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  • 1. International Conference on Agricultural Transformation in Asia: Policy Options for Food and Nutrition Security Siem Reap, Cambodia September 25-27, 2013 Role of Inputs in Agriculture Transformation in Nepal: Policy Issues and Options by Bishnu Dev Pant IIDS, Nepal
  • 2. 1. Agriculture in Nepal • Agriculture main stay of economy o Agriculture contributes around one third of total GDP o About four-fifth of the population depends on agriculture o It provides net employment to two-third of country’s population o Yet, agricultural development is at a nascent stage
  • 3. 2. Evolution and Use of Chemical Fertilizers • The use of chemical fertilizers started from late 1950s. • Formalization of import and distribution of fertilizers began after the establishment of the Agricultural Inputs Corporation (AIC) in 1966. • Subsidy introduced in 1973. It included both a price subsidy on the fertilizer and a transport subsidy for hill and mid-hill districts. • The AIC’s deficit rose to 850 million rupees during the twenty-three years of subsidy period. • In 1999, all subsidies were completely removed as this had a huge financial burden for the government.
  • 4. o After deregulation, the AIC was dissolved. o Two companies- the Agriculture Input Company Limited (AICL), responsible for the fertilizer business, and the National Seed Company Limited (NSCL), responsible for crop seed business were established. o Even then, the AICL has not been successful for importing fertilizers for fully meeting the country's demands. o The government’s policy of subsidizing fertilizers for the small farmers has also been highly ineffective. o The shortage of fertilizers in the market has forced farmers to rely on black markets for timely supply. o Chemical fertilizer use per hectare in Nepal is still one of the lowest compared to other countries of the region. Contd...
  • 5. Fertilizer use in South Asian Countries Source: World Bank 2010
  • 6. 3. Informal Fertilizer Trade • Scientific demand studies of chemical fertilizers have not been done yet. • Around 800,000 metric ton of fertilizers consumed in 2011/12, and up to 86 percent would have been supplied through informal cross border trade. Formal fertilizer import by AICL is around 200,000 metric ton (USAID). • Total import of fertilizer if converted into monetary term will amount to about $400 mn (i.e. NRs 40 billion approximately), which is substantial for a country like Nepal. • The prices of informally imported fertilizers, which is suspected to be adulterated and of low quality, keep fluctuating depending upon the availability of AICL imported fertilizers. • Numerous small local traders from both sides of the border are seen involved in informal importation of fertilizers. Local agro traders and agro-vets are found involved in distribution and sales of fertilizers and seeds to farmers in Nepal.
  • 7. 4. Evolution and implementation of Seed Policy • Though formal seed production and distribution began in late fifties, organized seed production and distribution started only from 1970s. • After 1990, AICL was solely responsible for supply and distribution of improved seeds in Nepal at a subsidized rate through its own distribution network across the country. However, it is the private sector which handles more than 90 percent of formal vegetables seed trade and supplies significant amount of hybrid maize, rice and other seeds. • In recent years, hybrid rice is getting very popular, especially in Terai districts because of higher yield rate (up to 100% higher) and covers 10-30% area in central and western Terai respectively. • About 600 metric tons of hybrid rice estimated to have been imported from India in 2012 that would cover around 60,000 ha. Cereal crops (maize and rice) usually enter Nepal through informal channel via Nepal- India border. • Hybrid vegetable seeds are imported from Thailand, China, Korea, Japan and India.
  • 8. Sale of improved seeds Type 1990/ 91 1995/ 96 2000/ 01 2005/ 06 2009/ 10 2011/12 Paddy 156 250 231 643.68 958.97 1200.464 Wheat 2075 2949 1656 2859.24 3554.6 2181.932 Maize 44 145 7 10.69 0.05 0 Vegetabl e 22 21 2 2.77 6.749 2.921 Others 28 103 25 34.62 9.431 10.537 Total 2325 3468 1921 3551 4529.8 3395.854 Source: MoAD, 2011
  • 9. • Even though a large number of hybrid rice varieties enter Nepal, not all of them are registered with the Seed Quality Control Centre (SQCC). So far, a total of 17 hybrids have been registered, all from India, and are being scaled up by their respective companies. • Recently, Chinese companies also have shown interest to collaborate in hybrid breeding in Nepal, and have been training some scientists, but they do not yet have any active program in this regard. • Seed sector is regulated under Seed Act 1988. This act was however, unable to provide mechanism to fulfill rising demand of quality seeds including hybrids as well as to address rights of farmers plant breeders. A new Seed Act 2008 has now been introduced. • In 2002, the government established National Seed Company Ltd. (NSCL) with objectives to produce, procure (domestically as well as through imports), process, and sell seeds—from foundation seeds to improved varieties—on a commercial basis. A number of other policies and legislations including Community Seed Guidelines 2009 have been implemented. Contd...
  • 10. 5. Major Gaps and Constraints • Effective seed planning including seed production, marketing and pricing, performance monitoring, and promotional activities of superior varieties (OPVS and hybrids) is completely lacking. • NARC has a lengthy process of price fixation of source seed (BS and FS ). the hybrid seed companies and private sectors have to face hassles in getting field tests, monitoring the performance and securing certificates for varietal registration. • In view of the capacity and efficiency of AICL, it is not likely that the AICL will be able to handle all the fertilizer requirements of the country. • The number of agricultural extension workers is highly inadequate and is not likely to make much impact in the transformation of agriculture in Nepal. • There is a lack of policy to support agricultural mechanization. • Climate change is a serious threat to agricultural production and productivity.
  • 11. 6. Conclusion and Recommendations • Unless the chemical fertilizers and improved seeds are sufficiently made available to the farmers in all districts on a timely manner and the substantial investments on irrigation are made, agricultural production situation in the country is not likely to improve. • Seed promotion policy is completely lacking in the country. New varieties developed by NARC need to be demonstrated to the farmers immediately after their release. Hence there is a strong need to establish effective coordination between NARC system and extension offices. • There is a need for the government to formulate appropriate policies and mechanism for undertaking competitive hybrid breeding program working closely with national and global seed companies. • There is a need to involve private dealers also in the distribution of AICL imported fertilizers so that the farmers who really need fertilizers can be benefitted, and they should also be provided similar commissions which has been given to the Cooperatives.
  • 12. Contd... The following policy options can be considered for meeting the increased demand for good quality chemical fertilizers in the country: i) The government should consider allowing a number of private groups to import fertilizers as needed and they should be given similar incentives and facilities as has been given to AICL. ii) In the medium to long term, the government should encourage Nepali business houses to partner with the business houses in India or Bangladesh to jointly invest in fertilizer industry in those countries and should provide a buy- back guarantee for the required amount of fertilizers within the country. iii) Another option would be to reorganize and reform AICL management on the basis of public, private and partnership similar to Nepal Telecom, so that it can compete with private sectors in importing and manufacturing fertilizers and distributing to the farmers.
  • 13. Thank You