chain equipment machines, etc.
 Rationalizing tariff structures on import (from all the
countries)
Government
 4.4 Technical guidelines for quality control
 A reliable system of quarantine control and food testing
should be established to ensure the export market that the
products originating from Nepal does not have risk of substandard quality and disease-pests.
 a. Bilateral agreement with Indian government for :
 b. Mutual Recognition of the certificates.
 c. Harmonization of local tax and bidding process for Jute
bags tender in India.
d. CV duty on Pashmina Products in India
 Bring conducive laws in: food, quarantine, contract farming,
land contract)
Government
4. Technical backups and marketing
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Technical backups for enhancement of productivity and the quality
Technical teams managed by the commodity associations
Encourage private sector to supply technology
Marketing systems that can aggregate and link small produce to
traders and larger markets while maintaining the traceability of the
products.
 Training and interaction among agribusiness operators, traders
and exporters
 Data base on agriculture production and enterprise , analysis,
projection and dissemination
Government
5. Knowledge generation
 Technology generation, verification
 Linking the livelihood concerns of small farmers to the
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export market
Market exploration
Technical and managerial means of reducing the cost of
production and handling
Post-harvest technology, preserving and storing
Machinery and equipment
Encourage private sector in research
Recommended activity from the Private Sector
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Give priority in the investment in agro business giving more focus on area
expansion in cultivation , crop production and processing.
Bring new technologies and inputs from foreign partners for mass production
Commercialization of the research
Larger scale investment for the agro processing business
Market exploration and linkage development
Buy back guarantee and contract farming for the mass production.
Quality and quantity production at the larger extent
Establishment and operation of Commercial farms
Advise government for the revision of policies and act to bring conducive
environment for FDI
Larger scale and aggregated farming of the crops
Bring joint venture investment with foreign partners and collaborate with
international buyers
Promotion of Nepalese niche agri products ,like specialty tea, coffee, vegetables
and food grains in the international market.
Collaborate with GoN in creating branding for Nepalese products .
Private sector:
Producers & processors
2. Quality control
 Adherence to technical guidelines for quality control.
 Testing and certification as business
 register and operate under the government testing and
certification system
 Get educated and follow the SPS/TBT requirements
of export market.
Producers and Processors
3. Technical specifications
 Visualize all the problems and prospects of production
including the
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input use,
variety requirements,
pesticides and MRLs,
inspection and quality control,
farm households involved in the production process including their
consumption requirements during the crop season.
 Packaging & labeling should be as required by the export
markets
Private sector : Exporters
1. Market explorations
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Explore the niche products
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Have information about the tariffs and non-tariff barriers in
importing country
Know the pre-shipment inspection requirements of the
importing country
Find quality, testing, treatments and certification requirements
and pass on these information to the producers and processors
Know if the product is eligible for entry to the country
of export
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treatments and conditions required
health certificates, safety test marks, or standards certification
Get information of the product quality, quantity,
production conditions of your export
Exporters
2. Meeting the requirements
 Inform to the government about the problem in export market.
 Give inputs to the government for trade negotiations
The Way forward
Enabling Environment
 GoN is implementing Agriculture Development strategies
for 20 years incorporating all the issues of
commercialization of Agriculture and enhance the role of
private sector.
 New directives for commercial banks investment at least
10 percent of their loan portfolio in Agriculture .
 Set priority to invest at least 2,00,000. Nrs at the VDC
level from Local Dev fund.
Way forward enabling environment (contd)
 Government investment in the Agriculture is
increasing.
 Increasing liberalization in tax regimes, waver of agri
development tax in imports of agriculture inputs
 New fertilizer policy is underway to incorporate more
private sector in the supply of fertilizers.
 Subsidy in organic fertilizer production in the country.
Way forward
Enabling Environment:
 Subsidy in Organic Certification for export promotion.
 SEED Vision 2025 is formulated and , which includes role
of private sector as pivotal for the seed production and
supply.
Recommended priority areas for development
under the collaboration with private sector.
1. Increase productivity and value addition through
commercialization and irrigation investments.
2. Improve the functioning of factors of production
and marketing.
3. Reach out to the poor and increase investment in
basic infrastructure
4.Insure the supply of fertilizers, seeds and
agricultural equipment for all.
Way forward
 Government of Nepal has been increasing annual budget
for the Agriculture Development.
 Expected increasing investment from the private sector
under joint venture and FDI.