Google+ Policy Reform and Strategies for Agricultural Development in Nepal


Policy Reform and Strategies for Agricultural Development in Nepal

by Yadav Sharma Bajagai

The Nepalese economy is fundamentally agrarian and the agriculture contributes to approximately one third of Gross Domestic Product (GDP) and the largest source of informal employment to the people.  Reducing poverty, improving food security and achieving sustainable development cannot be imagined in the agrarian economy like Nepal without inclusive development of agriculture sector. Two major requirements for the development of agriculture sector in our context are adequate investment and conducive policies. 

One of the major constraints faced by the agriculture sector in Nepal is the under-investment from both public and private sectors. Ministry of Agriculture Development is receiving approximately 3% of national budget which is not sufficient to promote adequate agricultural growth and ensure food security to ever-growing population. Out of this inadequate allocation, significant amount of public expenditure is being expended to give price subsidy in agricultural inputs mainly fertilizer. It has been also criticized that larger farmers are mainly benefitted by input subsidies rather than small and marginal ones. To get the best possible returns from subsidy policies, they should be subjected to a genuine cost benefit analysis and review. If allocated budget could have been invested in capacity building, rural infrastructure development and research in agriculture sector instead, it would have given far better results. It is experienced that producers are more concerned to easy access of these inputs than price. 

As subsidies have usually been politically sensitive agenda, it might be difficult to completely do away with them, but they should be subjected to improved modalities and management so that small and marginal farmers also benefit. 

The state is obviously not in the position to sufficiently invest in the agriculture particularly in developing countries which are in transition like Nepal. However, the government can draw other public and private sector investment by creating favorable investment climate.  As agriculture is predominantly small-scale, labor intensive and subsistence in our context; small farmers are the largest investors of agriculture. Therefore, farmers should be at the center to formulate any strategy related to agricultural development. Government policies should promote those agribusiness models which are in favour of small scale producers. 

Significant proportion of small scale farmers do not own the land they cultivate. Investment of these farmers to technology and farm level infrastructure to enhance production and productivity cannot be at optimum level unless there is perceived tenure security among these farmers. Marginal farmers cannot afford the risk of investing in uncertain rights of land tenure. This is inter alia one fundamental issue need to be addressed in our policy to increase private sector investment in agriculture and thus increase production and productivity of agriculture sector. 

Although private sector investment in Agriculture is mostly from scattered and unorganized small farmers, large scale corporate investment has been initiated in some sub-sectors mainly high value commodities like poultry and dairy. Favorable investment climate can attract corporate investors in other sub-sectors in future.  Large scale private investment in agriculture can create employment, transfer technologies and create forward and backward linkages. Although corporate investment could be the driving force for commercialization and modernization of agriculture if properly backed up by appropriate policies, there is risk that these investments may bypass small scale producers and pose additional risk to the livelihood of local communities. This can be prevented by the policy which ensures transparency and accountability of large investment. Governance of these large scale investments should be cautiously addressed in agricultural policy. 

Therefore, forthcoming agricultural development strategy should attract large investors but in the mean time interest of small farmers should be protected with due respect to the rights of small scale marginal producers. The policy should promote transparency and accountability of large investment and also ensure meaningful inclusion of local communities preventing transfer of productive capitals mainly land. Connection and relationship between large scale investors and small scale marginal producers should be a win-win model. This connection can be strengthened by mechanisms to ensure benefit sharing from large scale investment to the local communities. The strategy should promote direct involvement of local farmers in agriculture value chain. For example, contract farming regulated by appropriate and clear policy could be an option to attract large scale investment without transferring ownership of land and serving the interest of both. 

Moreover, youths are not sufficiently motivated to invest their time and money in the agriculture sector resulting either the agricultural land left barren or feminization of agriculture due to emigration of young males in search of employment. Policies to attract large corporate investors in agriculture may not necessarily motivate those youths to the agriculture sector as employment in agriculture sector is usually less attractive than in other sectors. Therefore, Agriculture Development Strategy should address this issue and create policies to attract youths in the agriculture sector. 

Thus, Increasing investment in agriculture is a must for reducing poverty, achieving sustainable development, and enhancing food security. Increased investment in agriculture will be beneficial to the country in the real sense only if the investments can help alleviate poverty and enhance food security of vulnerable communities. As government investment is not sufficient, appropriate policy and legal and institutional framework should be in place to create a favorable climate for investment. In our context, agriculture development policy should be in favor of small scale marginal producers and suitable to specific agro-climatic realities, but in the meantime, they should not hinder large scale investments capable of bringing equitable and balanced growth to the agriculture sector.

P.S. This article has been published in the Republica ( of 13 February 2013. 


  1. I got to read this article and must congratulate you for bringing some important points to the table. For me they were:

    1. Ensuring strategies that do not sideline or further marginalize the poor, small scale farmers
    2. Ensuring strategies that transform subsistence farming to a more profitable venture
    3. Ensuring the participation of youth in agriculture

    As important as the other points are, it is vital that agriculture is made attractive for young people. And I believe the media has a role
    in promoting agriculture as something that is 'trendy and sexy' and not something that only has to do with old people lacking style. It
    has to be portrayed as a profession, if seriously taken, can provide returns that can fulfil their dreams in life. And for this, we need more role-models - real life examples who have made it big through agriculture. AGRICULTURE NEEDS TO BE MADE TRENDY. That is the goal - there are numerous strategies towards that goal - and media is one of them.

    Another point I'd like to make is the importance of cross-sector strategic linking. Like for the point 3 above, agricultural polices need to link with the national youth policy and so on. Likewise, I saw in the news of the PM's plan for engaging youth through a national youth development fund or something to that extent -
    agriculture should be linked to that program as well. Likewise, I read of PKD's plan for capitalist economic revolution and if we can trust him for his plans, then agriculture needs to be integrated big time into the scheme of things there. I think this plan talks about
    agriculture in some way as in pooling land into cooperatives to improving agricultural productivity.

    A last point, which I am not sure if it is already in practice, and if yes to what extent - is the need to bring the FNCCI and NCC and other
    federations of trade and business into the fold of the agricultural plan. At the least, they need to have a division or focal point for
    agriculture within their organization.

    Thanks again for the article. And keep up the good work that you are doing!

  2. Surya Bahadur SinghFebruary 17, 2013 at 6:18 PM

    This is a good article. In my opinion, the major challenges are limited road access, and weak marketing management and farming support systems. Therefore, given these challenges, the increase in budget will have definitive impact only when there is rationale use of available fund. I liked your article. Keep it up.

  3. A well written article. I agreed that the ADS should also focus on establishing a connection between large- and small-scale farmers. I think it will boost up the farm productivity through a glut of capital investment and labour supply. Meantime, the government should also start privatizing the research and extension activities. A hump of agriculture budget has been invested in the extension activities but with minimal outputs. The government could invite the private sectors and CBOs with their expressions of interests for the extension services. Naturally, it would induce competitiveness on extending technologies. And also, it supports for bridging two pillars - research and extension. It is clearly observed that the governmental institutes are far behind in social mobilization activities as compared to the non-government bodies.

  4. loved it...i think infrastructures should be our priority at the moment..if the facilities exists, farmers can make their own investments...sustainable national and international market development strategy is another most important factor for our case...

  5. Shiva Prasad DevkotaFebruary 17, 2013 at 8:06 PM

    Good voice. We should look the sectoral policy as well to formulate ADS. If not synchronized it will again become failure like APP. Wider discussions are not taking place even in this. What are the voices and need of the small and marginal farmers is thought from the policy makers from the seats of the Ministries, NPC. I am reluctant that the politicians always sought for the bigger investment in Agriculture but it actually doesn't happen in the reality. Sectoral investments is the key for the development as well. We need roads, electricity, market, research, education, training for the overall development. So big investment should side be side go to these sectors.

  6. Nice article. You have covered a good deal of related aspects of agricultural development. Linking agricultural production to market and industry, sustaining agricultural land productivity, and inter-ministerial coordination are major challenges in this regard.

  7. chet narayan kharelFebruary 18, 2013 at 2:36 AM

    Nice to read. Concerns of mainstreaming marginal farmers is well addressed. In my opinion, there should be one door investment policy and research and extension should be well harmonized. Furthermore ADS should accommodate and give high priority to the views of real farmers and entrepreneurs versus the tainted view of their so called leaders.Readers like us would have been benefited better if you have been dived deeper into developments of ADS till now and recommended methodology to incorporate your important recommendations. I hope concerned authorities will take it seriously and we will have chance to read more of articles by the author.

  8. Ram Prasad GhimireMarch 1, 2013 at 6:52 PM

    I think Nirmal jee has a good point; unless the youths are attracted to and commercially involved in agriculture, it is difficult to transform agriculture in Nepal. Similarly, land use and management policy has to be successfully implemented to transform subsistence agriculture to a modern vibrant agriculture. Thirdly, intersectoral linkages should be established among the relevant policies. Likewise, the educated and well-trained people have to be involved in agriculture.

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