Unit 5.3 : Agriculture

By Suraj Chaudhary

Agriculture is the biggest sector of the Nepalese economy. It contributes about 26% to our GDP and provides employment to more than 60% of total working population. It has become the backbone of the Nepalese economy. Agriculture includes cash crops, animals husbandry, poultry, beekeeping, floriculture, horticulture and other related business.

Characteristics Of Nepalese Agriculture

1. Monsoon Based: Nepalese agriculture is still the monsoon based agriculture. Farmers cultivate their lands in the hope of rainfall. When monsoon favors, agricultural production increases only about 50% of agricultural land has got irrigation facility.

2. Subsistence Farming: Agriculture in Nepal has not been commercialized yet. Farmers produce agricultural products moving for hand to mouth rather than for profit. In recent years, commercial farming has also been started in some places.

3. Land Fragmentation: Nepalese agricultural land is being fragmented every year. There is very small size of land, building. More than 50% hold less than 0.5 hectare of land. Due to small size of land building, farmers face difficulty in cultivation, irrigation, harvesting etc.

4. Predominance of Food Crops: Historically, food crops is dominating the cash crops. More than 50% of the total production is contributed by food crops. Cash crops contribute only 28% of total production. Due to lack of market, transportation, and storage facility farmers prefer food crops to cash crops.

5. Dual ownership of land: Agricultural land in Nepal (Terai) is owned by two parties at a time. Legally, land is owned by the land lords and used by tenants. Land lords are rich but they are not willing to make investment. So, agricultural productivity is very low due to lack of investment.

6. Traditional Farming: Farming practice in Nepal is still traditional. Farmers use traditional tools/equipment’s, traditional methods, traditional seeds, fertilizers etc. Due to lack of modernization of agricultural sector, productivity is very low.

Importance / Roles Of Agriculture

Development of agriculture sector affects the development of almost all sectors like industry, trade, employment etc. Some of the roles of agricultural sectors are explained as follows:

1. Source of food: Agriculture is the main source of food. More than 90% of total goods comes directly from agriculture. So, agriculture is the biggest source of food. Development of agriculture sector causes to increase in food supply to feed increased population.

2. Development of Industry: Many industries in the country are agro-based industries. They are supplied raw materials from agriculture sector. Development of agriculture sector makes the supply of raw materials easy and cheap. So, agro-based industries can increase their output.

3. Increase in governmental revenue: When agriculture sector develops, government can raise its income from land registration tax, export tax, tax on agro based industries etc.

4. Export Promotion: Most of the export items of the country are agricultural products. Almost 70% of the total export is contributed by agriculture. Due to lack of manufacturing products our export is mainly composed of agro-products.

5. Animal Forage / Fodder: Agriculture and animal husbandry go hand in hand. They are complement. Agricultural sector provides forage for animals. Mainly the product from agricultural product are used to feed animals.

6. Employment Promotion: Agriculture is the biggest employment providing sector of the country. More than 60% of the working population is engaged in agriculture. But there is under employment in agricultural sector. Development of agriculture sector promotes employment opportunities to increased population of the country.

Problems Of Agriculture

In spite of the various efforts for the development of agriculture, Nepalese agriculture is still backwards and the productivity is low. The problems of agriculture are as follows:

1. Lack of Agricultural Credit: Nepalese farmers generally suffer from acute poverty. More than 25% of the Nepalese people live below the poverty and most of them are farmers. Agricultural Development Bank Limited (ADBL) does not reach out the majority of the poor people. Hence, the lack of agricultural credit has been the most serious problem in Nepal.

2. Lack of Irrigation Facilities: Agriculture in Nepal is heavily dependent on monsoon. Only 64% of land are found to be irrigated and of it, only 38% of the arable is estimated to come under irrigation round the year. Thus, agriculture is not possible due to lack of adequate irrigation facility.

3. Lack of Infrastructure: Development of agriculture is highly dependent on the availability of physical infrastructure for the modernization and commercialization of the agricultural sectors. Roads, irrigation facilities, equipment, warehouse, market centers are the necessary facilities for exchange of agri-products to increase the income of the farmers.

4. Traditional Farming: Nepalese Agriculture used traditional method of farming. Agricultural tools are not advanced. Due to traditional farming, work is very difficult and production is low. Farmers are not skilled in the methods of the modern agriculture. They are also not healthy enough to realize the potential of their farms. Crops and grains are destroyed by pests, insects and weeds. Animals also cannot give good yield when they suffer from diseases.

Agricultural Finance / Credit

Agricultural credit is the loan that goes to farmers for making investments in agricultural sector. Most of the farmers are poor, who cannot make investment in agriculture. They need loan to purchase machines, tools/equipments, fertilizers, seeds etc. The loan that goes in the hand of farmers for agricultural activities is known as agricultural finance/credit.

Sources of Agricultural Finance / Credit

Nepal is an agricultural country but the majority of the farmers are poor. So, Nepalese farmers need the financial credit required for investment in the agricultural sector. The farmers receive the required credit from different sources which can be classified in two sectors.

1. Traditional or informal or non-institutional sources :

The local individuals who provide credit to the farmers are unorganized source of agricultural credit. The rural farmers of Nepal are dependent on the unorganized sector their agricultural credit. About 60% of agricultural credit comes from these sectors. The unorganized sources of agricultural credit are as follows:

a. Friends and relatives: The friend and relatives provide credit to the farmers in a small amount to meet day to day needs and emergency needs. They provide a loan with or without interest and security.

b. Landowners: Landowners provide the credits to the farmers for short terms as well as long term. Generally, the short term credit is provided with the security of standing crops and cattle and long term credit is provided with the security of land and house.

c. Merchant and Traders: They also provide credit during the pre-harvest season. The farmers are forced to sell their products at a low price because the time for repayment of loan is very short.

d. Village Money Lender: The farmer may receive credit from village money lenders. They provide credit with the security of movable and immovable credit with the security movable and immovable property.

2. Modern or formal or institutional or organized sector
The institutional sources which provide the credit to the farmers are known as organized sources of agricultural credit. They are established especially for the development of the agricultural sector. In Nepal, 40% of the credits come from organized sources. The organized sources of agricultural credits are as follows:

a. Cooperatives societies: The co-operative movement was started in Nepal from 1953 AD with the concept of self-help through mutual help. It was established as back at 1963 AD. The main objective of this bank is to provide credit and other inputs in cheap rate to the farmers.

b. Agricultural Development Bank Limited(ADBL): The ADBL was established in 1968 AD for the development of the agricultural sector in Nepal. ADBL provides short term (less than one year), medium term (1 to 5 years) and long term (more than 5 years) credits to the farmers.

c. Commercial Bank: They are the second largest institution after the Agricultural Development Bank Limited (ADBL) to provide credit to the farmers. Nepal Rastra Bank (NRB) directed the commercial bank to invest more than 12% of their total credit under the priority sectors.

d. Rural Development Bank (RDB): The first RDB was established in Nepal in 2047 BS. At present, there are 5 rural development banks establish in each development regions with the objective to provide micro-credit to the poor farmers.

Agricultural Marketing

Agricultural Marketing refers to the activities that comes between the production of agricultural products and sale to final consumers. Agricultural marketing involves harvesting, collection, storage, transportation and sales to final consumer.

Nature of Agricultural Market in Nepal

Agricultural Marketing in Nepal is still unorganized. Farmers produce individually and sell the product individually. Due to unorganized marketing, there is no uniformity in price and measurement system. The nature of agricultural marketing is discussed with the following points:

1) Unorganized: Farmers do not have any organization to make decisions regarding to the production and sale of product. Farmers produce individually and sell individually.

2) Existence of Middleman: Middleman visit door to door of farmers to collect agricultural product in time of harvesting. Farmers are compelled to sell products to middleman at cheap price. The middleman store the product for longer period of time and sell it when price is high. So, farmers are loser and middleman are winners.

3) Adulteration: Adulteration means mixing low quality products with superior product. Pebbles in rice, water in milk etc. are the examples of adulteration. Due to adulteration, farmers are losing trust. It is mainly done by the middleman but innocent farmers are blamed for it.

4) Impact of Indian Market: Due to open border with India, price quality, quantity of agricultural products are highly affected by the conditions in Indian Market.

5) No uniformity in price and measurement: Different sellers sell the same product at different prices. Similarly, there is no uniformity in measurement system. The same product is measured in different units like kg, mana etc.

6) Seasonal: Production and sale of agricultural products is seasonal. Off season production and sale of agricultural products is seasonal. Off season production and sale is very limited. So, farmers are unable to charge reasonable price for their products.

Problems Of Agricultural Marketing

Nepal is an agricultural country, but there exists a number of problems in this field. Neither infrastructures nor facilities have been developed for agricultural inputs and agricultural products in Nepal. Both farmers and consumers are being exploited by the intermediaries. In this way, Nepalese agriculture marketing is facing different problems.
The major problems of agriculture marketing can be briefly shown as below:

1) Lack of storage: The storage problem is another problem for agricultural market in Nepal. Most of the farmers in Nepal are poor. They do not have sufficient storage capacity for agricultural products. Farmers do not get reasonable price for their production. There is no sufficient provision for cold storage facilities in Nepal. Due to the lack of storage, farmers are not able to store their products for long term.

2) Problem of Transportation: Poor transportation facilities is one of the major problems of agriculture marketing in Nepal. Nepal is a hilly country. There lacks efficient transportation facilities throughout the country. So, it is difficult to transport agricultural product and inputs from one place to the another place.

3) Lack of Promotional activities: There is a lack of promotional activities in Nepal. Promotional activities like advertising, personal selling, sales promotion etc. are not widely used for agriculture products. Due to lack of promotional activities in Nepalese agriculture market, consumers do not get more information about price, availability, etc. of agricultural products.

4) Lack of technical knowledge: Lack of technical knowledge is another problem for Nepalese agriculture market. Farmers are not getting technical knowledge about the process of marketing of the products. They are still not aware of it. Still, most of the farmers use traditional methods of production in agricultural field.

5) Defective measuring equipment: It is another problem of Nepalese agriculture market. Modern measuring equipment are not used in rural areas. They are only focusing in the traditional way of marketing products. Traditional measuring equipment like Mana, Pathi etc. is still widely used in rural areas. The use of defective equipment can exploit customers.

Suraj Chaudhary is a writer, developer, founder, and a constant learner. He shares lessons and resources for living a fuller life every week. On this blog, he shares helpful guides and helpful articles that help his 70,000+ monthly readers find answers, solve problems, and meet their curious needs.

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