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You reap what you sow
JUL 28 -
The Economic Survey 2010 recently released by the Ministry of Finance shows an agricultural growth rate of 1.2 percent against its target of 3.3 percent. As the agricultural sector contributes about 32 percent to the Gross Domestic Product (GDP), the fall in the growth rate directly affects the national economy. The economic growth rate dropped to 3.5 percent from the projected 5.5 percent in the fiscal year 2009/10 due to the low growth rate of agriculture.
An unfavourable monsoon was the main factor that hindered food production in the last fiscal year. Our farmers depend on the monsoon rains to grow major crops like paddy for lack of irrigation facilities. Last year, paddy and maize in particular were badly affected due to a drought and delayed monsoon. In some places, farmers even had to keep their land barren. As a result, rice and maize production declined by 11 and 4 percent respectively, ultimately hitting food security in the country. The overall food production during the last fiscal year decreased by 5.88 percent. According to the Ministry of Agriculture and Cooperatives, food production in the last fiscal year fell by 353,000 tons compared to the previous fiscal year. The ministry said that, as a result, the country would face a food deficit of 316,000 tons affecting about 1.6 million people directly.
Such deficits could recur until irrigation can be provided to the farmers. Though the monsoon this year has been better than previously, some parts of the country are suffering from drought and a delayed monsoon. In this situation, we need to focus on a year-round irrigation system to increase farm production and productivity. Out of the total arable land in the country, only 1.766 million hectares are regarded as being viable for irrigation. So far, only 1.227 million hectares have been irrigated. Furthermore, there is year-round irrigation only on 400,000 hectares. Alternative and traditional ways of irrigation also need to be expanded. The state can end the dependency on large scale irrigation projects by operating deep and shallow tube wells massively in the Tarai. In order to increase the access of small farmers to irrigation facilities, the government needs to provide them subsidies and incentives.
In addition to irrigation, irregular and insufficient supply of fertilisers and lack of qualitative seeds and other farm inputs are the other reasons behind the low production. Unless the government increases investment in the agriculture sector substantially, the country will be witnessing falling farm output in the future as well.
Nepal can learn from India which has given high priority to agriculture in recent years. India’s budget for the current fiscal year has introduced integrated programmes for the agriculture sector which includes a four-pronged strategy—agricultural production, reduction in wastage, credit support and a thrust in post-harvest technology and food processing. A sum of IRs. 2 billion has been provided for the heartland of the green revolution, namely Punjab, Haryana and Western U.P., while IRs. 4 billion has been earmarked for Bihar, Chhattisgarh, Jharkhand, Eastern U.P., West Bengal and Orissa.
The Indian plan could affect Nepal’s production and farmers. Increased output will bring down food prices making Nepal’s products uncompetitive because of their high cost of production. There is also a risk of dumping in Nepal. This will further increase our dependency and trade deficit. Therefore, Nepal also needs to bring out such programmes at least in the Tarai region to reduce its dependency.
Our government has done very little to identify and promote farm products having a comparative advantage. For instance, tea, ginger and cardamom, which are grown in the eastern region, couldn’t be promoted properly due to lack of market and processing problems despite their high potential. As farm products are our main exports, the state needs to give attention to commercialisation of agriculture and value added goods. This will help to reduce the trade deficit which has increased by 35 percent to Rs. 287 billion during the first 11 months of fiscal 2009/10. It is heartening that the government has announced introducing incentive programmes in the current year’s budget to substitute imports of meat and dairy products.
A substantial boost in credit availability in rural areas is also necessary to ramp up farm production. India’s budget has proposed a sum of IRs. 3.750 trillion to provide loans to farmers at 5 percent interest. Nepali farmers, in contrast, have to pay a minimum interest of 10 percent while borrowing money from banks. In this condition, how can Nepali products be cheaper? The government, therefore, has to radically step up investment in the agriculture sector, which it has not been doing. Despite agriculture accounting for 32 percent of the GDP, it gets less than 3 percent of the total national budget. In contrast, India has allocated 6 percent of the total budget for agriculture while it accounts for 17 percent of the GDP.
The National Planning Commission has set a budget limitation of about Rs. 10 billion for agriculture which is 26 percent higher that previously. Though the government has increased the farm budget to some extent, projects which directly benefit farmers have not been given more funds. While government investments have either decreased or stagnated, the private sector too is not keen on putting money into agriculture. The donor community also has been neglecting the farm sector. The share of foreign aid in agriculture has been decreasing for the last 10 years. Foreign aid in the agriculture sector in 1998/99 amounted to 5.25 percent of the total assistance which dropped to 2.34 percent in the current fiscal year.
Human resources in research have not been fully utilised for lack of sufficient budget. Experts suggest that at least 40 percent of the total farm budget should be allocated for research activities. The proposed budget for the Nepal Agriculture Research Council (NARC) has been hiked to Rs. 1 billion, which is 78 percent higher than last year. Even then, it is not enough to carry out research activities aggressively. This amounts to just 10 percent of the total agriculture budget. Unless investment in research and extension areas of agriculture does not rise, the agriculture sector cannot move ahead fast.
In recent years, the impact of climate change on agriculture seems to have been high. In this context, research needs to be done to develop new seeds and technology to enable agriculture to adapt to climate change. Agriculture is connected to the livelihood of poor people, so the government needs to direct increased attention and investment to it. Our national plans, policies and budget should be focused in this direction. Strong monitoring and coordination between line ministries and stakeholders is also necessary for effective implementation of the government’s farm policy.
(Dhital is economic reporter of Kantipur Daily)
Maina Dhital
mainadhital@gmail.com
Posted on: 2010-07-29 08:25
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