Only a small segment of Nepali agriculture has been commercialized and agricultural productivity remains low
The government of KP Sharma Oli announced annual budget of Rs 1048.92 billion on Saturday, surpassing the Rs 909 billion ceiling set by the National Planning Commission. Of the total, the government has allocated Rs 35.86 billion for agriculture—Rs 27.40 billion for agricultural development and Rs 8.46 billion for livestock development—which is up 57 percent from last fiscal.
The budget aims to promote agricultural productivity by arranging for agricultural technology in every VDC, running cold stores through cooperatives, commercialization and mechanization of agriculture, as well as irrigation expansion, agro-road construction and by easing access to seeds and fertilizers. It has promised to promote fruit forestry and floriculture as well. The government has also decided to form a Farmers' Commission by setting up a separate social security fund. Up to 25 percent of potential production will be imposed on farmer as a penalty if any farmer keeps his land barren. From now on, farmers will be categorized under four groups: agriculture laborers, marginalized farmers, semi-commercial farmers and commercial farmers.
The 'Prime Minister's Agricultural Modernization Project' has been proposed to boost agriculture production and productivity and Rs 5.78 million has been allocated for this. To implement it, production areas will be will be divided into pockets, blocks, zones, and super-zones throughout the country including 600 such pockets along the postal highway and 200 along the mid-hill highway. Altogether there will be 2,100 such production areas in the country.
Pocket and block approach of production is not new for Nepal. Block approach for rice and wheat production was introduced in the Tarai sometimes during the early eighties; the pocket approach was introduced during the late nineties. This was a part of Agriculture Perspective Plan (APP) which had defined a pocket as the production area of high potential for a particular commodity. The pockets were logically small at the beginning but became steadily more extensive over time and took the shape of growth centers. More than 2000 such pockets were developed during the APP implementation. In order to increase productivity through commercialization different production inputs, such as fertilizers, irrigation, technology, roads, rural electrification and credit were packaged together.
In this context, one wonders if there is any difference between previously introduced pockets and the ones that we are going to implement. Did the government carry out any study to analyze APP's pocket approach so as to learn from past mistakes?
There were efforts to implement APP's pocket package approach and thereby to commercialize agriculture. But only a small segment of Nepali agriculture could be commercialized and agricultural productivity remained low, due mainly to small and fragmented landholding, lack of industrialization, dependence on monsoon, inadequate marketing, unavailability of fertilizers, high transaction, etc.
These challenges exist even today. The new budget has no special provision to address these challenges in a time-bound manner. This is why agricultural experts doubt implementation of pocket approach. The government has distributed resources generously but there is a clear political motive. A monitoring team under the prime minister has been proposed to ensure effective project implementation, but this alone isn't enough.
The budget has promised huge grants and subsidies for farmers in order to make the country self-reliant on agro products through increased productivity. Farmers of pocket areas will get subsidies on fertilizers, seeds, saplings and canal construction besides other technical support. In addition, farmers of block, zone and super zone will get 85 percent cash grants for construction of collection centers, community seed banks, training centers and post-harvest centers. The farmers of each zone and district—who wish to purchase agriculture equipment, establish processing centers, warehouse, agricultural marts and cold storages—are liable to 50 percent cash grants, according to new budget. Providing services through 15 mobile laboratories in specialized production areas is also on the table.
Will it work? There are doubts. For such grants and subsidies were also provided in last year's budget, to no avail. The Parliamentary Committee on Agriculture and Water Recourses had raised issues of proper utilization of these grants and subsidies. There is no visible impact of this program as yet. Instead, production of food crops (rice, maize, wheat, millet, buckwheat and barley) has gone down by 6.2 percent this year. This indicates there is an urgent need to develop a mechanism to make grants and subsidies more effective. There must thus be a critical study on effectiveness of grants and subsidies in agriculture.
Budget absorbing capacity of agriculture ministry is also low. Up to the end of the third trimester of this fiscal, Rs 24.63 billion had been released for this ministry. Only Rs 11.63 billion (47.55 percent) was spent. How can we expect the ministry to spend Rs 27.4 billion, while it has the same structure and same set of human resources? Needless to say, there is no special implementation arrangement either. Thus it remains to be seen how this budget will make any difference to the agriculture sector.