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Commercialization of Agriculture:
Opportunities and Challenges
Krishna Prasad Pant
Context
• WTO to facilitate trade
• Trade facilitation means more competition
and more opportunity
• Competition needs efficiency
• Agribusiness Promotion Policy 2063
What hinders efficiency?
• Fragmented or loosely linked enterprises
in the commodity value chain
– low reliability in business relationships (in terms of quantity, quality and
price)
• Regulatory requirements (health, sanitary,
phytosanitary and quality)
– government-mandated
– industry/supermarket
– buyers
• High costs of production,
– small scale of production
– poor coverage & low quality of infrastructure
– inadequate public support
• Large proportion of isolated farms
Isolated farms
• Cause and result of subsistence farming
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geographic isolation
isolation from market
isolation from public support
technological isolation
information isolation
• Isolated farms find difficulty in
– starting a business
– selling their outputs
– purchasing for their daily needs
• WTO is very far for them
WTO and Agribusiness
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Scale sensitivity
Standards (quality, quarantine)
Technology transfer in agriculture
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Plant variety
Biotechnology
Agro-chemicals
Processing techniques
Service openings
Effects of policy changes abroad
Food prices and production
Competitiveness
Check-list for export competitiveness
√ Whether the product has export market or not?
√ Whether the quantity is large enough for scale of
economy in export?
√ What about the quality of the product?
√ Can it pass through the SPS/TBT measures
imposed?
√ Do we have a competent laboratory and
certification system in place to certify the quality
in the ways acceptable to the importing country?
√ Is the certification economical to make the
product compliance?
√ Can the aggregated product be traced back?
Supply-side Problems
• Highly fragmented businesses
– low economy of scale,
– limited commercial farming
– uneconomical to invest for research in product development and
market promotion,
– difficulties in the collection of the products,
– heterogeneity of the aggregated production,
– difficulties in product tracing back to the farm,
– high expenditures on testing and certification as these services
are charged on the basis of the services rendered rather than the
quantity of transaction,
• Poor export infrastructure within the country and in
transit
• Limited public supports in the exploration of the export
market
• Traders reluctant to start the export business,
• Risks of trade deflections or low quality consignment
Demand-side Problems
• Highly competitive
• Need to reveal product information
– production conditions
– quality of product
– other relevant information (Codex Alimentarius Commission, OIE, IPPC)
• Need to use some specified technology
• Requirements for grades and standards are ever increasing
• Certain products require health certificates, safety test marks, or
standards certification of the importing country
– Heat or chemical treatment
– Product modifications
– Labeling, marking, packaging
• Several pesticides are banned
– If not, MRLs are fixed
– tracking the level of pesticides applied to the crops in the field
• Government is made responsible for food and quarantine regulation
National Agriculture Policy 2061
• Increase competitiveness in regional and world
markets developing foundations of commercial
and competitive agriculture
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Large Production Packets with infrastructures
Insurance
Organic farming
Attraction to youths
Cooperative farming
Contract farming
Agribusiness Policy 2063
• Help to produce market oriented and
competitive agriculture
• Promotion of domestic marketing and
exports through the development of agroindustries
– Commercial production area
– Organic production area
– Export area
Packaging in AB Policy (1/2)
1. Infrastructure
– Agriculture road
– Rural electrification
– Irrigation
– Market network, auction
– Assistance for collection center, processing
plant, slaughter house
2. Inputs
– Agricultural inputs (seeds, fertilizers)
3. Land
– Lease hold pasture, herbs farming,
– Land ceiling exemption
Packaging in AB Policy (2/2)
4. Services
– Technology and technical services – human resource
development, service center in PPP
– Loan – project mortgage and group assurance,
repayment
– Insurance
– Information – e-commerce, PPP
– Cold storage – 25% rebate on electricity
– Export import certification, organic certification
5. Mechanization – custom duty rebate of 75 % for 10
years, interest subsidy on trucks
6. Processing – contract farming, local raw material,
7. FDI
What the government can do?
1. Quality control regulation and statutory law
• Quality control, disease-pest control and
quarantine control, certification
• Support private sector for quality control and
certification of agricultural products.
• Technical guidelines for quality control
– A reliable system of quarantine control and
food testing should be established to ensure
the export market that the products originating
from Nepal does not have risk of substandard quality and disease-pests.
• Legislation (food, quarantine, contract farming, land
contract)
Government
2. Investment and promote investment
• Infrastructure
• Long-term raw material development plan
– support measures requiring the agro-industries to
plan and develop supply of raw materials from
domestic sources
– incentives to agro-industries using the domestic raw
materials.
• Encourage private investments on local resource-based
and export oriented businesses (far reaching and
predictable measures)
– domestic
– foreign
• Pay certain fraction of premium for agricultural insurance
Government
3. Access to the market
• Ensure preferential access and country of
origin
• Lower tariffs on key agribusiness inputs
like packaging materials, farm green
houses, machineries, implements and cold
chain equipment, mother machines, etc.
• Rationalizing tariff structures on import
(from all the countries)
Government
4. Technical backups and marketing
• Technical backups for enhancement of productivity and
the quality
• Technical teams managed by the commodity
associations
• Encourage private sector to supply technology
• Marketing systems that can aggregate and link small
produce to traders and larger markets while maintaining
the traceability of the products.
– Training to and interaction among agribusiness
operators, traders and exporters
• Collection of agriculture enterprise related data, analysis,
projection and dissemination
Government
5. Knowledge generation
• Technology generation, verification
• Linking the livelihood concerns of small farmers
to the export market
• Market exploration
• Technical and managerial means of reducing the
cost of production and handling
• Post-harvest technology, preserving and storing
• Machinery and equipment
• Encourage private sector in research
Input-push based agricultural policy
focusing on government expenditure
Market-pull based policy
focusing on private investment
Business Creation
A problem of many people is an opportunity for some
What producers & processors can do?
1. Investment
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Identify the competitive area for
investment
Scale of production, suitable technology
Invest in quality control and certification
Establishing backward-forward linkages
is necessary to achieve the efficiency
Invite foreign companies (in joint venture)
to invest for value addition and exports
Producers & processors
2. Quality control
• Every input used in the value addition should be
as specified by the requirements of the export
market.
– Every step of the value addition needs to be tested by
an accredited laboratory and certified by the
competent authority.
• Adherence to technical guidelines for quality
control.
• Operating manuals to demonstrate quality
control as required by export markets
• Testing and certification as business
– register and operate under the government
testing and certification system
• SPS/TBT requirements of export market need to
be learnt by the agribusinesses.
Producers and Processors
3. Technical specifications
• Specify the terms of quality for the product, including
size, appearance, and other factors
• Product and process requirements should be known
before production planning.
– PP should be based on the contracts made with the
traders.
– PP should visualize all the problems and prospects of
production including the
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input use,
variety requirements,
pesticides and MRLs,
inspection and quality control,
farm households involved in the production process including
their consumption requirements during the crop season.
• Packaging & labeling should be as required by the
export markets
• Treatment of biological packaging materials
Producers and Processors
4. Cost of compliance
• Agribusiness should compare a priori the
– costs required for quality compliance
– expected benefits from export
– level of risks involved
What exporters can do?
1. Market explorations
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Explore the niche products
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Know if the product is eligible for entry to the
country of export
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Have information about the tariffs and non-tariff
barriers in importing country
Know the pre-shipment inspection requirements of
the importing country
Find quality, testing, treatments and certification
requirements and pass on these information to the
producers and processors
treatments and conditions required
health certificates, safety test marks, or standards
certification
Have full information of the product quality,
quantity, production conditions of your export
Exporters
2. Meeting the requirements
• Beware of low quality products or products imported
from elsewhere without having required value addition in
the country.
• For getting a favorable treatment on export, the goods
should be produced wholly or there should be sufficient
value addition within the country.
• Provide information asked by importers
• Get the feed-back from the consumers abroad
• If you face any problem in export market, inform to the
government
• Give inputs to the government for trade negotiations
Thanks
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