The Covid-19 pandemic has given way to start the discourse related to the modernisation of the agriculture sector in a new light. How do you see the prospects of modernisation and commercialisation of agriculture in Nepal post-Covid?
The agriculture sector has long been a scapegoat of ineffective policies. If we look closely at budget of the last 10 years, we can’t see significant changes in government’s priority about agriculture. Time and again, terminologies like ‘commercialisation’ and ‘modernisation’ gain prominence in speeches and discussions. We have a separate budget for agriculture grant and the grant amount alters according to the size of the budget. The major part of the grant is allocated for fertilisers which ranges from Rs 6 billion to Rs 9 billion. The remaining budget is allocated to some small areas such as fish farming and poultry. The finance minister paid extra attention to agriculture during the budget announcement made amidst the Covid-19 pandemic. But I do not find any significant difference between budget of previous years and the current fiscal year.
A question always comes to my mind that ‘are we trying to create employment out of agriculture or is it the increased output we are seeking’. Creating employment and increasing output are something that need clarity to determine our direction of agriculture development.
Substitution of food import has become a most talked about topic in the recent years. What is the possibility of import substitution?
It was encouraging to hear agriculture minister saying that we should stop dreaming of export and rather talk about import substitution. His statement was trolled in social media. But if we see positively, then he must have realised that we lack essential infrastructure for export and we also don’t have any inherent advantage.
I see a growing awareness among the people in the government that that substitution of food imports should be our priority. There are 5-7 major crops and farm produce - paddy, wheat, maize, potato, livestock and milk - that contribute to 70-80 percent of Nepal’s agricultural GDP. So, we need a complete turnaround in the production of these items. We need plans to substitute import of these items in the next five years. If we look at the last year’s statistics, 5.5 million tonnes of paddy was imported. We need to look into why rice mills in Nepal are closed. These topics should be areas of focus in our discourse of agriculture sector development. We talk about agriculture zone and industrial districts, but there is also a need to talk about agro processing zones.
If we look at the countries in the world having high agricultural output and compare the number of people employed per hector of land in those nations and Nepal, then we can observe our real situation. The question here is what plans we have to provide employment to people if we are to modernise the agriculture sector. I think the answer lies in having a linkage between agriculture and manufacturing sectors. This also means creating a market for farm produce.
Problems in taxation also obstruct the market of domestic agricultural products. For instance, 9 percent duty was imposed on import of flour and wheat in the current fiscal year’s budget which is very low. As wheat is produced sufficiently in Nepal, the duty should have been 15 to 20 percent. The duty structure on import of agricultural products should be in four slabs which I have already suggested to ministers and government secretaries. First, duty should be levied on import of raw materials; second, duty on import of intermediate raw material; third, duty on finished goods and fourth, duty on luxury and finished goods.
Food and agriculture are two different subjects. There is Ministry of Agriculture and Livestock Development but there is no food ministry like in most developed and emerging countries.
According to the National Economic Census 2018, agriculture is the most profitable business in Nepal. But why isn’t there the attraction of private sector investors the way it should have been?
Profitability in agriculture depends on crops that are cultivated and ownership of land. Nevertheless, the business of food is profitable in itself, so our should move towards food processing. Despite various problems, some industries such as sugar have been doing good business in the country.
Issues in land reform are cited as hindrances to private investment in agriculture. But let us look at the sugar industry; land was fragmented even when sugar industries began to open in different parts of the country.
The lack of storage and warehousing facilities is also another major hindrance for commercialisation of agriculture sector. These infrastructures have the potential to attract private investment.
We have been talking about setting up fertiliser plants in Nepal with private sector participation for long. But there cannot be private investment without profit and fertiliser plant is not economically viable in our country. The cost of construction is too high, and we don’t have major components necessary to run such plants. Besides, there is no shortage of fertilisers in the world. It makes import of fertilisers cheaper than producing it here locally. The recurring shortage in Nepal is just because we haven’t been doing things properly in supply and distribution. I suggest making fertilisers fully subsidised like in India. Besides, the quantity of import should also be increased; we need around 900,000 tonnes of different types of fertilisers but import only about 400,000-500,000 tonnes annually. We also need to address the lack of storing fertilisers in large quantities. In the foreseeable future, our three border points with neighbouring India and China will be connected with railways making it easy to import fertilisers. The private sector can operate fertiliser storage facilities along the bordering areas.
During the Nepal Investment Summit 2019, Nepal Warehousing Company Limited announced partnership with National Collateral Management Services Limited, India to set up large grain/agro products storage and commodity facilities in Nepal. How is the progress of this project?
Three storage facilities having total capacity of 55,000 tonnes are under-construction at Sunsari, Parsa and Kapilvastu. The projects will be completed by March 2021; the project in Sunsari will be operational within the next 2-3 months.
The facilities will be used to store three commodities – wheat, maize and soybean. But the scope of storage can be increased significantly, so this will be a huge project. We have requested the Ministry of Commerce, Industry and Supplies to allow us to do some of the functions of Nepal Food Corporation.
The warehousing facilities will be working in advanced manner. It provides safe and scientific storage solutions to the farmers enabling them to fully focus on production of grains. We will provide them a receipt which will work as a collateral for their grains which can be monitised. It means they can avail loans up to 50-60 percent against the receipt. The storage and warehousing facilities are our attempt to create a link between agriculture and food.
How do you observe the initiatives of businessperson like Birendra Basnet’s Nepal Krishi Company?
The initiative is a good agribusiness model. They have tried to address the problems created by fragmentation of land and have also brought mechanisation in agriculture. But I don’t think that they have a larger direction. It is because the company is being run as corporate social responsibility (CSR) initiative of Buddha Air, which is, nonetheless, beneficial to the community. But my question here is, if they have a tie up with the industrial sector and how do they view the production of food? Producing wheat and producing food from it are two different things. I think we should start thinking about production of food and it is profitable as well.
Lately, startup companies are seen attracted towards bringing innovative solutions to the agriculture sector. What is needed to be done to enhance their scope of work and expand their markets?
The startup agribusinesses are very positive initiatives though the scale is small and there is no national level intervention of such companies till date. But this is also not expected from startups. Many have come up with good ideas and small interventions are important. What is still missing is the ‘Eureka idea’. We are in search of something like the ‘Facebook of agriculture’ or ‘Air bnb of agriculture’. It is also encouraging that budget of Rs 500 million has been allocated to support startups for the current fiscal year.
As an agribusiness major in the country, is Nimbus interested to collaborate with startups?
Yes, we are interested and are in touch with a lot of startups. Established businesses have become saturated. We are also running out of new business ideas. This is why we invested in Foodmandu. The ideas of young generation have become vital also for us. It is important to see how the government mobilises the budget allocated for startups.