Policy Review on National Agricultural Policy, 2004

KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

Pichhe Tole, Gwarko, Kathmandu

Submitted to:

Ms. Anupama S. Panta

Faculty of Nepali Economics

Bachelor of Business Administration

Submitted by:

Jeevan Regmi

Roll no: 18781

Section: "A"

DATE: March 23st, 2020

TABLE OF CONTENTS
INTRODUCTION 4

SUMMARY 4
1. AGRICULTURAL PRODUCTION AND PRODUCTIVITY: 4
2. SPECIAL FACILITIES FOR TARGET GROUPS: 4
3. DEVELOPMENT OF COMMERCIAL AND COMPETITIVE FARMING SYSTEM: 5
4. CONSERVATION, PROMOTION AND UTILIZATION OF NATURAL RESOURCES AND THE ENVIRONMENT: 5
5. IMPLEMENTATION AND MONITORING ARRANGEMENT: 5

ANALYSIS 5
PROS OF NATIONAL AGRICULTURAL POLICY 2004 5
1. INCREASE IN PRODUCTION LEVEL DUE TO PROPER UTILIZATION OF RESOURCES: 5
2. INCREASE IN NATIONAL INCOME: 7
CONS OF NATIONAL AGRICULTURAL POLICY 2004 7
1. FINANCING: 7
2. REGULATORY FRAMEWORK: 8
3. BUDGET DEFICIT: 8

EFFECTIVENESS OF THE POLICY 8

1. WOMEN IN AGRICULTURE 8
2. ESTABLISHMENT OF AGRICULTURAL UNIVERSITY 9

INEFFECTIVENESS OF THE POLICY 9

1. INEFFECTIVENESS REGARDING GOOD GOVERNANCE 9
2. INEFFECTIVENESS REGARDING INCREASING PRODUCTIVITY 9
3. INEFFECTIVENESS REGARDING PROFITABLE COMMERCIALIZATION: 9
4. INEFFECTIVENESS REGARDING INNOVATION AND AGRO-ENTREPRENEURSHIP PROGRAM(INAGP): 10

SOLUTIONS 10

MANAGERIAL IMPLICATIONS: 11

REFERENCES: 11

HONOR CODE 11
INTRODUCTION
The agricultural sector is the highest employer in Nepal at 66% of the population. Nepal
Agriculture is in a low development stage. The majority of the population engaged in agriculture
are basically traditional ways of farming which is less commercial based and more for self
consuming purposes. Productivity and competitiveness of the sector are low, adoption of
improved technology is limited. And even though most cultivated area is devoted to cereals,
there is no proper supply chain management where raw materials are processed further into
finished products. There is a growing food trade deficit and malnutrition is high. Some
subsectors such as dairy processing, poultry, tea, vegetable seed and fisheries show dynamism,
but overall, these positive signs are not yet sufficient to lift a large number of people engaged in
agriculture out of poverty. When the long-term agricultural strategic plan known as the
Agriculture Perspective Plan (APP) was launched in 1995-96, Nepal agricultural sector was in a
worse situation. After AAP was launched, improvement in living standards has occurred and that
the agricultural sector overall was performing better than in the past.

SUMMARY
The National Agricultural Policy 2004 (NAP-2004) is a policy in the agricultural sector which
guides all the commodity and subject specific policies formulated in this particular sector. The
major vision of this policy is to increase the living standard of people from the shift of
subsistence oriented system to competitive commercial farming system. The policy ensures the
objectives to increase in agricultural production and productivity. These objectives would be
fulfilled by the implementation of policies formulated in the year 2004. The policies under the
National Agricultural policy are categorized as:

1. AGRICULTURAL PRODUCTION AND PRODUCTIVITY : The policy aims to develop and expand
irrigation facilities, agricultural roads, rural electrification and other appropriate agricultural technologies.
Further, the use of information technology and means of mass communication is emphasized in the
agricultural extension activities. Agricultural and forestry Universities are also proposed to be established
in order to produce skilled agricultural human resource
 2. SPECIAL FACILITIES FOR TARGET GROUPS: Government is willing to bring all the marginalized
groups of farmers into the mainstream of agricultural development. The government has put special
emphasis to provide better facilities to the Dalit and Utpidit classes as well to women farmers

3. DEVELOPMENT OF COMMERCIAL AND COMPETITIVE FARMING SYSTEM : Larger projects

which create the base for commercialization are proposed to be operated and supported as central
projects along with the participation of the local bodies. Further large production pockets are proposed to
be developed to produce agricultural products in larger quantities and better qualities. Agricultural
training for capacity improvement and enterprise promotion shall further support the notion of
commercialization.. Further a separate agricultural industry development policy is also mentioned to be
formulated and implemented.

4. CONSERVATION , PROMOTION AND UTILIZATION OF NATURAL RESOURCES AND THE

ENVIRONMENT: Talking from the environmental perspective, the policies encourage the production,
use and promotion of organic fertilizers. The use of agro chemicals on the condition shall be minimized.
The policies further emphasize the importance of organic agriculture. Organic farming shall be
encouraged and necessary support shall be provided for the certification. Arrangement is said to be made
for gene banks and in situ conservation is said to be encouraged.

5. IMPLEMENTATION AND MONITORING ARRANGEMENT : National Agricultural Development

Board at the nation level. A Central Agricultural Development Committee shall be formed at the centre
level and Regional Agriculture Development Committee at the regional level in order to assist the Central
Agricultural Development Board. National Agriculture Development Board shall monitor the
implementation of this National Policy

ANALYSIS

PROS OF NATIONAL AGRICULTURAL POLICY 2004

 1. INCREASE IN PRODUCTION LEVEL DUE TO PROPER UTILIZATION OF RESOURCES: Major emphasis is
given in the utilization of available resources. Also proper training and development of the
farmers will help our agricultural sector to move closer to its production capabilities.
The figure below shows how we will move closer to the optimal production possibility
curve:

In the above figure if the policies work accordingly to utilize our human, natural, physical and financial resources
properly, we could reach near our production possibility. We could move from point ‘A’ to point ‘B’ towards
optimum capacity as shown in the above figure.

S HIFT IN PPC : Proper implementation of this policy is expected to shift the PPC outwards also. The
PPC shifts outwards due to the mobilization of new technologies and technical services that
improves the production process and helps to boost the economy efficiently. As we read the policies,
we can notice a high degree of emphasis put on the development of infrastructures and technology. Such
improvement in technology helps us to increase our production capabilities thus shifting the Production Possibility
Curve (PPC) to the right. This condition is presented below:
In the above figure there is increase in production capabilities, i.e shift of PPC1 TO PPC2. The shift is due to
technological advancements in agriculture sector so we can notice the shift is towards agricultural goods.

2. INCREASE IN NATIONAL INCOME: If the policies are carried out effectively, the national income will
increase as it would hit all determinants (consumption, investment, government spending, and net exports)
of the aggregate expenditure curve. With the increase in level of income of the rural farmers the
consumption in the nation will increase, the investment will increase and more investors and foreign direct
investment come. Also the government spending in developing the rural areas will increase and finally due
to the increased productivity the exports will also increase. In summary, the entire AE curve will shift to the
right and as a result increasing the national income. This is shown in the figure below:
 In the above figure all the components of AD curve (consumption, investment,
government spending, and net exports) rise because of the above mentioned reasons.

CONS OF NATIONAL AGRICULTURAL POLICY 2004

Even though the flow of investment for infrastructure will greatly improve the future of Nepal agriculture
still there are other challenges that encounter the infrastructure projects.
1. FINANCING:
Each infrastructure project comes with a huge capital expenditure and huge capital expenditure
brings high risks and high expected returns. Long gestation periods and disrupted cash inflow have
always been a major problem for any infrastructure project. Previously the projects were carried out
by the government and no proper viability of the projects was checked. Enron’s Dabhol Power plant
failure (2001) in India is one such example of the ignorance of the state government in infrastructure
project. Risks associated with infra projects pose another serious challenge in financing and
implementing infrastructure projects such as market risk, operational risk, environment risk, human
rights risk, commercial risk and construction risk.

2. REGULATORY FRAMEWORK :
Nepal lacks regulatory framework for infrastructure. Several projects overrun cost and time because
of the state or central government policies like land acquisition, environment clearances, finance
approvals etc.

3. BUDGET DEFICIT: The policies in the National Agricultural Policy, 2004 require a high level of
spending for it to be successful. The policies talk about developing and expanding irrigation facilities,
agricultural roads, rural electrification and appropriate agricultural technologies. In areas with
irrigation, road and electricity facilities, arrangement shall be made to ensure both intensive and
extensive use of the available technologies. Also, the policy plans to carry on large projects covering
more than one district, to promote potential agricultural production and enterprises and create the
basis of commercialization. In other words, these projects are not possible unless the government
allocates a high amount of its budget. For a country like Nepal, who is already operating on a high
budget deficit, it will further increase the deficit and create pressure in the country.

EFFECTIVENESS OF THE POLICY

 1. WOMEN IN AGRICULTURE
As young people, especially men, seek employment in cities or abroad, ag- riculture is feminizing in
Nepal. Women tend to be more disadvantaged in seeking off-farm employment, and earn less as
farm laborers. On the other hand, a group of women that produced fresh vegetables and also
sold them stated that they had full control of the income and how it was spent, regardless of
whether their husbands were abroad or not .
The policy stresses out on much on trainings and encouraging participation of women in
agriculture. The National Agricultural Policy was issued on 2004 . It has now been more than
one decade since then. The involvement of women in income generating activities in Nepal
have increased since then; including of those in agricultural secto r.
2. ESTABLISHMENT OF AGRICULTURAL UNIVERSITY The policy in its quest to increase its
agricultural production and product ivity has planned to establish `` Agricultural and Forestry
University`` and other agricultural colleges. University was created by the Parliament of Nepal
through a bill passed in June 2010 merging two constituent campuses of Tribhuvan
University: the Rampur Agriculture Campus of the Institute of Agriculture and Animal
Science and the Forestry Campus, Hetauda of the Institute of Forestry in Hetauda,
Makwanpur establishing Agriculture and Forestry University (AFU), a public agricultural
university with central offices in Rampur, Chitwan, Nepal.

INEFFECTIVENESS OF THE POLICY

1. INEFFECTIVENESS REGARDING GOOD GOVERNANCE : The part about good governance in the
document does not show commitment in implementation of National Agricultural Policy 2004. If that were the
case, we don’t have to see rich people taking subsidy allocated for poor farmers. Sound planning of
implementation will not be possible just by talking about the theoretical aspect of good governance. Good
governance is just limited to suggestions rather than identifying what should be done. In the place of good
governance we can see present agricultural bureaucracy engulfed within nepotism and obeying orders from
higher officials.
The description of good governance should be presented as a strategic work plan. Restructuring
bureaucracy, review of the procurement law of the government and efficiency in the flow of
service and technology should be taken as important constituents of good governance while
talking about agricultural sector.
2. INEFFECTIVENESS REGARDING INCREASING PRODUCTIVITY : Productivity will increase in case of
timely availability of quality inputs. The policy recognizes that the long term productivity and competitiveness
of the agricultural sector depends on the access and adoption to improved technology as well as effective
management of natural resources and other inputs to achieve increase of total factor productivity.
 Nepali agriculture is still weaker as small farmers can’t invest and take risks against the possible
losses in farming on their own. Primarily, because of this farmers are moving away from
agriculture. Further, it should not be forgotten that APP has failed mainly because donors
encouraged developing the project with high investment and eventually they backed off
themselves.

3. INEFFECTIVENESS REGARDING PROFITABLE COMMERCIALIZATION:

Profitable commercialization by transforming subsistence agriculture is proposed while a suitable
environment for investment and infrastructure development are presented as the main areas of reform in
the policy. Although, it discusses the future of Nepali agriculture, nothing has been mentioned about the
transformation of subsistence agriculture to commercial. Commercialization of limited number of
products prioritizing their chain value is presented in this proposal. However, in reality, it has not
internalized well that a large amount of production and marketing of any specific product is not feasible in
a country like Nepal which has diverse biological and environmental conditions.

4. INEFFECTIVENESS REGARDING INNOVATION AND AGRO-ENTREPRENEURSHIP PROGRAM (INAGP):

Improved tax incentives, establishment of agribusiness incubators, and matching grants under INAGEP are
proposed, however, any plan of implementation or the types of benefits have not been elaborated. The
management model proposed for this program is the same as above which may not be effective during
implementation.

SOLUTIONS

1. The description of good governance should be presented as a strategic work plan.

Restructuring bureaucracy, review of the procurement law of the government and
efficiency in the flow of service and technology should be taken as important
constituents of good governance while talking about agricultural sector.

2. National agriculture policy (2004) in general is based on capital intensive mode of

agricultural development solely aimed at promoting commercial agriculture. Nepali
agriculture, given its scale and size, cannot be developed by mimicking agricultural
systems of other countries. It needs to be focused with an integrated and holistic vision
of agricultural development with low-external-input approach to agriculture for Nepal.
 3. Balance in demand and supply:The agricultural demand in market should be analyzed very carefully
in order to measure the productivity increment. Proper methods and offices should be assigned to know
how much are we importing and what types of agricultural goods, then only we can plan on the proper
supply. Our first target should be making import of agricultural goods zero then we can look further into
commercialization. We should not be depended on china and India for basic agricultural produce. We
should more focus on self-fulfilling part first.

MANAGERIAL IMPLICATIONS: Organizations should make up some effective plans, implement them,
test the performance and measure its results to achieve their targeted goals. Implementation and the proper
supervision, regulation and control of activities is something which we should focus more for the accomplishment
of goals in an organization.

REFERENCES:
National Agricultural Policy (2004)

Agriculture Development Strategy (ADS), 2014

An Analysis of the Agricultural Development Strategy of Nepal (ADS 2015-2035) from Civil
Society Perspective

HONOR CODE
On my honor as a student, I pledge that I have neither given nor received aid in this assignment.

Jeevan Regmi

18781