Budget 2020/21: The Agricultural Perspective

Just as every other aspect of the economy, the Covid-19 has greatly hindered the agricultural sector threatening the livelihood of numerous farmers across Nepal and the food security of the entire Nepalese. The farmers have experienced problems in the form of failure to access the market, difficulty in the transportation of vegetables, and spoilage of products, that has compelled the farmers to destroy their produce. Moreover, the lockdown has impacted the current peak harvest season that is deemed to threaten the food security in the incoming cycle. Likewise, Nepal, being the net importer of chemical fertilizers, the lack of access to this vital farm input in the time of crisis has exacerbated the threat of food crisis.

With the pandemic bringing forth the ever-existent challenges that have always persisted in the agricultural sector, it heightened the expectations of the general public towards the FY 2020/21 budget, hoping that the policymakers would better identify the challenges and seize the opportunities in the agricultural sector to look beyond the constraints and craft a robust architecture to help the sector and the farmers to heal and grow.

Bearing the present crisis in mind, the government has taken substantial initiatives that prioritize the development of the agricultural sector of the country. The plans include commendable new initiatives such as dividing agricultural land into pocket zones and promoting one crop policy, soil testing for the purpose of identifying most suitable crops for the lands, promoting quality seed through testing and certification, establishing haat bazaar and agricultural market-hubs, introducing mobile insurance programs, branding of high-value crops like tea and coffee, involving agricultural universities in research and development and making agreements with other nations to create an international market.

The budget speech has also incorporated other plans related to expanding irrigation, storage facilities and modern technology throughout the nation. Although, the government has time and again promised the implementation of such programs through past budgets; they have been of no avail. The major factors that have hindered such developments are inadequate funding and private sector involvement. Yet, this budget failed to incorporate plans to promote Public-Private Partnership (PPP) and foreign investment in the sector that would be critical not only to bridge the investment gap but also to help the transfer of technology and expertise that would foster modern agriculture. Moreover, the promotion of contract farming has been at the heart of all the plans and programs of the current government since it came into power. However, till date, no Act/Legislation has been introduced to facilitate the same and the country has not experienced an incredible leap in the sector.

Another point of the budget speech guaranteed cash subsidy to the farmers producing improved seeds and ensured the supply of adequate chemical fertilizers through subsidies by increasing the budget under this heading to Rs 11 billion. However, the problem with these subsidies is that it typically transfers income from taxpayers to relatively wealthy farm households with high economies of scale rather than the small and marginal farmers. Moreover, the high rates of subsidies lead to additional complexities in the public finance sector as new and increased investment in agriculture is required year on year. This increased expenditure not only harms the fiscal position of the government but also disproportionately benefits the large farmers, accentuating vertical inequality within the sector. Therefore, despite the huge cost of the policy, subsidies have not been able to meet the entire demand of the market and have left thousands of farmers without quality seeds and fertilizers.

While the budget has provided the establishment of local markets, haatbazar, market-hubs, it has overlooked a major component – well-connected agricultural road network – to access those markets. As the current rural road network is underdeveloped, farmers have to transport the products themselves on foot or rely on middlemen. Farmers who can’t transport goods on their own usually end up selling their products at very low costs, while the consumers pay high final food prices due to unavoidable costs incurred by the presence of the middlemen.

Despite the persistent emphasis to be agriculturally self-sufficient, the budget has failed to emphasize on value addition that involves agro-processing. We are well aware that much of the post-harvest losses have been a result of lack of adequate value addition, among other major reasons. The lack of mention of promoting processing industries, quality standardization services such as testing and certification of agriculture products, proper accreditation service and good manufacturing practices in the budget, yet again, serves as a roadblock to the development of a proper value chain. Another setback on the road to self-sustainability is that the budget does not state the need to focus on the high value cash crops that the country has a comparative advantage in.

Scrutinizing the plans and policies, the budget has actually failed to address the two most important issues – adequate supply of farm input and facilitation of proper transportation of agricultural products – that will severely hamper the development of the agricultural sector amid and beyond the raging pandemic.

This article is written by Ayushma Maharjan, Ankshita Chaudhary, Prakash Maharjan, and Suzana Shrish.