ifpri - naes conference on sustainable & resilient agriculture - bishnu pant - accelerating...
TRANSCRIPT
Regional Workshop on
Agricultural
Transformation:
Challenges and
Opportunities in South
Asia, February 10-11, 2015
Accelerating Growth in Agricultural
Productivity and Profitability
Bishnu Pant, IIDS
Background
• Associated with low level of economic growth, Nepal is characterized as a
country with a large rural population, high poverty rate and subsistence
agriculture.
• Agriculture plays most important role , as almost two third of country's
population rely on agriculture for employment and contributes about one
third of national GDP , and is the main source of food, and income for the
majority of the people. In 1990/91, agriculture contributed to 48 percent of
total GDP, which declined to about 34 percent in 2012/13.
• Hence this sector is most crucial for country's development and is key in
issues of economic growth, poverty alleviation, better living standard of the
people and overall human development.
Agricultural Growth and Sustainability
• The agricultural growth has observed inconsistent growth pattern during the
last three decades (1980/81-2010/11).
• The production of cereals over this period increased by 2.25 times (Paddy
1.80 times, maize 2.78 times and wheat 3.66 times). Where as the yield rates of
these cereal crops during this period increased respectively by 1.54, 1.40 and
1.86 times, there by implying that technology has not contributed much in
enhancing the agricultural productivity in Nepal.
• An idea about the increase in production of major cereal and other crops and
related developments during this period can be seen from the following table,
which shows that there has not been any significant growth in both production
and productivity of major cereal crops. Table 1 shows positive growth in
paddy productivity from mid eighties until few years back. Lately growth rate
of paddy seems to have stagnated. Table 1 also shows some positive growth in
the productivity of maize and wheat since 2005/06, but they are not quite
significant. This implies that agricultural growth in Nepal is not sustainable.
Contd…
Table 1: Yield of Paddy, Wheat and Maize (in metric ton/ha)
Year Paddy Yield Maize Yield Wheat Yield
1984/85 1.97 1.42 1.18
1990/91 2.41 1.61 1.41
1995/96 2.39 1.68 1.55
2000/01 2.70 1.80 1.81
2005/06 2.72 2.05 2.07
2010/11 2.98 2.28 2.27
2011/12 3.31 2.50 2.41
2012/13 3.17 2.35 2.29
Source: Economic Survey, various years
Contd…
• Table 2 shows the status of chemical fertilizers and improved seeds over
the years.
• There has been highly inadequate use of agricultural inputs in Nepal. The
present level of chemical fertilizer consumption is highly unsatisfactory.
Government does not seem to have adequate capacity to supply the
increased fertilizer demand in the country, which is about a million ton a
year.
• Likewise the use of high yielding varieties of seeds has not been
encouraging. Total sale of improved seeds was 2946 metric ton in
2012/2013. There has been sharp increase in the demand of improved
seeds by the farmers. The supply of improved seeds will have to be
significantly increased to meet the increased demand.
• Investment in irrigation has also been very minimal with the result that
only about 31 percent of total agricultural land is currently irrigated.
Contd…
Table 2: Status of chemical fertilizer and improved seeds (in metric ton)
Year Chemical Fertilizer Improved seeds
1984/85 42829 2116
1990/91 72719 2275
1995/96 70154 3343
2000/01 23623 1894
2005/06 8136 3514
2010/11 29604 4192
2011/12 45672 2348
2012/13 145653 2946
Source: Economic Survey, various years
Declining Profitability of Agriculture
• Dramatic increase in food prices in recent times might also lead one to believe
that farming is a profitable business. However, in Nepal, while large farmers are
net sellers of food grains, small farmers who constitute a major percentage of
farming population are net buyers. This means that as food prices increase, large
farmers make bigger profits while smaller farmers are forced to shell out more
money for their food.
• Numerous reasons have been cited for this decline. In 1970s and 1980s, High
Yielding Varieties (HYV) of crops, most importantly rice and wheat, were
adopted mainly in Tarai and low lying hill districts and led to increased
productivity. Although these crops required higher inputs of chemical fertilizers
and irrigation, they had much higher output than traditional varieties.
Furthermore, government promoted these crops by subsidizing fertilizers and
providing extension services to the farmers.
• However government withdrew these subsidies in 2002/03. At the same time, the
government made some policy changes regarding agricultural extension services.
Since about a decade ago, there has been sharp increase in the migration of
agricultural labor force, there by causing sharp increase in the labor wages.
Besides, the fragmentation of land holding over the years has contributed to
decline in productivity.
Contd…
• All this means that while farmers spend more money on growing their
crops, their total output and therefore their profit has continued to decline.
The following Table 3 shows the operational average cost and net profits
of selected crops.
Table 3: Average Cost and Net Profit of Selected cereals
Contd…
• With the shortage in supply of agricultural labor, farmers are getting
disincentive to opt for cereal farming as the cost of production increases
with the hiring of expensive labor.
• In the recent years, vegetable farming has been a lucrative business with
the increasing demand . Table 4 shows the average cost and net profits of
the selected vegetable and spices farming:
Vegetable and
Spices
2009/10 2012/13
Cost Profit Cost Profit
Potato 439 194022 904 107173
Chilli 287 2496945 415 288529
Tomato 292 207086 559 319909
Pea 226 184679 683 178918
Cauliflower 359 164800 452 216071
Cabbage 179 140371 310 235832
Ginger 1056 266737 2835 327929
Garlic 667 1170346 1503 1219081
Onion 289 134455 387 170578
Source: Statistical Information on Nepalese Agriculture, Cost in Rs./Qt and Profit in Rs./Ha
Programs and Policies
• Some efforts being made by the government towards addressing increasing cost of
agricultural production in Nepal. Since the last few years, there has been sharp increase
in the agricultural labor wages in the country. Higher labor wages have significantly
contributed in escalating cost of production to a large extent.
• Farm mechanization policy has recently been initiated in the country. However, it
needs to be effectively implemented. Introduction of efficient farm equipment and
mechanization can help not only in reducing the cost of cultivation, but also in
increasing profitability in the agricultural production.
• There is also need to aggressively adopt climate smart new seed varieties for
improving agricultural productivity as well as to enhance pest and disease control in
farming. The use of hybrids in rice and maize is increasing dramatically particularly in
Tarai and accessible hill pockets. NARC has limited capacity and programs to produce
competitive hybrids to date. Promoting private sector in hybrid seed and commercial
seed business at the remote and community levels is urgent.
• MOAD has, over time, brought out a number of programs and policy guidelines
including agricultural development strategy (ADS), seed vision, NARC vision, etc.
There is a need to effectively implement these guidelines so that they will be able to
address the problems related to cost of production there by improving the profitability
in agriculture in Nepal
Issues, Challenges and Recommendations
• Nepal lacks adequate road networks connecting production pockets to market
centers. Agricultural roads contribute to reduce transportation costs and increase
profitability in agriculture. Government will have to give highest priority in
constructing agricultural roads in every districts specially in connecting major
production pockets to market centers.
• AICL does not have necessary capacity in supplying increased fertilizer demand
in the country. Involvement of private sector, preferably under PPP model, in
producing, importing and distributive fertilizer is important. Likewise, effective
seed planning including seed production, marketing and pricing, performance
monitoring and promotional activities of superior varieties (OPVs and hybrids) is
completely lacking and will have to be sufficiently addressed.
Continued......
• As there is shortage in supply of agricultural labor, government needs to
intensify effective implementation of farm mechanization policy. Introduction
of mechanization policy can help not only in reducing the loss due to
outmigration of agricultural labor force but also in contributing to reducing cost
and maximization of agricultural profits.
• Investment in Research and Development in agriculture is imperative since the
dynamics of farming is changing. Agriculture research is an engine for
agricultural growth if it generates and disseminates agricultural technologies
that farmers can accept and that increase food production. The agricultural
research in Nepal suffers from highly inadequate research funding. The
government must consider providing adequate funding, fill up scientists' vacant
positions and develop necessary infrastructure so that they will be able to
continue research and contribute to the improvement of agricultural production
in the country.