The importance of agriculture to Nepal in the period covered in this section was in meeting the country’s growing demand for food, as well as in raising the level of its exports. Food grain was the primary export of the country at that time with 60 percent of the income from exports derived from the export of food grains alone (NPC 1965). Hence, agricultural development was the most important priority area. All the periodic plans from 1956 to 1990 identified the lack of agricultural modernisation as one of the most important challenges facing Nepal’s agriculture. They identified the lack of use of new plant varieties, lack of use of modern agricultural tools and techniques, and the subsistence mode of agricultural
157 potential. Similarly, low agricultural productivity, a higher population growth rate compared to the growth rate of agricultural production, increased population pressure on cultivable land due to the lack of industrial development, erratic weather conditions, lack of irrigation
facilities, lack of credit to farmers, and so on, were other problems of the agriculture sector (NPC 1956, 1962, 1965, 1975, 1980, 1985).
To address these problems and challenges, governments laid out various plans and policies in different plan periods. Mostly, they emphasised the use of modern agricultural tools and techniques. The Third Plan (1965–1970) envisaged establishing the Agricultural Supply Corporation as a government entity for the purpose of providing improved seeds, fertiliser and modern agricultural tools to farmers (NPC 1965). The Corporation was established immediately in 1965, and was separated into two entities—the Agriculture Inputs
Corporation (AIC) and the Nepal Food Corporation (NFC)—in 1974 (ANZDEC 2002). The AIC had three objectives: i) importing chemical fertilisers from the international market and distributing them throughout the country; ii) producing and processing recommended
improved varieties of seeds and distributing them throughout the country; and iii) importing, locally procuring, and distributing agricultural chemicals and implements whenever the need arose (ANZDEC 2002). Hence, the use of chemical fertilisers, improved seed varieties and modern farming tools were emphasised with the idea of increasing agricultural production and productivity, and modernising agriculture. Such policies continued in every plan period until the Sixth Plan (1980–1985), which, despite emphasising modern farming techniques, discouraged mechanised farming and encouraged labour-intensive methods (NPC 1980). This was out of fear that mechanisation would displace people from farms, and the Nepali
economy did not have the capacity to absorb displaced people into the underdeveloped manufacturing and services sectors.
Although agriculture was given the highest priority and food production was emphasised for self-consumption as well as for exports, food shortages in the hills and mountains were a
158 perennial feature. This became more acute prior to the 1990s due to transportation
difficulties. The surplus foodgrain from the Tarai28 used to be exported to India instead of
being supplied to the hills and mountains of Nepal (Pyakuryal, Roy & Thapa 2010). The First Plan had emphasised that every district needed to be self-sufficient in food to the extent possible (NPC 1956). This did not materialise, but the policy of self-sufficiency continued. The Seventh Plan set a target of 10 years for the hills to become self-sufficient in food grain production (NPC 1985). Meanwhile, the government undertook programmes to distribute food grains from surplus to deficit districts. At the same time, it was also engaged in exporting food grains through SoEs.
Along with promoting increases in food grain production, cash crop production was also emphasised. This was in accordance with the objective of developing the industrial sector, which would mostly be agro-based, such as sugar and tobacco industries, and would therefore need cash crops as raw materials. However, production targets for food crops and cash crops varied significantly over the different plan periods. The Third Plan target of increasing
production of food grains by 15 percent and cash crops by 73 percent had been reduced to 4.3 percent and 5.2 percent, respectively, by the time of the Seventh Plan (NPC 1965, 1985). Higher targets for increases in cash crop production in the initial years were due to the low base of cash crop production in earlier years.
The Government’s promotion of cash crops for industrial development was a well-thought- out policy since industrial development was essential to transfer human and capital resources from agriculture to other sectors. In choosing cash crop production over food crops, the idea was that farmers could earn more income from cash crops, which they could use to buy food from the market. However, there were mainly two implications of this policy. First, cash
28 The Tarai is the southern flat land of Nepal, which is the most ideal for agriculture due to its geography. It is
considered the country’s food basket as this region accounts for the major part of cereal production, most importantly rice, which is the major staple food.
159 crops for industrial purposes would have to be produced from larger swathes of land owned by bigger farmers. Hence, only bigger farmers would benefit from the production of cash crops. Second, given the country’s topography, large swathes of land were in the Tarai, which was also the area that produced the majority of food grains, especially rice. Hence,
production of cash crops would significantly reduce the production of food crops. The government might have devised the policy with the intent of increasing the production of both food crops and cash crops to ensure both agricultural and industrial development. However, it does not seem that the trade-offs and implications of the policy were carefully analysed.
Also, to incentivise farmers, the government adopted a policy of ensuring fair prices for agricultural products by fixing minimum purchase prices of principal food crops such as paddy, wheat, maize and lentils, and cash crops such as cotton, oilseeds, jute, tobacco, sugarcane and cardamom (NPC 1980). Similarly, agricultural subsidies were provided in the form of grants to the Agriculture Development Bank to meet the administrative costs
associated with providing credit to farmers, transporting improved seeds and chemical fertiliser to the hilly region, purchasing chemical fertiliser, providing loans to install shallow tube-wells, and so on (NPC 1975).
The agricultural subsidies exerted huge pressure on the government exchequer. Moreover, the bigger farmers were especially benefiting from the subsidies, compared to the smaller
farmers. Therefore, the Sixth Plan envisaged abandoning subsidies on chemical fertilisers and selling them at cost price. In the same vein, the Seventh Plan planned to gradually reduce prices and transport subsidies present in the sale and distribution of chemical fertiliser. It also planned to engage the private sector and cooperative organisations in the sale and distribution of agricultural inputs. Plans to withdraw agricultural subsidies and open the agricultural inputs market to the private sector were made with the idea of lessening government support to the agriculture sector and increasing the role of the market.
160 However, the plan was not implemented immediately. The government continued to provide support to the agriculture sector to attain self-sufficiency. In 1987, during the Seventh Plan period, the government launched the Basic Needs Programme (BNP) as a long-term action plan stressing the fulfilment of people’s basic needs through self-sufficiency to the largest extent possible (World Bank 1990). The major attention of the BNP was in increasing food production to attain national self-sufficiency in staple foods: food grains, pulses and potatoes. To attain this, the government devoted two-thirds of the prospective investments under the programme to the agriculture sector, although in the Sixth Plan it had envisaged reducing some agricultural subsidies. To meet the basic needs target in other areas such as clothing and shoes, the government designed supplementary programmes in non-food crops and livestock products. A target was set to be self-sufficient even in cotton (NPC 1985) although cotton is not a product of comparative advantage to Nepal; indeed, it does not even feature in Nepal’s agricultural statistics.
The targets set in the BNP, along with the investments necessary to achieve them, were too ambitious (World Bank 1990). Against a backdrop of policy and institutional constraints, and a lack of adequate technical and administrative implementation capacities, the BNP could not achieve its objectives (World Bank 1990). What it demonstrated, however, is that the
government wanted to attain self-sufficiency in food. This aligned with the idea of national food sovereignty, although the idea of food sovereignty only surfaced prominently on the world stage later.
In setting its food and agricultural policies, Nepal was not working alone, however. It was aware of global events regarding food and agricultural issues. As far back as the early 1960s, Nepal was aware of the “free from hunger movement” that was ongoing in the world (NPC 1962). Nepal’s focus on increasing cereal production, and the awareness of the need to have a food policy to raise food and nutritional standards to meet the objectives of the “free from hunger movement”, was inspired by, among other things, this global movement (NPC 1962).
161 Thus, prior to the 1990s, problems in the agriculture sector in relation to land and other issues were identified. Accordingly, different plans and policies prioritised agricultural
development. However, the situation of agriculture did not alter much. While adverse weather conditions and lack of irrigation facilities and inadequate infrastructure were
identified as the major reasons for the low performance of Nepal’s agriculture sector, internal administrative factors, such as a lack of timely administrative decisions, were also to blame (NPC 1975, 1980). Most importantly, the agricultural plans and policies could not bring about improvements in the lives of small farmers and peasants.