Issues and Challenges of Agriculture Sector in Nepal – Potential from Ginger

Agriculture at a Glance

Since over two decades, Nepal holds the pride of declaring itself an agriculture dominated country, Nepali might have a different opinion though. Nepal is still an agro-based country but the development of agriculture always stands as a question. Besides farming; diary processing, poultry, tea, vegetable seed and fisheries are the sectors that contribute to the growth of agriculture. Limited use of technology and most of the arable lands being used for food crops has led to the lag in achievement of the estimated growth rate.

Agriculture has continually provided a comprehensive base to the Nepali economy, thus, directly and indirectly, the growth coined by agriculture holds very high potential to have relatively eclectic impact on both poverty reduction and sustainable development. Nepali agriculture, whether somebody likes it or not, is one of small family farms, primarily subsistence oriented and yet not sufficient of supporting the adequate subsistence of the farm families. Agriculture production is heavily inclined to food grains production, paddy being the pervasively cultivated crop. However, the self-sufficiency in food is not ensured. And, therefore, as agriculture failed to grow, poverty remained largely an agricultural phenomenon. Several studies have shown that those employed in agriculture sector account for over three quarters of all poor.

Growth in agriculture has been impeded by several constraints. Nepal's agriculture has been heavily dependent to water intensive crop agriculture in a situation of derisory back up of required inputs. Even up to this point of time, not more than a fifth of irrigable land has access to year round irrigation while use of improved seeds or the hybrid seeds is quite unsatisfactory. The abstruse reliance on import for supply of chemical fertilizer heightens the uncertainty of the availability and cost. The collective result -persistently low yield of cereal crops. Geo-climatic diversity offers Nepal special comparative advantage in agriculture but taking advantage of such potential is hindered by high transactions costs curtailing from poor connectivity, deficiency of economies of scale, grades and quality compounded by weak agricultural R&D capacity. The trend of climate change has increased the vulnerability of both water intensive cropping system and rainfed agriculture. The soaring food price are affecting the food security and increasing vulnerability of the poor and small holder farmers as they are the net food buyers. For rural youths, agriculture is becoming least preferred vocation even as there is high unemployment rate among them.

Though agriculture has provided a direct employment to 66 % of total population and contributed 33% to GDP according to Ministry of Agriculture (2016), coming to this point of time, the focus has shifted from agriculture to service sector. And how could the theory of “Unlimited Supply of Labor” not work on this as workers from the agricultural fields have started moving themselves to better income opportunities increase the rate of migration either to city areas or to other countries, decreasing the participation in agriculture. The population of Nepal is growing at the rate of 1.2% annually, whereas the growth of agriculture in Nepal was last measured at 1.9% in 2015 according to World Bank which is very low.

From the above diagram, we can see that the growth rate of the so-called priority sector of the government has been very unstable. Lot of humps and dips are seen in the figure which do not project the stability of the agriculture sector. Trying to draw the linear trend line of the agriculture sector from 2006 to 2014 we can see that the value of the slope is so low and with that under-performing growth rate, we expect to grow ourselves as an agriculture dominated country. According to the data, the agriculture growth rate is averaged to 2.9 during last decade. There was huge year-on-year variation where the highest range was 5.8% in 2008 to the lowest range 1% in 2007. This variation reflects that there was no proper development in agricultural sector and also due to high weather dependence. Due to the fluctuation of rates on the growth of agriculture sector from 2006 to 2015, the estimated growth rate of 5% in 2030 will not be met (other things remaining constant). However, with more refined and improvised policies, budget and planning, the target could be met.

But, the story does not only have the darker sides. There have been improvements in agricultural infrastructures in the recent years. More than 12 districts are planned to be brought into the national roads network soon. Mobile phones have opened up bigger opportunities for effective and speedy market information system. The physical infrastructures that facilitate market transactions and post-harvest performance are few to none in rural areas and their linkages with the urban market centers are weak but increasing rapidly. The policy environment is generally oriented to agricultural diversification and commercialization for broad based growth and poverty reduction but that itself has a big question embedded.

With the emerge and a minor level execution of Agriculture Development Strategy after the tentative closure of Agriculture Perspective Plan, all the agriculture development plans and policies share the common thread of commercialization of agriculture. Nevertheless, the stated policy interventions are hard to realize in the present situation of pertinacious underinvestment and a huge human resource gap in the government system as well as the fields. Government, though has recognized the role of private sector, cooperatives and NGOs; and has been more open to public private partnership, is still skeptic about the profit-making behavior of the firms. Achievements have also been made in social capital formation in the form of functional civil society and advocacy groups as well as organization of farmers into beneficiary groups. The nascent enterprises, however, are still vulnerable to shocks of crop or market failure; and there lies ahead the challenges to develop it to benefit from the opportunities of the export market as well.

Ginger Potential

When we talk about the export potential of a Nepali commodity, Ginger is one of the most potential one. But, Ginger has a tragedy to face. Ginger is one of the major spice crops that is grown throughout the country (more in the mid-hills of Nepal). Specifically, the major ginger producing districts of Nepal are Jhapa, Illam, Pachthar, Dhankuta, Terhathum, Morang, Dhading, Nuwakot, Nawalparasi, Palpa, Syangia, Dang, Surkhet, Kailali, Doti, Dadeldhura, Salyan and Sindhuli.

In 2013, Nepal was the third largest ginger production countries after China and India. The production of Ginger in 2013 was 276,150 tons compared to 425,000 and 683,000 metric tons of ginger production of India and China. Nepal shares 12% world’s production share of ginger (FAO, 2016; MOAD, 2014). Nepal’s ginger production area has increased from 20,256 hectares in 2012 to 24,226 hectares in 2013 (MOAD, 2014). The annual increase in ginger production of Nepal from 2000 to 2015 has been 9.15% (calculation based on the data provided by FAO).  

The regional production (in tons) and regional production area of ginger in summarized in the table below:

Development Region	Production Area (Hectares)	Production (MT)
Eastern Development Region	8060.6	103,626
Central Development Region	2872	37413
Western Development Region	8347	72588
Mid- Western Development Region	3102	34355
Far-Western Development Region	1844	28168
Total	24,226	276,150

                                                                        Source: Ministry of Agricultural Development, 2014

The total export of ginger in the year 2014/15 and 2015/16 with its associated value is given in the table below;

Year:	Quantity (Kg)	Value (In 000 Rs)	Per ‘Kg’ value (Rs)
2013/14 (2070/71)	20,415,666	449,901	22.04
2014/15 (2071/72)	24,548,657	464,921	18.94
2015/16 (2072/73)	28,351,823	643,086	22.68

                                                            Source: Trade and Export Promotion Center (TEPC), 2016

From the above table, we can see the per kg value of ginger exported in the year 2015/16 is 22.68. However, when we look at the local market price of ginger it is, Rs 75 per kg (wholesale price) and Rs 90-100 per kg (retail price) (Kalimati Market, as of 13 September, 2016). This itself show the disparities that exist within as well as in international market in the price of ginger.

If we are to look at the annual percentage change in export value of ginger, we can see a huge difference that exist in recent years. The annual percentage change in the value of ginger in the year 2014/15 compared to 2013/14 was 3.3 but the value increased to 38.3% in the year 2015/16 compared to 2014/15. Over the years, it is seen that the major market of Nepali Ginger has been our southern neighbor, India. In 2013, about 65% of ginger produced got exported and about 99% of this was exported to India (Vancura, Peneva, Tominaga, & Cardenas, 21014). After India, Japan, Bangladesh and Sri Lanka are our other market places for ginger.

Similarly, a recent study shows that ginger produced in Nepal have good quantity of Oleoresin in them. Oleoresin is a substance (mixture of oil and resin) extensively used in food and pharmaceutical industries because of its pungent flavor and antioxidant properties. Its demand in international market is very high. So, if we are able to find these markets then it is sure that we can increase our ginger export value. Also, India account for 60% of oleoresin sold in global market. This further adds to our advantage of exporting ginger to India (Kathmandu Post, 2016). Countries like Dubai, Japan and Netherlands and EU have shown a high demand of ginger in recent years (Vancura, Peneva, Tominaga, & Cardenas, 21014).

Some of the projects that supports production, processing and marketing of ginger in Nepal are Project for Agricultural Commercialization and Trade (PACT), National Spices Crop Development Program, Commercial Agriculture Development Project (CADP) and High Value Agriculture Project (HVAP) which are the governmental projects. Also, there a SAMARTH-NMDP a five year programme funded by UK government’s DFID. This programme focuses on the development of ginger export industry of Nepal. 

In June 24, 2010 government launched Nepal Trade Integration Strategy. NTIS has placed ginger with tea, lentils and cardamom to build a competitive export supply capacity by Good Agriculture Practice, Integrated Pest Management and Quality Management System. (MoCS/GoN, 2010).

Distribution of Nepal Ginger (2013)

 

The organizations that are involved in this sector are Department of Agriculture (DOA), Ministry of Commerce and Supplies, Food and Agriculture Organization Office-Nepal, , Agro Enterprise Centre (AEC), the Federation of Nepalese Chamber of Commerce and Industry (FNCCI), Ginger and cardamom development section/Vegetable Development Directorate (VDD), Spice Development Centre, Panchkhal, and Nepal Agriculture Research and Development Fund (NARDEF), Asia Network for Sustainable Agriculture and Bioresources (ANSAB), Agro Enterprise Centre/Federation of Nepalese Chamber of Commerce and Industries (AEC/FNCCI), Micro-Enterprise Development Programme (MEDEP).

In traders’ level, Business Membership Organizations like Jadibuti Association of Nepal (JABAN), Nepal Ginger Producers and Traders Association (NGPTA): promote and protect the rights of ginger producers and traders in Nepal, District Chamber of Commerce and Industries (DCCI) are supporting for business success. Agro Enterprise Centre (AEC) is working in the area of market development by providing market information, facilitation for market linkages, etc. (ANSAB, 2011).

Challenges with the potential Ginger

Despite of so much potential in ginger production, Nepal has not been able to have a substantial impact in global market. One of the major constraints in this is the lack of quality maintenance and lack of proper storage capacity. This has resulted our ginger to get low unit price in international markets. Along with poor quality maintenance, some other constraints in ginger production, processing and exporting are: Farmers using traditional cultivation practices for production has been decreasing the overall productivity of ginger; Lack of proper knowledge and technologies (i.e. lack of commercial approach to ginger farming); Difficulty in the availability of improved and quality seeds; Heavy dependence on India for trade and Indian government’s discouragement of import from Nepal, when ginger production is high in India; Lack of collection centers and storage facilities in Nepal; Lack of collective marketing practices; Lack of cleaning or washing facilities and use of inefficient processing and product development technologies in Nepal; Occurrence of rhizome rot disease during production of ginger.

The cut throat challenges specially for Ginger are: most of ginger exported are in raw form (uncleaned and unprocessed) and there is a high occurrence of unaccounted payments in the transportation of ginger and moreover farmers are compelled to be price takers rather than being price makers because of the fluctuation of the ginger market in India (the major ginger market for us). In the current stringent agricultural scenario, where commercialization has been prioritized but the effectiveness has not been thought of as off the policies. As, commodification of agricultural produces is very important and development of agricultural derivatives is very essential for the commercialization but no agricultural policies as such is found. For the development of derivatives, proper warehousing mechanism is essential and along with it, comes the insurance challenges which will value the products. But, for whatever reasons, insurance companies are not ready for the same. Banks could play an important role for the development of agriculture commercialization by the provision and acceptance of Warehouse Receipts (WR) but banks also have been reluctant in doing so with the issue of hypothecation. Though WR has been identified as a negotiable instrument by Secured Transaction Act 2063, the lawyers have made it subject to interpretation.

In this regards, though with an added objective of achieving a 5% growth rate of agriculture sector in Sustainable Development Goals, the target seems to be a distant dream, owing to the current policies.

References and Bibliography

Ministry of Agricultural Development. (n.d.). Ministry of Agriculture Development official page. Retrieved 2016, from Ministry of Agriculture Development: http://www.moad.gov.np/en/content.php?id=319

New Agriculturist. (2009, November). Role of the media in agricultural development. Retrieved from New Agriculturist: http://www.new-ag.info/en/pov/views.php?a=1031

Oakeley, P., & Garforth, C. (1985). Guide to extension training. Retrieved from FAO Corporate Document Repository: http://www.fao.org/docrep/t0060e/T0060E00.htm#Contents

Shrestha, S. (2004). Public Support for Agriculture Extension and Marketing Extension System in Nepal.

The World Bank. (2016). Retrieved from http://data.worldbank.org/indicator/NV.AGR.TOTL.KD.ZG

 ANSAB. (2011). Value chain analysis of Ginger subsector in Nepal. Kathmandu: Asia Network for Sustainable Agriculture and Bioresources.

FAO. (2016). FAOSTAT.

Kalimati Market. (2016, September 13). Kalimati Fruits and Vegetables Market Development Committee. Retrieved from http://kalimatimarket.com.np/

Kadel, B. & Pradhan, A. (2016). Ginger Report. King’s College, Nepal (Unpublished Report)

Kathmandu Post. (2016, September 3). Nepali ginger good for global market: Report. Retrieved from http://kathmandupost.ekantipur.com/news/2016-09-03/nepali-ginger-good-for-global-market-report.html

MOAD. (2014). Statistical Information on Nepalese Agriculture. Lalitpur: Ministry of Agricultural Development.

MoCS/GoN. (2010). Nepal Trade Integraton Strategy 2010. Executve Summary and Acton Matrix. Kathmandu: Ministry of Commerce and Supplies. Government of Nepal.

Pokhrel, P. & Pant, S. (2016). Growth of Agricultural Sector. King’s College, Nepal (Unpublished Report)

TEPC. (2016). Foreign Trade Statistics of Nepal (Annual Trade Data for Fiscal Year 2072/73). Kathmandu: TEPC.

Vancura, L., Peneva, T., Tominaga, R., & Cardenas, I. (21014). Opportunities for Nepalese Ginger and Derivative Products in Dubai. Samarth, Nepal.