CORPORATES IN FARMING : Can Big Investment Work Wonders in Agriculture Sector

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 CORPORATES IN FARMING : Can Big Investment Work Wonders in Agriculture Sector

--BY NEWBIZ TEAM

Buddha Air, one of the leading domestic airlines in the country, recently announced that it was starting a rice mill in eastern Nepal. Rice mill is the latest addition in the business portfolio of the airline company which ventured into farming about a decade ago. Buddha Air isn’t the only one. Many business houses have entered farming sector over the past two decades. Nepal’s leading business and industrial houses like Jyoti Group, Golyan Group, and IMS Group, to name a few, have made big investments in the agricultural industry. They are growing and selling everything from coffee to rice, green vegetables, and fruits. Some of them have also started exporting farm products.

Despite being an agrarian economy, Nepal imports millions of tons of food products annually. It relies on imports for even fruits and green vegetables. Official data shows more than two-thirds of the population is involved in farming. However, most of these farmers are involved in sustenance farming. Many of them take farming as a seasonal occupation. In the lack of a market, farmers, especially from Tarai region, are forced to sell their produce at a lower price, while those in the mountainous regions are still awaiting better infrastructure to take their farm products to the market. Because of this, the country’s farm imports is growing with every passing year. According to a study conducted recently by the National Planning commission, the country spends Rs 200 billion annually to import agricultural products that can be produced within the country. Nepal is importing farm products like paddy, rice, corn, fresh vegetables, fruits and other farm products worth more than Rs 200 billion every year. Big investment in agricultural sector by corporate houses has made people hopeful that farm imports can be lowered in the coming years.

Meanwhile, the large industrial houses have expressed some optimism that large-scale agricultural investment will assist to cut the nation's imports.

Corporates in Farming

IMS Agro: IMS Agro, a subsidiary of IMS Group, was established in 2018 with a vision to become a one-stop solution for agribusiness in Nepal. IMS Agro’s farm is located in Barju Rural Municipality of Sunsari district. This farm is spread over 25 bighas of land. Along with producing different products, the company also conducts research on different crop varieties. IMS Agro is currently producing lime and strawberry on its farm. In the long run, the company also aims at exporting fresh vegetables to foreign markets.

Muktinath Krishi Company: Muktinath Krishi Company Limited was established in 2018 with the objective of bringing a gradual change in the value chain and supply chain of agri-inputs. It also aims at transforming the country toward the path of self-sufficiency. Muktinath Krishi Company also provides business development services to farmers and agriculture entrepreneurs in order to enhance their capacity and broaden their opportunities for sustainable and efficient economic growth. Business development services are provided in various stages, ranging from investigation and feasibility to growth and maturity for a start-up to long-established agribusiness including marketing, technical, financial, and capitalisation services. Building value-added and viable business, business management, research and analysis, financial facilitation, and business risk management are the major business development services that Muktinath Krishi Company has been providing. Muktinath Krishi Company finds its roots in Muktinath Bikas Bank Limited - a ‘B’ class financial institution licensed by the Nepal Rastra Bank.

Jyoti Group: One of the largest industrial houses of the country, Jyoti Group, is involved in coffee farming. It has been producing and exporting coffee since 2008. The group started commercial coffee farming from Nirmalpokhari, Kaski. More than 100 farmers from Nirmalpokhari and nearby villages work in the group’s coffee farm and industry today. Jyoti Group has been producing 1,000 kilograms of coffee annually. The group has been exporting its coffee to Japan. The Himalaya Arabica brand of coffee from Nepal is being supplied to Japan for the last many years.

VOITH: Vaidya’s Organization of Industries and Trading Houses (VOITH) is also engaged in agro-processing, tea production and animal feed production. Its subsidiary companies including Guranse Tea Estate, Mai-Illam Guranse Tea Industries and Nirvana Tea Processing and Packaging are involved in production and export of high-quality Nepali orthodox tea.

RK Golchha Group: Arihant Agri-farm and Research Center (AARC) is involved in the commercial production of cereals, vegetables, oilseeds and fruits, among other crops. Established in 2016, AARC is also promoting farm mechanisation as well as trading of agricultural products. The company has also been producing medicinal herbs and dairy products.

Golyan Group: Golyan group has established a company to promote indigenous farm products. It educates and enables farmers to produce quality products, and procures them from farmers. The group has been farming fruits and vegetables in 200 bighas of land in Jhapa. Farm products of Golyan Group are available in departmental stores of the Kathmandu Valley under the ‘Mato’ brand.

Buddha Air: Buddha Air’s managing director Birendra Bahadur Basnet established Nepal Krishi Company under the airline’s corporate social responsibility. It is involved in farming in different parts of eastern Nepal like Jhapa, Morang and Sunsari. For the past 20 years, Nepal Krishi Company has been encouraging farmers and farmers’ cooperatives by distributing various types of advanced tools and seeds to farmers. The company recently started its rice mill at Dangihat of Morang.

Dugar Group:
K.L Dugar group is also in agiculture business for more than a decade. The group has invested in different sector of agriculture. Established in 2000, Saurabh Food Products Pvt. Ltd. is located in Birgunj. Similarly, Vikash Flour Mill Pvt. Ltd., situated in Nepalgunj, a far western area of Nepal, is Nepal’s leading manufacturer of superior quality wheat flour, blended baby food, all purpose flour (maida) and semolina (suji). Vikash Mills exports its Chakki Aata to UAE, Singapore and China. Under name of Gyan Food Products Pvt ltd, the group is also operating a processing plant of Lentil, Gram, Arhar with a capacity of 70 MT per day.  The group has also invested on oil processing and herb harvesting.

Why are the corporates interested?
Corporate houses say they are investing in the agriculture sector because they see great potential in the sector. “Big investment can make a huge impact on agricultural development. Big industrial houses are investing in this sector because they have seen the potential,” Chairman of Muktinath Krishi Company Pvt Ltd, Bharat Raj Dhakal, said.  “Mass production and distribution of agricultural goods is needed. Industrial and business houses can play a big role.”

Dhakal further said he believed the investment of large industrial houses of the country is going to benefit the sector. Along with making a big investment, he underlined the need to foster cooperation with farmers and suppliers to run the agriculture business with a healthy supply chain.  

Deepak Malhotra, chairman of IMS Group, feels the same. “Agriculture has an immense potential in Nepal which needs to be exploited. Realizing this, we have invested in the agriculture with eyes on the export,” Malhotra said. “A large number of youth have returned to Nepal from abroad. To grab this opportunity, we have to develop the agricultural sector and that’s what the IMS Group is aiming at.”

Eye on subsidy?
Many, however, say big industrial and business houses are starting farms just to pocket government subsidies. Currently, banks are providing up to Rs 50 million in loans whereby 5 percent interest is subsidised by the government. The Nepal Rastra Bank (NRB), the central monetary authority of the country, has directed banks to abide by the instructions and disburse the loans accordingly.  

Malhotra refutes the allegations. “Law is the same for everyone. It is the responsibility of the government to ensure that loans are being issued properly and that no borrowers are misusing them,” he said, adding that the scheme is raising eyebrows due to a lack of understanding among the public.

Dhakal too emphasises the necessity for strong government oversight on this matter. “The government needs to study whether the subsidies are being misused. Instead of charging any individuals or groups of misusing subsidies, the government should identify the offenders and punish them,” he said, adding: “Loans and subsidies for agriculture ought to go to the actual farmers.”

While business houses argue that their investments will help the agriculture industry, small farmers say such houses are entering the sector just to pocket government subsidies. “We don’t oppose big investment in the agriculture sector. We only want them to take strong farmers along,” Uddhav Adhikari, former president of Nepal Farmer’s Group Federation, said.

He also alleged that the subsidy programme targets big investors only. “Due to big investors, small farmers have started to face problems. Farmers, whose sole profession is agriculture, are suffering due to the government’s rules. Most of them are not getting the government’s subsidies while others are forced to work as seasonal workers on their own land,” Adhikari said, “The government is doing nothing for small farmers.”

Small farmers are concerned that big investments with newer technology might displace them. Therefore, it is important for corporates to enter the farming sector in cooperation with small farmers. “As small farmers cannot compete with the big investors, they might face difficulty in utilizing the government subsidies. Some of them even struggle to get such loans, which corporates are easily getting. Such disparities must be addressed,” he added.

He said some corporates are doing really well in the sector, while others seem focused just enjoying the subsidies and grants. “Such activities should be controlled,” Adhikari said.

Road ahead
“While the traditional agriculture is gradually transforming into modern agriculture, the government is overseeing the sector based on the same old rule and law,” Malhotra said, underlining the need for legal reforms. “The way people work is changing. We are heading to industrial farming. However, legal hurdles are restricting this sector.”

Malhotra also said the existing ceiling on landholding is affecting the development of the agricultural sector. “No one is allowed to hold more than 11 bighas of land in their name. If they do so, they do not get any subsidies which means they have to pay more interest on loans,” he said, adding that the rule should be relaxed for those starting large-scale agricultural projects.

Adhikari, on the other hand, said corporates should focus on promoting agriculture based on the value chain.

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