Back to the rootsOutput-based incentives in farming could make Nepal a food sufficient country.
Agriculture is Nepal’s dominant economic sector contributing one-third of the country’s gross domestic product and employing 70 percent of the population. The sector’s growth rate has not been encouraging and is unstable, ranging from 5.8 percent in 2008 to 4.5 percent in 2011 and 1.9 percent in 2015. Nepal used to produce surplus food until the 1970s; but since then, it has become a net food importing country.
Surprisingly, an increasing proportion of agricultural lands in rural areas have been kept fallow. In 2013-14, about 25 percent of the total arable land was left uncultivated. In urban areas, there is a rapid decline in agricultural lands due to urban expansion. The underutilisation of cultivable land is associated with land degradation, loss of crop diversity, and food and nutritional insecurity.
The agriculture industry is facing a severe shortage of the younger generation. Every year, a large number of farmers are moving out of agriculture. With the objective to support farmers and motivate them, the government of Nepal initiated an input subsidy programme in 2009. Nevertheless, farming is one of the least preferred occupations.
The main reason for neglecting agriculture is due to the high opportunity cost of being a farmer. Farming is less profitable compared to other occupations, which is mainly due to the low price of agricultural produce. Although the country has experienced a dramatic surge in the price of many agricultural commodities, farmers are not getting reasonable prices for their products. The benefits of increased market prices have been mostly received by intermediaries such as middlemen, processing industries and supermarkets.
Providing output-based incentives could make farming an aspirational choice. The incentives can be in the form of better prices for farmers' produce. The government can set price floors for major agricultural products. Better prices for agricultural products will motivate farmers to invest more time, money and energy in agriculture. In addition, there should be development and enhancement of farmers' markets where farmers can sell their products directly to consumers, bypassing intermediaries. Furthermore, crop insurance against natural disasters provides the security of investment in agriculture.
To support consumers, basically landless people and marginal farmers who can be affected by the higher prices for agricultural products, the government can provide consumption support through food quotas. Provisions to set higher prices for organically produced products, and rare and important crop cultivars and species would further support sustainable agricultural development.
Security of investment in agriculture through insurance and fair prices for agricultural products means profitable farming that allows farmers to live a better lifestyle. In the foreseeable future, there will be a greater number of farmers, sustainable management of cultivable land, increased investment, and more agricultural research, leading to overall agricultural development.
This will further support agrobiodiversity conservation and improve food security, nutrition and the health of the people. It can also be expected that people will migrate to rural areas from urban areas and engage in farming which reduces the population pressure in urban areas and enhances rural development.
My recent study in a village of Kaski district, Nepal indicates that providing incentives to farmers for producing food in the form of fair prices for their products is the potential pathway to agricultural development. On a hypothetical scenario that ‘all the agricultural products you produced will be purchased by the government at 20 percent more price than the average cost of production’, 91 percent of the farming households who kept their land fallow consecutively for more than two years reported that they would cultivate those lands and produce crops for the market. And it increases to 97 percent when the scenario was further improved by providing easy access to inputs and insurance against natural disasters.
Such policies can be applicable to many other countries like Nepal where there is a high level of unemployment, barren cultivable land, and the country is food insecure. Nevertheless, before adopting it at the national level, this needs to be piloted and tested on a smaller scale.
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