Agriculture in Nepal

Features/Characteristics of Nepalese Agriculture:

1. Subsistence Farming: Subsistence farming is a common practice in Nepal. The majority of households are engaged in agriculture for their livelihood. According to the National Sample Census of Agriculture, 60% of the farmers are unable to fulfill their needs throughout the year; they don’t have surplus agro-products for sale. Agriculture practice is still primarily subsistence farming which lacks commercialization.

2. Traditional Farming System: Nepalese agriculture is mostly based on traditional farming. Even today, 52% of farmers use traditional farming tools. According to Nepal Living Standards Survey III, 2011/12 about 1% of farmers use tractors or power tiles, 7% of farmers use pump set for irrigation. Improved seeds, chemical fertilizers, hybrid seeds, etc. are less in practice and concentrates mostly in the Terai region.

3. Monsoon Based Agriculture: Irrigation is the lifeblood of agriculture. But out of 2.641 million hectares of total arable land, 1.479 a million hectares of land has irrigation facility. Nepalese agriculture is primarily based on monsoon. Irrigation facility is available only in 56% of arable land of which only about 33% of irrigated land has irrigation facilities throughout a year. Therefore, Nepalese agriculture depends on the monsoon which is unpredictable and uncertain.

4. The predominance of Food Crops: There is the predominance of food crops in Nepalese agriculture. According to Economic Survey 2019/20, out of total agricultural production food crops contribute 45.2%. It is followed by vegetable 16.8%, industrial crops 14.5%, cash crops 13.3%, and other crops 10.2%.

5. Small Size of Landholdings: The average size of landholdings is declining over years. In 1990/91, the average size of landholding was 0.98 hectare which was 0.68 hectare according to the National Sample Census of Agriculture 2011/12. In Nepal, two-third of the total farm household has less than 0.5 hectares of land. A farmer having a small size of land often faces the problem of disguised unemployment. Likewise, this type of landholding is economically not viable for commercial farming.

6. Unequal Distribution of Landholdings: The distribution of land and the size of landholding are unequal in Nepal. Large numbers of marginal and small farmers hold a limited part of total land. About 92% marginal and small farmers operate 68.7% of the total land areas whereas the share of land is 31.2% for the remaining 8% medium and large farmers.

7. Low Productivity: The production of per unit land is low in Nepal as compared to the developed nations and many other developing nations. Productivity means production capacity per hectare of land. In Nepal farmers still use the traditional tools and technology in their farms. Besides, the reasons for low productivity are lack of irrigation facilities, lack of training, and lack of necessary information.

8. Dual Ownership: Dual ownership of land is the common practice in Nepal. In this system, both the tiller and the owner have ownership of cultivated land. In most cases, poor farmers who till the land receive a small part of the production. That discourages the poor tillers which result in a decrease in production.

9. Geographical Disparities: One of the main features of Nepal is geographical disparities. The agricultural land is not similar to the entire region.

10. Inadequate Investment: Most of the Nepalese farmers are poor. Being poor, they are unable to invest huge amounts of money as per their need in the agricultural sector.

Role/Importance of Agriculture in Nepal:

1. Source of Livelihood: Agriculture is the main source of employment in Nepal. This sector has been generating mass employment opportunities because it is a labor-intensive activity. According to Nepal Labour Force Survey 2018, 60.4% of the population has been engaged in farming activities.

2. Source of Food: Agriculture is the primary sector of the economy that provides people's basic necessities. It is the source of food crops and cash crops in Nepal. The production of agricultural products on one hand and substitute imports on the other saves the foreign exchange that can be put for other development works.

3. Source of Raw Materials: Industrial Sector can be developed with the help of agriculture. Agriculture is the source of raw materials based on which different agro-based industries can be established. Agricultural development helps to decrease the import of raw materials and on the other side helps to increase the export of such materials.

4. Source of National Income: Agriculture is the backbone of the Nepalese economy because it has contributed about 27.1% of GDP in 2018/19. Therefore, economic development in Nepal can largely be affected by the modernization of the agriculture sector.

5. Basis of Foreign Trade: The major source of export of Nepal is agricultural products. Out of the total export agricultural product contributes about 39%.

6. Source of Government Revenue: Agriculture is the main source of government revenue directly and indirectly. The share of government revenue from agriculture can be increased by modernizing this sector.

7. Improve Living Standard of Rural People: In rural areas, the majority of the population is engaged in agriculture. So modernization of agriculture helps to increase productivity, income level, and living standard of rural people. It also helps to develop the non-agriculture sector of the economy.

8. Expansion of Market: Expansion of farming activities will expand the size of the market. It helps to develop trade and commerce within the country as well as outside the country. Moreover, it helps to extend the size and volume of agriculture credit.

Modernization and Commercialization of Agriculture:

Production of surplus agricultural products for the purpose of sale in the market by using modern technology to earn money is called the Commercialization of agriculture. In commercial farming, larger quantities of agricultural inputs are employed to produce in bulk for selling purposes.

Measures for Modernization and Commercialization of Agriculture:

1. Controlling Population Growth: Nepal’s population is growing rapidly. As a result agricultural land turns into a residential area which badly affects agriculture. To decrease the high pressure of population on land, population growth should be controlled by adopting various measures.

2. Expansion of Irrigation Facilities: Irrigation is considered the lifeblood of agriculture. It helps farmers to cultivate their land in time and it also encourages farmers to engage in agriculture for their livelihood.

3. Provision of Adequate Credit: Agricultural credit is another important input of modernization and commercialization of agriculture. If agriculture credit and subsidies are provided to the farmers, they will be able to invest in agriculture inputs and produce more agricultural products which encourages farmers towards commercial farming and develop the agricultural sector.

4. Provision of Agricultural Input: Agricultural inputs are very essential for the development of the agricultural sector. Availability of these inputs helps farmers to grow more food and earn money. Therefore, the availability of agricultural input is vital.

5. Marketing and Storage Facilities: Organized marketing and modern storage facilities ensure farmers get reasonable returns for their products. Therefore, proper marketing and storage facilities may encourage farmers to engage in agriculture.

6. Agricultural Research and Information Centre: Agricultural research is an important input to modernize agriculture and commercialize farming activities. The outcome of agriculture research should be disseminated up to farmers in remote areas.

7. Access to Land: The agricultural sector can be developed through the transfer of ownership of agricultural land to farmers. When there is access to land, farmers are encouraged to produce more quantities to sell in the market.

8. Effective Government Policy: If the government implements adequate and clear-cut policies that encourage entrepreneurs and farmers to start commercial farming, the agricultural sector expands. The modernization of agriculture is possible only if the government invests sufficient funds for agriculture credit and subsidy, agriculture market, storage facilities, and agriculture research.

9. Agricultural Education and Training: Suitable agricultural education should be promoted to make people realize the value of their agricultural sector.

10. Transportation and Communication: Transportation helps rural farmers to get agricultural inputs in time and enhance production. Likewise, Communication facilities help the rural farmers to get market information and encourage them to sell the products at competitive prices.

Agriculture Finance

Agriculture Finance is the provision of credit to the farmers for agricultural as well as non-agricultural activities. To stimulate commercial farming farmers must have adequate credit in time.

Sources of Agricultural Finance:

1. Institutional or Formal Sources

The agricultural finance that has been borrowed or managed by an institutional source such as a bank, finance, cooperatives, etc are called organized sources of agricultural finance. Organized sources are legally established specially for the development of the agricultural sector under the policy and regulation of the government.

a. Cooperative Society: The cooperative movement has started in Nepal since 2010 B.S. to remove economic weaknesses and social exploitation. It was established to provide agricultural inputs including credits. It also has an important role in the marketing of agricultural products. The cooperative is considered best for providing credit to farmers, especially small and marginal farmers. Its main objective is to make available cheap credit and agricultural inputs to farmers. According to NSCA 2011/12, cooperatives have been providing 16% of agricultural credit.

b. Agricultural Development Bank: Agricultural Development Bank has been established in 2024 B.S. with the modernization and commercialization of the agriculture sector. It also provides short, medium, and long-term credit for commercial farming. According to NSCA 2011/12, it has been contributing 12% of agricultural credit.

c. Rural Development Bank: In Nepal, Rural Development Bank was established in 2049 to provide credit facilities to the deprived rural people at a reasonable rate of interest. Microcredit is given without collateral on a group guarantee basis to needy members.

d. Commercial Banks: Commercial banks have been providing credit facilities to needy farmers to invest in the agricultural sector. Nepal Rastra Bank directed commercial banks to invest 12% of their total deposit liabilities in the priority sector. According to NSCA 2011/12, commercial banks have been contributing 9% of agricultural credit.

e. Finance Companies: Finance companies established in rural areas are directly involved in loan supply to farmers to produce agricultural output.

2. Non-Institutional or Informal or Unorganized Sources

The agricultural finance that has been borrowed or managed by a non-institutional source such as friends, relatives, etc. is called the unorganized source of agricultural finance. In Nepal, noninstitutional sources have dominated agricultural credit. The interest rate of non-institutional sources is higher than the formal source.

a. Friends and Relatives: The friends and relatives of farmers supply agricultural credit in a small amount to meet day-to-day needs and emergency needs. They get such loans with or without interest and collateral. Out of total agricultural credit, 34% has been provided by friends and relatives.

b. Village Money Lenders and Landlords: Village money lenders and landlords are the main sources of short-term and long-term credit to marginal and small farmers. They charge a high rate of interest to the farmers.

c. Merchants and Traders: Farmers also take loans from merchants and traders to invest in the agricultural sector. They generally take loans from them during the pre-harvest period.

d. Women’s Group or Farmer’s Group: In rural areas, agricultural credit has been managed by women’s and farmer’s groups. According to NSCA 2011/12, about 23% of agricultural credit has been provided by such groups.

Agricultural Marketing

Agricultural Marketing is a process of purchase and sale of agriculture inputs and outputs. An agricultural marketing system is one of the most important factors for the development of agriculture. An organized marketing system ensures the farmers for reasonable return of their products.

Nature of Agricultural Marketing:

1. Seasonal: Nepalese agriculture is predominantly of a subsistence nature. Most of the farmers produce a single cropping pattern due to various difficulties. Agriculture marketing is seasonal. Rural farmers supply their products only during harvest season. Similarly, due to the lack of a proper transport system, rural farmers can carry their products only in fair weather.

2. Small Size: The size of Haat Bazar is small which means agricultural input and outputs are traded in a small amount. Subsistence farming is common at the village level and agriculture is not commercialized till now. So, rural farmers do not have a large number of commodities to sell.

3. Inadequate Market Centers: The number of agriculture market centers in Nepal is insufficient. As compared to urban areas, several agriculture markets are few in rural areas.

4. Unorganized: The agricultural marketing system in Nepal is in unorganized form. During harvesting time, farmers are exploited by middlemen for price. There is no scientific weights, measures, and grading system.

5. The predominance of Middlemen: Agricultural marketing in Nepal is dominated by middlemen who purchase agricultural products at lower prices from farmers and sell them at a high price to the consumers. Due to this both producers and consumers have been exploited due to the unorganized form of agriculture marketing system in the country.

6. Influence of the Indian Market: The open border between Nepal and India plays a crucial role in the pricing of agricultural products. Agricultural marketing in Nepal is directly and indirectly influenced by the price and quantity of commodities imported from India.

7. Price Fluctuation: It is one of the other natures of Nepalese agricultural marketing where price fluctuates during harvesting time and off-season. However, farmers cannot reap the benefits of higher market prices in the offseason as the supply is under the control of middlemen.

8. Poor Marketing Network: Marketing Network is not so strong in Nepal in areas where the potentiality of agricultural products is very high. There is a lack of market information centers which further creates problems for smooth agricultural marketing.

Problems of Agricultural Marketing:

1. Lack of Transportation: Transportation is essential for the development of agricultural marketing. However, poor transportation facilities have restricted the movement of agricultural products and inputs. Moreover, agricultural inputs are not available in time, and the transportation cost of such material is high.

2. Lack of Marketing Information System: A marketing information system is very important to develop agriculture marketing. However, there is no marketing information system in Nepal which is the main cause of the poor marketing network in the country.

3. Lack of Storage Facility: Due to a lack of modern storage, farmers have to sell their agricultural output just after harvest. Similarly, due to the seasonal fluctuation of price farmers have to sell their product at a relatively lower price. Farmers are not able to get a reasonable return by preserving their output for future market demand.

4. The predominance of Middlemen: There is a predominance of middlemen in the Nepalese agriculture market. The middlemen have control over market supply and the market price of agricultural input and output. Moreover, in the absence of organized agricultural marketing, most farmers are exploited by the middlemen.

5. No Proper Grading and Standardization: Farmers produce several agricultural outputs of different quality. But the scientific grading and standardization system is not yet practiced in rural Nepal. Farmers are unable to obtain a reasonable price for their high-quality products. So, farmers are not encouraged to produce high-quality products.

6. Defective Weights and Measures: In rural areas metric measurements are not in practice. Most of the traders in the rural areas do not use proper weights and measures. Similarly, under traditional measures, food grains are measured in volume. So, farmers have been exploited by the traders.

7. The problem of Adulteration: Adulteration of inferior products with superior one is common practice among traders in Nepal and it kills the motivation of farmers to produce superior quality goods.

Remedial Measures of Agricultural Marketing:

1. Development of Transportation and Communication Facility: Transportation and Communication are infrastructures of development. The development of transportation and communication facilities encourages farmers to produce more and sell their products at the local and regional markets at better prices.

2. Market Information Centers: Agriculture market information centers can be established in different areas of the country. It helps the farmers to obtain market-related information and also farmers can get information about new products and new farming methods. Based on this information, farmers can take appropriate decisions.

3. Providing Storage Facility: If there is the provision of the cold storage facility, farmers can preserve their cash crops and sell them at a high price in the off-season.

4. Proper Grading and Standardization: The grading and standardization system ensures the farmers get reasonable returns for their products. It encourages the farmers to start commercial farming. Proper grading and standardization help farmers to compete for their products with other national and international products. It helps them to obtain a reasonable price for their high-quality goods.

5. Scientific Weights and Measures: Most of the traders in the rural areas do not use scientific weights and measures. As a result, farmers are easily exploited by the traders and are not getting an actual price for their products. So, the development of uniform weight and measurement helps to control such malpractice.

6. Provision of Credit Facilities: Agriculture credit is one of the important inputs. Therefore, there should be institutional credit for actual farmers.

7. Government Protection: In the initial phase of development, government protection is essential. There should be the provision of subsidies and grants for the agriculture sector to compete with foreign products. Moreover, the government should fix the minimum price of agriculture products and there should be a guarantee of purchasing such products by the government at a reasonable price.