International Food Policy Research Institute (IFPRI) in collaboration with the Ministry of Agricultural Development, Government of Nepal, and Institute for Integrated Development Studies (IIDS), and Federation of the Nepal Chambers of Commerce and Industries (FNCCI), organized a two day workshop on ‘Best Practices in Contract Farming: Challenges and Opportunities in Nepal’ on 10-11 February 2015 in Kathmandu, Nepal. IFPRI is engaged in Policy Reform Initiative in Nepal with overall goal to reform agriculture sector for accelerating agricultural growth and enhancing farm incomes. In view of large number of smallholdings in Nepal, contract farming is envisaged as one of the strategies to increase their incomes by linking them with remunerative domestic and global markets. At present, contract farming in Nepal is at its infancy and needs to be popularized. This would require enabling polices and appropriate institutional arrangements. The main aim of the workshop is to learn lessons from the best practices in neighboring countries to address the multi-faceted challenges and opportunities in promoting and up scaling pro-smallholder contract farming in Nepal.

1. Success story of Vegetable Value
Chain Programme in the East from
Bhutan
Workshop on Best Practices in Contract Farming: Challenges
and Opportunities in Nepal
February 10-11, 2015 Kathmandu, Nepal
Sangay Wangdi, Project Director, MAGIP
Dorji Wangchuk, Marketing Officer, DAMC
Karma Tenzin, Marketing Officer, RAMCO
Ministry of Agriculture & Forests (MoAF)
Bhutan

2. Presentation outline
• Country Profile
• Project Profile
• Background on VVCP-E in the east
• Aim and objectives
• Vegetable value chain map
• Production support
• Marketing support
• Impact of VVCP-E
• Constraints/Challenges
• Opportunity

3. 1. Bhutan
- 38,394 km2
- 27.5274° N, 90.0453° E between China & India
- 20 districts, 15 sub-districts, 205 blocks
- Currency – Ngultrum (pegged with Indian Rupee)
- National language - Dzongkha
- Population - 748,500 (53% male: 47% female) [2014]
- Government - Parliamentary Democracy [2008]
- Flora & Fauna – Forest cover >72% & 60% under protection
- People - Tshanglas, Ngalops &Lhotshampas
- Religion – Mahayana Buddhism

4. • Market Access and Growth Intensification Project
(MAGIP)
• Six eastern Dzongkhags (districts) of Bhutan
comprising Lhuentse, Tashiyangtse, Trashigang,
Mongar, Pemagatshel and Samdrup Jongkhar
• Ministry of Agriculture and Forests (Lead
Implementing Agency); in collaboration with
District Authorities (District and gewogs (blocks)
RNR Sector Staff) RAMCO & SNV.
Project Profile

5. Goal
• to reduce poverty and improve food security
and the standards of living of targeted rural
households in six eastern dzongkhags.
Specific project purpose
• to improve the productivity of subsistence-
based farming systems in communities with
no road access, and to intensify the
production of cash crops and dairy products,
while enhancing smallholders’ access to
markets, in communities with road access.

6. Outputs
• In 11 remote gewogs, some 880 households will be
supported with the relevant low cost, labour-saving
production technologies and quality inputs
• In 49 gewogs with good road access and the necessary
agro-ecological potentials, the project will support some
3,600 producers organized in groups or cooperatives with
the necessary inputs, training and services

7. Cost & Financing
IFAD loan: USD 8.49 million
IFAD grant: USD 2.0 million
RGOB: USD 1.99 million
SNV: USD 0.15 million
Beneficiaries: USD 0.86 million
Project Period:
5 years (22 April 2011 – June 2015)

8. Components
Component 1: Support to poor subsistence farming
communities
Component 2: Agricultural intensification and support to
market access
Component 3: Project organization and management

9. Background on VVCP-E
• VVCP-E is a programme initiated to enhance
production and marketing of vegetables in the region
• VVCP-E Programme was started in mid 2011 by
RAMCO/DAMC in collaboration with other
stakeholders
• The programme has 119 FGs comprising of 1527
households in 35 Gewogs out of seventy
• The linking programme as a part of VVCP-E was
initiated in 2012 based on.
a. Internal market study conducted in106
schools has huge vegetable demand (link)
• Till 2014, 90 FGs have been linked with 40
schools/institutions to supply vegetables.

10. Aims and Objectives
• The aim of the programme is to promote semi-
commercial production and marketing of summer
vegetables in order to increase income of more than
2500 households from 5 to 15 percent by 2016
Objectives:
• To assist production of larger volumes of vegetables
required for both internal/external markets.
• To explore both internal and external market
opportunities.
• To identify, facilitate and link both local and Indian
traders with farmers groups

11. Supply seeds,
fertilizers, training,
equipment etc
Prepare land, grow,
protect, harvest ,
clean and store
Assemble, grade,
pack, carry to the
road head and
transport to school
/local market or the
auction yard
Load, Pack, transport
& supply to schools,
sell in the local
market or export
Consume as
vegetable, use for
chips and crisp
making or keep for
seeds
Middlemen/
Local Traders
Consumers
in India
Bidders at
Auction
Yard
Local
Vegetable
Vendors
Consumers in
Bhutan
DAO, RAMCO,
MAGIP, SNV,
RNR-RDC
FCBL
RNR-RDC,
SNV, RAMCO,
Dzongkhag
Disease,
pest control,
production
improvement
Market
infrastructure,
MIS, Training on
grading,
packaging
Auctioning of
vegetables
VC Operators VC SupportersVC Functions
Training,
technical
advice
Inputs
Production
Collection &
Transportation
Trading
(Wholesale &
Retail)
Consumption
Existing Value Chain Map of Vegetable Subsector
DEO, DAO,
RAMCO,
MAGIP,
SNV,RDC
MoE,
MoAF, MoF
and GNHC
Create
enabling
environment
Institution
Vegetable
Growers (119
FGs)
OSFS/ Commission
Agents
Dzongkhag
,RAMCO,
SNV, RNR-
RDC
Contractual
agreement

12. Support to value chain actors
(Production)
• Inputs like seeds, sprinklers and HDP pipe to the groups on
cost sharing basis (75:25)
• Group Coordinators was introduced for better coordination
of group activities
• Incentive mechanism was introduced for the group
coordinator for programme sustainability
• Provide training to FGs (Postharvest, staggered sowing,
pests and diseases management)
• Developed cropping calendar
• CoP of 15 major vegetables

13. Marketing support
• Identified various markets at nearby border towns to
market Bhutanese vegetables
• Conducted regular Buyers-Sellers meeting to discuss and
understand the market mechanism
• Auctioning system was introduced mainly to export
vegetables to India
• Provided timely market information, packaging materials
(plastic trays), and value addition equipments.
• Provide capacity building support (entrepreneurial
development, group advocacy, book keeping, leadership,
marketing aspect, post harvest, exposure visit and
consultative meeting )

14. Infrastructure development
support• To facilitate smooth marketing of vegetables
market infrastructure like market sheds for
Sunday market, sales outlet, collection shed,
cold storage, and OSFS was supported.

15. Progress trend of VVCP-E
1307
1377
1527
1150
1200
1250
1300
1350
1400
1450
1500
1550
Year- 2012 Year- 2013 Year- 2014
Total number of members
29
104
119
0
20
40
60
80
100
120
140
Year 2012 Year 2013 Year 2014
Total number of groups
355.75
1229.36
1935.63
0
500
1000
1500
2000
2500
Year 2012 Year 2013 Year 2014
Total quantity sold (MT)
5.13
20.67
38.81
0
5
10
15
20
25
30
35
40
45
Year 2012 Year 2013 Year 2014
Total income earned (Nu in Million)

16. Impact of VVCP-E
• The income generated by 119 FGs in 2014, Nu. 38.81 million
was quit impressive
• Awareness among farmers on the opportunity of vegetable
production and marketing for income generation has greatly
increased
• Several villages started producing summer vegetables on a
semi-commercial scale for the first time as they were only
used to kitchen gardening
• Group marketing has a history with potatoes, but not for
vegetables. For the first time joint and collective marketing of
vegetables was applied on a large scale
• More FGs came forward to link with schools/institutions
• Schools have shown great interest to buy local vegetables
• From the total production of vegetables FGs have sold 63% ,
19% used as home consumption and 18% were damaged.

17. Constraints/Challenges
• The expected prices for vegetables by FGs are very
high, hence leading to low demand by local traders
and consumers.
• There is shortage of farm labour in the communities.
• Limited landholding per household
• Not being able to compete with cheaper Indian
vegetables – during vegetable season in India (Oct –
April)
• Poor access (poor conditions of farm roads) and high
transportation costs (increase in fuel price) are also
hindrance to marketing of vegetables.

18. Opportunity
• As vegetable cultivation is a business-oriented
activity:
a. It has potential to attract the youths to the
rural areas thus solving labour shortage on the
farm.
b. will create youth employment.
c. It will curb rural-urban migration.
d. Help to enhance income and livelihood
e. Reduce import of vegetables

19. KADRINCHEY