Agriculture Perspective Plan

Implementation Action Plan Preparation

APP Implementation Status Report

Annexes

April 2006

In Development Group Limited (UK)

in association with

NARMA Consultancy - Nepal

and

SEEPORT Consultancy - Nepal

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Table of contents ANNEX 1: INTRODUCTION ............................................................................................................. 1 ANNEX 1.1: OBJECTIVES AND STRATEGIES OF NEPALS APP............................................................. 1 ANNEX 1.2: EXAMPLES OF CONTEXTS, POLICIES AND INSTITUTIONS EVOLVED DURING THE TENURE OF APP IMPLEMENTATION (MAJOR).................................................................................................... 2 ANNEX 1.3: STUDY TOR..................................................................................................................... 4 ANNEX 1.4: LIST OF PERSONS MET AND CONSULTED........................................................................ 13 ANNEX 1.5: COMPOSITION OF TWT.................................................................................................. 15 ANNEX 1.6: COMPOSITION OF THE HLTF ......................................................................................... 13 ANNEX 1.7: CONSULTANTS FOR THE STUDY .................................................................................... 16 ANNEX 2: APP ACHIEVEMENTS ................................................................................................. 17 ANNEX 2.2: IRRIGATION.................................................................................................................... 17 ANNEX 2.3: FERTILISER .................................................................................................................... 26 ANNEX 2.4: TECHNOLOGY ................................................................................................................ 29 ANNEX 2.5: ROAD ............................................................................................................................. 37 ANNEX 2.6: RURAL ELECTRIFICATION .............................................................................................. 39 ANNEX 2.7: CREDIT........................................................................................................................... 40 ANNEX 2.8: LIVESTOCK .................................................................................................................... 42 ANNEX 2.9: HIGH VALUE COMMODITIES ......................................................................................... 54 ANNEX 2.10: AGRIBUSINESS ............................................................................................................. 55 ANNEX 2.11: FORESTRY .................................................................................................................... 66 ANNEX 3: STATE OF APP IMPACTS ........................................................................................... 81 ANNEX 3.2: POVERTY REDUCTION .................................................................................................... 81 ANNEX 3.3: FOOD SECURITY ............................................................................................................ 83 ANNEX 3.4: ENVIRONMENT .............................................................................................................. 85 ANNEX 3.5: GENDER ......................................................................................................................... 88 ANNEX 4: POLICY, INSTITUTIONAL AND OTHER CONTEXTUAL ENVIRONMENT ... 92 ANNEX 4.3: INSTITUTIONS ................................................................................................................ 92 ANNEX 4.4: OTHER CONTEXTUAL ENVIRONMENT ............................................................................ 98 ANNEX 5: EXPLANATION FOR OBSERVED PERFORMANCES......................................... 101 ANNEX 5.2: PROBLEMS AND CHALLENGES ..................................................................................... 101

Annex 1: Introduction Annex 1.1: Objectives and strategies of Nepals APP 1. Main objectives of the APP are: to accelerate the growth rate in agriculture through increased factor productivity. to alleviate poverty and achieve significant improvement in the standard of living through accelerated growth and expanded employment opportunities. to transform the subsistence-based agriculture into a commercial one through diversification and widespread realization of comparative advantage. to expand opportunities for an overall economic transformation by fulfilling the precondition of agricultural development. to identify immediate, short-term and long-term strategies for implementation, and to provide clear guidelines for preparing periodic plans and programs in future Main Strategy of APP are: A technology-based green revolution in agriculture becomes the initial engine of accelerated growth. Accelerated agricultural growth creates a demand-pull for the production of high-value commodities in agriculture, as well as for non-agricultural commodities, with consequent large multiplier effects on other sectors of the economy. Broadly based high employment growth then becomes the mechanism for achieving societal objectives. Public policy and investment focus on a small number of priorities, building on past investment in human capital and physical and institutional infrastructure. A package approach to development is introduced, which in Nepal's case would be differentiated for the terai, hills, and mountains, and would recognise the powerful complementarity between public and private investment and priorities, and would ensure their co-ordination. To achieve broad participation, the strategy is regionally balanced and explicitly ensures the participation of women.

2.

The strategy has 7 components. First, accelerating agricultural growth. Second, doing so through large, concentrated investment in a small number of input priorities. Third, those input priorities are STW irrigation in the terai, agricultural roads, fertilizer, and the technology system of research and extension. Fourth, a small number of high- value commodity priorities to facilitate intensification of agriculture, especially in the hills. Fifth, those priorities are citrus, vegetables and vegetable seeds, apples, apiculture and sericulture. Sixth, strong multipliers from increased farm incomes to growth of output and employment in the rural non-farm sector, as the principal means of solving the problems of employment, poverty, environment, and dispersal of urbanization. Seventh, an implementation mechanism that operates at the district and national levels, and is complemented with an analytical body to facilitate reinforcement and adjustment of the plan over time.

Annex 1.2: Examples of contexts, policies and institutions evolved during the tenure of APP implementation (major) 1. Context More power and authorities devolved to local elected bodies through the promulgation of the Local Self-Governance Act 1999, but absence of the elected local leaders. Liberalisation and open market economy and membership in the World Trade Organisation, nearing to the establishment of SAFTA, and membership in the BIMSTEC. Increased support and activities for the public-private partnership, privatisation and outsourcing. Renewed emphasis on good governance, transparencies, timely delivery of services to the people, gender mainstreaming, equity, inclusion, etc. Phenomenal growth of non-government and civil society organisations. Producers increased dissatisfaction with the pricing policies of companies and industries, which purchase raw materials, for example, Sugar Factories, Dairy Industries, Tea Companies, tec. Donor assistance declining in the agricultural sector. Termination of government subsidies on fertiliser and shallow tube wells. The Poverty Reduction Strategy Paper (PRSP) formulated with four distinct but interrelated pillars. Escalation of the insurgency movement (domestic conflict) in the country and difficulties for the government staff including frontline development staff to enter into internal parts of the districts. Increasingly rising expectations of the rural people, and support for the participatory approaches increased and its value and usefulness being recognised at all the levels of the government system.

2.

Policies Allocation of resources within the framework of the Medium Term Expenditure Framework (MTEF), Prioritisation of Government Resources and Budget. Devolution of authorities and power to local bodies. Increased role and responsibilities to the private sector- private sector development policy. Conserving agricultural bio-diversities. Strong commitment to open, liberal and market led economic growth. Formulation of sectoral policies and strategies (e.g., National Agricultural Policy, Irrigation Policy, Revised Forest Policy, National Biodiversity Strategy, Water Sector Strategy, Private Sector Development Policy, National Fertiliser Policy, Tea and Coffee Development Policy, Local Infrastructure Policy and so forth); Institutions Devolution of basic development functions including agricultural extension services to the local bodies Outsourcing agricultural research under the competitive research grant systems Increased collaborations and partnerships with the civil society organizations and the private sector (e.g. public-private partnership) Termination of Agricultural Input Corporations monopoly to import and distribute the fertilizer in the country Pocket package strategy Display of civil charters in all the development offices Increasingly support and confidences in the participatory approaches

3.

Establishment of the National Agricultural Development Committee, Central Agricultural Development Implementation Committee, Regional Agricultural Development Committee and District Agricultural Development Committee APPMAU established at the MOAC. Reorganisation of the major line ministries namely MOAC, MOLD and MOWR in governments decentralisation policy.

Annex 1.3: Study TOR Concept Note and ToRs for1 Agriculture Perspective Plan Implementation Action Plan Preparation January 2005 Background and Rationale 1. His Majestys Government of Nepal (HMGN) has issued the Agriculture Perspective Plan (APP) as a 20 year vision and strategy for agriculture led growth in 1995 and has implemented it since 1997, the first year of the Ninth Five Year Plan. The APP is one of the documents that have received consensus from major political parties and key Nepalese stakeholders. Almost all the bi-lateral and multilateral agencies endorsed and acknowledged the potential merits of APP for Nepalese agriculture led development and poverty reduction. The government has endorsed and incorporated the vision and strategic thrust of APP in its policies and plans. The 9th Plan recognized the central role of agriculture and adopted the strategies, priorities and targets set by the APP. The Poverty Reduction Strategy Paper (PRSP)/10th Plan provided continuity to most of the efforts started under 9th Plan and reiterated many of the aims and approaches of the APP and has given agricultural development and poverty reduction a high priority. 2. Some positive effects in the forms of accelerated agricultural growth, improved agricultural trade, increased productivity and steps towards greater market orientation and a favourable investment climate are evident after implementing agriculture and rural development programmes both at central and district level within the APP framework. For instance, the Agriculture Sector Performance Review (ASPR) 2002 identified an improvement in the sector in the late 1990s (average growth rate of 0.7%) relative to early 1990s (average growth rate of - 0.6%). The agricultural GDP is estimated to have grown by 3.7% in 2003/04 as compared to 2.5% growth rate registered in 2002/03 through a noticeable increase in the production of paddy, potato, fish, milk and poultry despite decreased production of barley, sugarcane, tobacco, jute, fruits and vegetable crops; and meat and normal increase in the production of other crops. 3. Despite such apparently impressive agricultural performance, the evaluation of the 9th Plan (1997/98-2001/02) and its impact on poverty reduction revealed that past development efforts have been unable to meet the intended goal of poverty reduction, particularly in rural areas and the problem of poverty is more widespread and deeper amongst women, ethnic groups and Dalits (disadvantaged groups). Incidence of poverty was estimated to be 38% by the end of 9th Five Year Plan i.e FY 2001/02. The poverty problem is more severe among those living in rural areas compared to urban areas and among those living in mid and far western development regions than in western, central and eastern development regions2. It has been increasingly felt that farmers income has not increased due to problems in direct access to the market in the absence of agricultural/rural roads, safe and adequate storage facilities including cold storage (ASAR 2002). Middlemen are reaping extra profits at the cost of farmers and consumers (Economic Survey 2004). 4. As coordination of APP implementation is lacking effectiveness at central and regional level, the concept of APP has considerably lost significance. The absence of regular coordination, together with frequent staff changes and the need to attend to immediate priorities, diverts attention from APP issues. Each implementing institution adheres to its sectoral focus with barely token acknowledgement of APP objectives and coordination intentions. At the district level the APP concept of concentrating resources into a limited number of Pocket Packet Programme (PPP) areas is not well understood and APP
Prepared by APPSP and approved by High Level Task Force. NPC, Poverty Monitoring and Assessment Framework http://www.npc.gov.np/introduction/Booklet2.pdf
2 1

Document

Singadarbar,

Kathmandu

see

awareness raising and guidelines have not been sufficiently institutionalised. Where PPP areas have been designated they are generally in the form of small and separate PPP for each commodity or sectoral programme, instead of the collaborated concentration of investment by all required agencies in a few PPP areas as per the APP concept. Considerable institutional effort will need to be invested to make such APP concepts functional. 5. In conformity to international best practices and pursuant to implementation success and failures, there have been changes in context, policies and institutional framework governing Nepalese agricultural sector during recent years. First, several contextual changes such as insurgency and conflict; increased involvement of private sector and nongovernment sector in agricultural service delivery; and WTO membership have taken place after APP formulation in 1995. Second, there have been institutional changes at several fronts including attempts to transform the centralised, supply driven and target oriented national public sector extension system into a more decentralised, demand driven and client oriented pluralistic system through devolution of agricultural extension services to the District Development Committee (DDCs) under Local Self Governance Act, 1999; formation and involvement of Department for Local Infrastructure and Agricultural Roads (DoLIDAR) preparing a district transport master plan to ensure access of agricultural products to the market; establishment of the National Agricultural Research and Development Fund (NARDF) to promote a private sector led demand driven type of agricultural research; implementation of the agriculture development programme under Pocket Package Strategy (PPS); and structural changes within MOAC and its line departments to address the changed context and Nepal's recent WTO membership, etc. have implications in Nepals agricultural sector. Third, policy changes initiated in Nepalese agricultural sector after APP implementation include, among others, endorsement of the new Agricultural Policy 20043, Water Resource Strategy 2002 and Irrigation Policy 2003, formulation/implementation of the fertiliser policy 1999 and deregulation of fertiliser trade, involvement of private traders on equal footing with the government owned AIC (now the Agricultural Input Company (P) Ltd.) to import and distribute fertilisers, removal of subsidies on fertilisers and STWs4, amendment of the Forest Act 1992 in 2002 and paradigm shift in forest management such as collaborative forest management, and livelihood forestry initiatives, preparation of national and district transport master plan, etc., the impact of which are yet to be seen. 6. Nepalese agriculture is still characterized by subsistence orientation and low level of commercialisation. Main problems of the sector include the reduction on land frontier due to inappropriate use of agricultural land as well as various calamities; lack of access to agricultural land to those providing agricultural labour and possessing skill as well as inability of those with access to agricultural land to adequately commercialize agriculture using improved technologies; low productive livestock, diseases incidence and poor nutrition; market competition with livestock and agricultural commodities; agriculture and livestock industries still depending on imported raw materials; weak agricultural export promotion initiatives; inability to attract enough investment in related agricultural infrastructure such as irrigation, road, electricity, communication, industry, market, agricultural business and improved technologies given the extent of natural resources and bases for non-agricultural sector development; inability of the industrial policies to capture the sensitivity of the agriculture sector. The people's perception of these problems may be incomplete or different from this sectoral analysis. This problem will need to be addressed if farmers are to accept and adopt the necessary actions for change. Present understanding of the challenges in the agricultural sector have led to more pro-poor objectives and approaches, so as 1) to diversify
HMGN argue that Agriculture Policy 2061 is consistent to APP vision and strategy and prepared in the sprit of the 10th Plan/PRSP see http://www.npc.gov.np/prsp/AgriPolicy2061final.pdf 4 Budget speech of the FY 2004/05 has reinstated capital subsidy for STWs in the arid Terai regions and for small irrigation programmes throughout the kingdom. See http://www.mof.gov.np/publication/budget/2004/index.php
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agriculture into labour-intensive high-value agricultural commodities such as horticulture and livestock for increased profit incentives and employment opportunities, 2) strengthen backward and forward linkages between agriculture sector and off-farm sector in rural areas to create a virtuous cycle of growth of incomes and employment, 3) high priority in public sector allocations to rural development, and 4) focus on re-distribution of assets to the poor. 7. In cognizance to this, the major thrust of the 10th Plan in agricultural sector is directed at ensuring successful implementation of the APP through an effort to modernize, diversify and commercialize crop and livestock production by expanding technology use, and increasing access of farmers to modern agricultural inputs and credit, promoting participation of private sector and NGOs/INGOs in service delivery, market promotion and infrastructure development. One important aspect of the 10th Plan is its commitment to implement the programmes relating to the APP in the form of campaign by proclaiming the 10 year period of the current 10th and forthcoming 11th Five Year Plans as an "Agricultural Decade, which requires sufficient preparation. 8. As laid by above realities and context, the current perceptions about the effective implementation of the APP are mixed. Despite that the broad approaches to agricultural development outlined in the APP is very much accepted, doubts are raised on its targets, implementation aspects, institutional linkages, and achievements in view of the changed context, institutional reforms initiated, policy dynamisms and performance on APP implementation. The need to review the aspects of APP implementation to make it relevant and appropriate in view of recent changes and developments has been widely felt. The Immediate Action Plan (IAP) of the HMGN for the FY 2061/62, indicates that an APP implementation status report, showing APP implementation status at the national level as well as district level will be prepared. Objectives 9. This study is aimed at 1) assessing the current implementation status and modes of APP for their effectiveness and relevance in the present institutional and socio-economic context, and 2) formulation of recommendations on changes and action to be taken in order to accommodate relevant and appropriate aspects of the recent changes and developments, particularly in the context of the four pillars of the 10th Plan/PRSP, governments main objective of poverty reduction, it's policy to strengthen decentralised governance system, membership in the WTO, recent agricultural policy, etc., ensuring compatibility with people's needs, demands and capabilities. The specific objectives of this study will be the following: a) To undertake a critical assessment of 1) past and ongoing APP initiatives in relation to priority inputs, priority outputs, approaches, strategies, institutional arrangements, organisation, reform and adjustment, etc., 2) the APP objectives and targets set in the 10th plan/PRSP, and 3) analytical assessment of the APP implementation both at the central and district level. b) To assess and identify areas of changed environment, like WTO, SAFTA, decentralisation, public private partnerships, etc., and recommend responses in objectives, targets and working modalities of APP, as deemed necessary based on the above assessment. c) Assess possible consequences of the above recommendations for the recent National Agricultural Policy 2061 and indicate ways to make the two compatible. d) To assess the institutional aspects of APP implementation and to identify lapses in coordination and implementation and recommend measures for improvement. e) To assess the extent in which current M&E and reporting systems measure APP implementation and impact on poverty reduction and reaching the rural poor and excluded consistent with the indicators in the Poverty Monitoring and Assessment System (PMAS) and suggest improvement as deemed necessary.

To assess the likeliness of APP being able to reach it's defined goals and targets as well as those set for poverty reduction in accordance with MDGs and PRSP. g) To identify gaps in the existing planning system, suggest planning modalities responding to actual situation and in line with APP's major strategies and prepare guidelines and a action plan for changes in APP implementation that will ensure concerted efforts in addressing the issues of growth, poverty and social inclusion. h) To design a coordination model for APP that will guide the agricultural sector and the actors involved in its implementation for the next decade or so. Implementation 10. Considering the interactive and interdependent nature of the APP that crosses many interrelated sectors, sub-sectors, public agencies, the farming community, private entrepreneurs, non-governmental organizations, and international donor and cooperating agencies, HMGN has formed a High Level Task Force (HLTF) under the chairpersonship of the Honorable Member (agriculture), National Planning Commission (NPC) and charged it with the responsibility for implementation of this study of reviewing the APP and formulation of an APP implementation plan in line with governments plan to implement 10th Plan and the forthcoming 11th Plan as Agricultural Decade. The High Level Task Force will form and guide the Technical Working Team, who, with the assistance of a group of consultants, will implement the Study. The HLTF will ensure proper coordination among and cooperation from key stakeholders, ensure ownership, and facilitate reflection of the works on policy making and policy adjustment as required. It will also ensure high level intra-ministerial involvement as well as harmonize with donors; NGOs and private sector as necessary. Fig 1: Operational Structure

f)

A P

High Level Task Force

Donor Group

CADIC

P S P Consultants Technical Working Team

TWG

- Review Group - Independent reviewers

(International and National)

11. The HLTF will form a seven member Technical Working Team (TWT) involving appropriate sector/professionals representing the key APP partners to undertake the APP implementation review and prepare the APP implementation plan. A Review Group consisting of three senior persons among Nepalese civil society will assist the TWT on technical matters, review process and work in progress, and provide their comments and observations on the reports of review and implementation plan before they will be released

by the TWT. Apart from these, a number of independent reviewers, amongst which the ADB, will be requested to review the outputs and to give their comments and recommendations for consideration at the different stages of the process. 12. In view of the urgency and comprehensiveness required of the study, a competent and experienced Team of Consultants /Firm (National and International) will be contracted to assist HLTF and TWT on implementation review and preparation of the implementation plan. The Consultants team/firm will be identified as per DFID's rules on hiring consultants. The outputs produced from the study on behalf of TWT will be shared among Technical Working Groups (TWG) and Central Agriculture Development Implementation Committee (CADIC)5 for their comments before submitting to the HLTF. At one point in time, feedback will be obtained from the joint donor group as well. At all levels of the study, APPSP will monitor and facilitate/support progress and implementation. Consultants team The Consultants Team should be both multi-national and multi-disciplinary, with the overall leadership coming from an international consultant (firm). The International Partner will have a mentoring and guiding role and should possess the following qualities: Proven experience in review and strategic planning of national policies and programmes in the agricultural sector Proven experience in institutional management and change processes Extensive experience in Impact Assessment Current knowledge of Nepals agricultural sector and policy environment A national partner or partners, either as individuals or as a company, should be an integral part of the Team composition. Extensive knowledge of Nepal, its policy framework to address poverty and agriculture, and current trends, changes and processes within it, is considered essential for both national and international members of the Team. Individual members should have a minimum of 10 years experience of strategic planning level and organisational change management with a background in agriculture. They should have the ability to work in a multi-national team and the commitment and ability to produce pragmatic and workable recommendations. In addition they should have specific skills in one or more of the following disciplines/areas of expertise: (Agricultural) Policy Analysis Institutional Development and Institutional Change Impact Assessment, Monitoring and Evaluation Agriculture and Livestock Extension Agriculture and Livestock Economics National and International Marketing and Trade of Agricultural Products Social, Livelihood and Rural Poverty Analysis Participatory Approaches and Stakeholder Involvement Whilst it is recognised that the individual composition of the Team may vary during the Review period according to the issues being addressed, it is essential that the Team retains

5 In line with multi-sectoral nature of the APP, the CADIC was formed including members from the key APP implementing institutions and chaired by Secretary MOAC to supervise APP implementation and resolve implementation problems at central, regional and district level. The TWG was created under the chairpersonship of the Joint Secretary, M&E Division, MOAC drawing on members from among Department of Agriculture, Irrigation, Livestock Services and Local Infrastructure Development and Roads, the NARC, the NGO federation, FNCCI to provide technical inputs to CADIC that meets as and when required to screen and discuss the issues on the agenda before every CADIC meeting. APP Monitoring and Analytical Unit (APMAU) based in M&E Division, MOAC works as secretariat for both TWG and CADIC.

at least one member, designated as the Team Leader, for its full duration to ensure continuity and co-ordination of the inputs and results. In addition to the necessary and appropriate technical skills and competencies to contribute to the Review itself, the Team Leader will also be expected to have at least ten years of experience successfully leading multi-national and multi-disciplinary teams and producing clear, concise and pragmatic recommendations. A Review study on the Impact of Agricultural Research will be commissioned at the same time as the present study and is likely to take place in approximately the same period. Although the two studies will have different objectives and are positioned at different policy levels, there are several areas of relationship and interactions and the coincidence of their implementation offers opportunities for interchange of views and findings for mutual benefit and their adjustment and coherence within the wider policy framework. It deserves therefore recommendation that close contacts will be maintained with the team that implements the other study and it would be an advantage if the international member(s) of the team would be the same for both studies. However both reviews will be undertaken under independent contracts and the teams as such should operate independent from each other. Methodology 13. The review will consist of two parts. The first part will be an assessment and diagnosis the APP implementation, it's problems from a wide range of perspectives and recommendations on ways in which they may be fixed. This will be done through desk and field studies. Desk study will be the basis for reviewing APP implementation status at National level while an assessment on status of APP implementation at district level will be made in selected representative districts6.The Consultants will organise series of consultations with key stakeholders in the sector including representatives of implementing agencies, both at policy making and implementation levels, farmers, local administrators, NGOs, private dealers of agricultural inputs and outputs, and external funding agencies to address their expectations, concerns and suggestions on status report and facilitate emergence of consensus and ownership. The APP implementation status report will be ultimately approved by the Task Force. 14. The APP implementation status report will provide a basis for preparing the APP implementation action plan. The Consultant's team will prepare the draft APP implementation plan in consultations with key stakeholders including Donors, NGOs, private sector and farmers and under the supervision of the TWT. Apart from general aspects of implementation, the implementation plan will also include a model of a complete district level plan for inputs and services packaging, including coordination and planning mechanism in the decentralisation context, for one district. Prior to further processing and action by TWT, the APP implementation plan will be critically reviewed by Review Group and independent reviewers. The plan will also be shared in the TWG and CADIC meetings to obtain their feedback, as well as with donor groups as appropriate and relevant. The APP implementation plan will be ultimately approved by the HLTF. Subsequently, it will be submitted to HMGN for approval through MOAC. The APP implementation plan thus prepared will form the basis for planning, monitoring and evaluation of the agriculture development programme under the APP framework in future. 15. The APP is the main policy framework for the Government for Rural Development and many sector and sub-sector policies and plans are based on it. It is therefore important that care is taken that the review takes into account a number of other policy and planning activities that are presently ongoing, like the National Agricultural Policy, The Review of
In order to select the districts, the 75 districts will be divided into three categories: (i) better, (ii) good and (iii) slow in term of progress on APP implementation. Districts will be selected from each category for district level studies.
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National Agricultural Research and others in agriculture and other sectors covered by the APP, such as irrigation, forestry, agricultural road and rural electrification. As an important study that will determine the future of an important aspect in the agricultural sector, the Agricultural Research Review will be carried out at approximately the same time as the APP Review and also under the APPSP mandate. Coherence and complementarity of both studies will be ensured at high level through NPCs active involvement, while the same will be ensured at working level through coordination of the teams implementing the two studies. Expected Outputs 16. The expected outputs of this review will be the following. APP Implementation Status Report APP Implementation Plan, including a district level model APP plan with implementation modalities and guidelines and coordination mechanism Presentation of the findings in workshops and coordination meetings Work plan 17. The whole exercise, including fformulation of the APP Implementation Plan is to be completed within a time span of six months and is expected to start by February 1st 2005. The detailed workplan of key actions, responsibilities, activities to be undertaken and the due dates is to be presented in the consultants proposal. References ANZDEC Limited, New Zealand (2002), "Nepal: Agriculture Sector Performance Review (ADB TA No. 3536-NEP) Main Report" prepared for MOAC and ADB. ANZDEC Limited, New Zealand (2002), "Nepal: Agriculture Sector Performance Review (ADB TA No. 3536-NEP) Final Specialist Report (Institutional Assessment Specialist)" prepared for MOAC and Asian Development Bank. APPROSC/JMC (1995), "Nepal Agriculture Perspective Plan Main Document (Final Report)" ADB TA 1854. APPSP (2003), "Inception Report of the APP Support Programme" prepared for MOAC and Department for International Development. APPSP (2004), "Review the Implementation of the Pocket Package Strategy under Agriculture Perspective Plan" draft report. MOF (2004), Economic Survey 2004 Kathmandu. MOAC (1998), "Implementation Guidelines for Pocket Package Strategy for Agriculture Development Singhadurbar, Kathmandu. MOAC (2001), "Policy and Institutional Arrangements for Effective Implementation of Agriculture Perspective Plan 2057" Agriculture Information and Communication Centre, Pulchok, Lalitur. MOAC (2003), Implementation Status of APP during Ninth Plan (Interim Period) Singhadurbar, Kathmandu. World Bank (2002), "Reaching the Rural Poor: A Renewed Strategy for Rural Development" The World Bank, Washington DC.

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Summarised Terms of Reference for Reviewing APP 1. Review of the following: a) past and ongoing initiatives in relation to implementation (goal, purposes, performance, strategy and operational mechanism) of the APP; b) review of APP, 10th Plan/Poverty Reduction Strategy Paper (PRSP) and Sector policies, acts, rules, by-laws and directives to assess coherence and/or discrepancies between APP and sectoral policies issued by the concerned ministries, line agencies and other actors; as well as assess the coherence and/or gaps between central level policies and district level interpretation and implementation; c) current situation of priority inputs (fertiliser, irrigation, agricultural road, rural electrification, technology and agricultural credit) and performance of priority outputs (forestry, agri-business, high-value crops and livestock), approaches, strategies, institutional arrangements, organisation, reform and adjustment, etc. of the APP; d) mapping of progress in agriculture road, shallow tubewell, irrigation and rural electrification vis--vis agriculture development started in 2000/01; e) public expenditure pattern on agriculture development in relation to priority inputs envisaged in the APP; f) institutional framework to identify institutional bottlenecks (if any) for agricultural service delivery; g) human resources and management information system requirements for the implementation of APP, so as to respond effectively to local needs and potentials; h) Planning system and partner coordination in the sprit of the APP; i) M&E and reporting systems to identify gaps in measuring implementation status and impact on poverty reduction and reaching the rural poor and excluded; j) on-going budget and planning procedures in the agricultural sector and recommend areas of improvements to make the process more responsive to priority inputs, priority outputs, approaches, strategies, institutional arrangements, organisation, reform and adjustment, etc. envisaged in APP; k) import substitution, export promotion, food security and poverty reduction; l) agriculture support policies of the neighbouring countries (India and Tibet); m) APP implementation in line with Punjab and Himachal Pradesh success Models in the Tarai and Hills/Mountains areas of Nepal respectively. 2. Study the macro-economic framework vis--vis agriculture development to identify key pro-poor macro-policy for poverty reduction; 3. Critical analysis of the causes of lapses on APP implementation; 4. Analyse the causes of poor intra and inter Ministry and line agency coordination and suggest mechanism for effective sector coordination; 5. Evaluate the a) sufficiency of the priority inputs and outputs proposed in APP for agriculture development vis--vis attainment of poverty reduction targets set in the 10th Plan/PRSP; b) impact of policy reform measures initiated in the agricultural sector and their impacts on agricultural development and growth; and identify critical issues and gaps acting as constraints to APP implementation and to overall agriculture development; and c) areas and their relevance of changed environment i.e. in responses of WTO, SAFTA, etc., decentralisation, public private partnerships, etc. on objectives, targets and working modalities set in APP; 6. Assess the adequacy of the Punjab and Himachal Pradesh development model for Terai and Hills/Mountains respectively 7. Identify a) key constraints on delivery/investment on priority inputs and the extent to which these priority inputs contributed to achieve priority outputs;

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b) MOACs need for capacity enhancement institutional and organisational reform to implement APP as a dynamic policy by supporting the needs of institutional structures, technical support, regulatory guidance, input supplies, etc., and the quality of implementation by addressing conflict resolution and security issues, gender and the needs of target groups; c) gaps on existing planning system; d) service coverage (inclusion); e) devolution and public private partnership. 8. Assess the quality of understanding of the livelihoods of disaggregated socio-economic groups by the various implementers, and the extent to which this understanding informs implementation in practice; 9. Assess the likelihood of the APP achieving its poverty targets; 10. Suggest a) the mechanisms for strengthening devolution of agricultural extension services, b) planning modalities suitable to match the APP's strategy; c) measures to formulate a demand-led pro-poor national agricultural strategy and to enable them to formulate the same and enhance their capacity for implementation; d) the measures to address the issues of social inclusion and livelihood; e) updated objectives, target, working modalities of APP as deemed necessary based on assessment on context, institutional and policy changes; and f) mechanism on using opportunities generated by road access (especially North-South corridor) on agricultural commercialisation. 11. Prepare a) APP Implementation Status Report along the above mentioned assessment and evaluation criteria, including identification of major gaps and suggestions and recommendations for policy and institutional changes and adaptations b) APP Implementation Plan, including a district level model APP plan, addressing the changed context, policy reform and institutional changes that address the issues of growth, poverty and social inclusion, highlighting inputs and services packaging, including coordination and planning mechanism under decentralisation context, immediate, medium term and long-term action plans with implementation modalities and guidelines and coordination mechanism for agriculture development in line with the APP, that will guide sector development for the coming decade, especially in the context of the current agricultural decade; relationships with other actual and relevant policy and strategy documents. 12. Present findings in Workshops and Coordination Meetings.

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Annex 1.4: List of consultations

Sub-thematic/Thematic details SN 1 2 3 4 5 6 7 8 9 10 11 12 14 15 16 17 18 19 20 13 21 22 23 24 25 26 27 Sub-thematic/Thematic Gender Agricbusiness Livestock Irrigation Environment Road and Rural Electrification High Value Commodity Fertilizer Technology Credit Forestry Civil Society Consultation Technology (II) Credit (II) Agribusiness (II) Fertilizer (II) High Value Commodity (II) Irrigation (II) Forestry (II) Marketing & Trade Livestock (II) Road and Rural Electrification (II) Policy and institutional reform Poverty food security and livestock Priority output Priority input National Consultation Total No. Date 2-May-05 2-May-05 3-May-05 3-May-05 4-May-05 6-May-05 9-May-05 9-May-05 10-May-05 10-May-05 15-Jun-05 16-Jun-05 21-Aug-05 21-Aug-05 21-Aug-05 22-Aug-05 22-Aug-05 23-Aug-05 23-Aug-05 25-Aug-05 28-Aug-05 1-Sep-05 1-Sep-05 2-Sep-05 4-Sep-05 4-Sep-05 30-Sep-05 No. of participants 18 11 22 17 12 15 16 16 16 13 21 14 16 15 19 17 18 19 21 23 25 17 25 26 29 29 42 532

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Annex 1.5: Composition of the HLTF meetings held

SN 1

2 3 4 5 6 7 8 9 10 11 12 13

Name / Designation / Organization Dr. Ram Prasad Chaudhary Hon. Member, National Planning Commission Dr. Hari Krishna Upadhaya Hon. Member, National Planning Commission Mr. Govinda Prasad Pandey Secretary, MOAC Mr. Ananta Raj Pandey Secretary, MFSC Mr. Mahendra Nath Aryal Secretary, MOWR Mr. Laba Prasad Devkota Secretary, NPC Mr. Bal Krishna Prasai Secretary, MLD Mr. Tirtha Raj Sharma Secretary, MLRM Mr. Sri Krishna Upadhaya Chairman, SAPPROS Mr. Binod Bahadur Shrestha President, FNCCI Mr. Deepak Prakash Banskota Chairperson, National cooperative Federation Mr. Bhairab Raj Kaini Joint Secretary, MOAC Mr. Krishna Kumar Shrestha Joint Secretary, Planning Division, MOAC Mr. Shankar Lal Chaudhary Programme Manager, APPSP Dr. Purushsottam Mainali Programme Manager, APPSP

Chairperson Former Chairperson* Member Member Member Member Member Member Member Member Member Member Member Member Secretary Former Member Secretary

* As on 26th April 2005 (13/1/2062)

14

Annex 1.6: Composition of TWT

SN 1

2 3

4 5 6

Name / Designation / Organization Mr. Ganesh Kumar K.C. Secretary, MOAC Mr. Govinda Prasad Pandey Secretary, MOAC Mr. Bhairab Raj Kaini Joint Secretary, MOAC Mr. Kapil Dev Ghimire Joint Secretary, MLD Mr. Padam Raj Regmi Joint Secretary, MLD Mr. Narayan Prasad Bhattarai Joint Secretary, MOWR Dr. Mohan Prasad Wagle Joint Secretary, MFSC Mr. Shankar Lal Chaudhary Programme Manager, APPSP Dr. Purushsottam Mainali Programme Manager, APPSP

Chairman Former Chairman* Member Member Member Member Member Member Secretary Former Member Secretary

*As on 10th January 2006 (26/9/2062)

15

Annex 1.7: Consultants for the Study A. International: the IDL Group, United Kingdom SN Name 1. Mr Steve Ashley 2. Dr Gerry Gill 3. Dr Taylor Brown : : : : Position Team Leader Member Member Key Responsibilities

B.

Domestic: NARMA Consultancy Private Limited and the SEEPORT Consultancy Private Limited Consultants SN Name 1. Dr Govind Koirala 2. 3. 4 5 6 7 8 9 10 11 Dr Birendra Bir Basnyat Dr. Shyam K. Poudel Mr. Bijendra Basnyat Mr. Ratneshor Lal Kayastha Mr. Yam B Thapa Dr Surendra Kumar Shrestha Dr. Bekha Lal Maharjan Dr. Suman Sharma Mr. Raghu Ghimire Mr. Kumar Adhikary Position Team Leader Dep. Team Leader Member Member Member Member Member Member Member Member Member Key Responsibilities Macro-economic Policy Analysis Institutional Analysis, Livelihoods Analysis High Value Commodities Forestry and Environment, District Model Plan Irrigation and rural infrastructure Agriculture trade and marketing Livestock Agribusiness Poverty and Food Security Human Resources Development Conflicts analysis

: : : : : : : : : : :

Technical support staff

SN 1. 2. 3. 4. 5 6 Name Mr Amir Poudel Mr Samir Rijal Mr Parmeshwor Singh Kalwar Mr Niraj B Basnyat Mr Sarad Sharma Ms Roshni Rupakheti Position Research Officer/Environment Research Officer/Agriculture Research Officer/Horticulture Research Associate Research Assistant Research Assistant

16

Annex 2: APP Achievements Annex 2.2: Irrigation Annex 2.2.1: APP irrigation target by 2016/17
Particulars Irrigable Area ('000 ha) Including forest area Excluding forest area B Irrigated area by 1994/95(000 ha ) 1. Surface Irrigation Year round Monsoon 2. Ground water Irrigation Total Irrigated Area Irrigation percentage C Irrigated Area by 2016/17 ('000 ha) 1 Surface Irrigation Year round Monsoon 2 Ground water irrigation area D Total irrigated area (000 ha) Irrigation percentage Source: APP Main Document - Table 4.2 S.N. A Mountain 61 55 41 21 20 41 77 53 40 13 53 96 Hill 374 355 212 115 97 212 60 293 197 96 293 83 Terai 1,743 1,356 407 182 225 141 548 40 486 277 209 612 1,098 81 Total 2,178 1,766 660 318 342 141 801 45 832 514 318 612 1,444 82

Annex 2.2.2: APP targets and progress during the ninth plan New Areas (ha) % Progress of APP Targets 153 Progress S.N . Irrigation system type % Target as of APP Target APP Target Ninth Plan Target % Progress of Ninth Plan Targets 69.5 56.9 75.9 40 58.8

Surface irrigation 72000 158900 186 110465 New 52,400 29,856 Rehabilitation 1,06,500 80.879 Groundwater 116000 90500 78 36238 irrigation 188000 249400 119 146703 Total Source: APP 1995, DOI Website (www.doi.gov.np) and Tenth Plan 2002 Total Irrigable Land- 1,766,000 ha

1 (a) (b) 2

31 78

17

Annex 2.2.3: APP targets/tenth plan targets progress S.N. Irrigation System Type New Areas (ha) for 2002/03 & 2003/04 Tenth % Target as of Progress Plan APP Targets Targets 26592 145 17710 8,220 25,930

APP Targets 18,400

2 55,600 9815 18 Total 74,000 36,407 49 Source APP (1995), DOI Irrigation Book 2061

Surface Irrigation Ground Water

%Progress as of APP Targets 96 15 35

Annex 2.2.4: APP targets and achievements to date S.N. 1 2 Irrigation System Type Surface Irrigation Ground Water Total APP Targets ( 10\997/98-2003/04) 90,400 171600 262,000 Achievements 128175 44478 172653 % Progress of APP Targets 141.8 25.9 65.9%

Annex 2.2.5: Total area irrigated by physio-graphic region Year Mountains 1996/97 17299 1997/98 19449 1998/99 21909 1999/00 24203 2000/01 25823 2001/02 26979 2002/03 28119.67 2003/04 28340.27 % change 6.8 Year round irrigation target by % increase (1994/95 to 2014/15) 3.3 Source: SINA, MOAC, Different Years Hill 86833 92301 99173 104825 110081 115337 118490.1 120588.3 4.7 Terai 635470 649306 684425 715166 737534 753661 761192.3 774740.5 2.9 Total 739602 761056 805507 844194 873438 895977 907802.07 923669.07 3.3

2.7

5.2

4.6

18

Annex 2.2.6: Government expenditure in irrigation vis--vis total government expenditure in agriculture, irrigation and forestry, (In million Rs.)

Fiscal Year

1 1996/97 2 1997/98 3 1998/99 4 1999/00 5 2000/01 6 2001/02 7 2002/03

Total government Irrigation expenditure expenditure, in agriculture, as percentage of total irrigation and forestry government expenditure in agriculture sector Regular Develop Total Regular Develop Total Reg. Develop Total 100 2727 2827 688 5080 5768 14.5 53.7 49.0 104 111 117 132 78 207 2438 2941 3044 3953 3446 2138 2542 3052 3161 4085 3524 2345 725 931 1008 1072 1173 1367 11.0 4992 5340 5563 6762 6676 4593 2.1 5717 6271 6571 7834 7849 5960 3.5 14.3 11.9 11.6 12.3 6.6 15.1 48.8 55.1 54.7 58.5 51.6 46.5 44.5 48.7 48.1 52.1 44.9 39.3

Irrigation expenditure

Growth rate 8.5 1.5 1.8 Source: Economic survey of Nepal, 2004

Annex 2.2.7: APP investment targets and expenditure (NRs. In Millions) Ninth Plan (1997/98 2001/02) Tenth Plan (2002/03 & 2003/04) APP Expenditure % APP Target Expenditure % Target 13760 15519 113 6040 3337 55 Source: NPC (Annual Programme 2004/05): IDVAFP, Economic Survey 2003/04, Ministry of Finance

19

Annex 2.2.8: Shallow tube well, subsidy and CGISP: Where is the reconciliation? With the ADBs approval of a 50 million US$ ADBs Second Agriculture Programme Loan (SAPL) to the Kingdom of Nepal on 22 January 1998, the subsidy issue for STWs has become a headline news of most of the national newspapers and subject to 3 Cs- contest, challenge and contradictions- within HMGN departments and ministries and the donor agencies. The Agricultural Development Bank of Nepal, the organization which had developed a reasonable capacity for maintaining a high growth rate in STW lending and supposed to be lead agency for the STW promotion in Nepal as per the APP, and joined by many other government departments and professionals, were against to that condition of the SAPL which required the government to eliminate the capital-cost subsidies for private STWs as one of the eight conditions for the release of the SAPL second tranche by November 1999. The ADB, on the other hand, opposed to any decision, which would lead towards the continuation and or reintroduction of the subsidy, and contradict with the SAPL covenants. The purpose of this Annex is two fold. First, it is to present views and concerns of both the subscribers and critics of the STW capital subsidy, conclusions of some said to be7 independent research and studies and the CGISP approach which not only vehemently opposed capital cost subsidy for the private STW development, but also reported to progress STW installations satisfactorily after the termination of the subsidy. Secondly, it is to encourage all concerned stakeholders and agencies to make collective efforts for promoting STWs as to the spirit and target of the APP and keep farmers positive, confident and motivated to install STWs and make most cost-effective use of it. The importance of this Annex comes from the fact that any discussions in irrigation in any coordination committees, discussion forums and meetings at any level would start from this issue, end without any decisions, and sometimes lead to postponement or complete ignoring of other crucial decisions which were supposed to be discussed and resolved. The revised/adjusted APP should appropriately resolve this issue because the present APP8 is supportive of the STW subsidy. Issues Demand for STW STW subsidy subscribers Drastically declined posing a threat to the success of the APP. The removal of subsidy in STWs has hit the farmers hard. Especially so because about 70 per cent of the farmers own a meager half a hectare. STW subsidy critics Inadequate allocation of subsidy was hampering the supply of STWs, and therefore a threat to the success of the APP. Demand for the STWs can be increased by decreasing the cost of the STWs rather than by giving subsidies. Removal of subsidy, resulting in greater private participation, would ensure higher demand of the STWs through higher supply. The demand for an under-priced good is always strong and insatiable Subsidy removal is likely to benefit the farmers through increased supply of STW. Financially attractive even without subsidy Encouraged investment in pump sets that were larger and more costly than necessary

Supply constraints

Investment

Improve supply systems Ensure tight monitoring and quality control Compared to surface irrigation, ground water has yielded better return to investment.

The team used the term said to be because some might even question the objectivity and independency of the researcher itself. 8 Contradictions were noted between the APP main document and the technical paper, which was supposed to be an input to the APP main document in this regard. The main document explicitly argues to continue with capital cost subsidy, the technical paper (Gautam, K.H. 1994), citing an IIMI study states STW without subsidy is also an attractive investment for farmers.

20

Issues Ability of the government to pay the subsidy

STW subsidy subscribers Questionable, the total subsidy requirement is not so high that the govt is not able to bear Poor and costly for small and marginal farmers as they cant afford cost of STWs, specifically pumps

Access of small and marginal farmers

Cost of cultivation and ensuring competitiveness with neighboring Indian farmers

Use and misuse of the subsidy

External experience

Increases farmer dependence on the government Tendency to be negligent about tube well O and M. Distorts free competition (in the market of well assembly materials such as casing pipes, screens and the pump sets) and likely to affect the innovation of local drilling technology and the STW installations itself. The very low utilization rate of the STWs shows that farmers benefiting from the subsidy have not been making efficient use of their STWs As seen from the above Table which is still not exhaustive, coming to a conclusion on the subsidy issue for STWs in Nepal is an Herculean task and not likely to be resolved in the near foreseeable future. Both views are obviously based on some plausible assumptions, logics and reasons, and guided by two different school of thoughts. Regarding STW subsidies two major studies and two other supplementals were carried out after the SAPL. Box 1 below summarizes their major conclusions.

Effects

High cost of cultivation and making difficult for the Nepalese farmers to compete with their counterparts in India. Inadequate rural roads and insufficient electrification have further resulted in the increase in the cost of production of the Nepali agro-products- give some relief to the farmers . Not an issue, can be controlled with good governance and transparency. Subsidy for STWs may be removed in countries like Bangledesh where the STWs installation cost is low and cheap, cheap Chinese pumps are available, but not in countries like Nepal and India where the installation cost is high and aquifer is found at much lower level Farmers become motivated to install STWs

STW subsidy critics Questionable, evidences mount to suggest govt. inability to pay the subsidy and it is easy to install subsidy once, but difficult to remove after it is provided. Poor, caused by collateral requirements and not matched with extension, social mobilisation. Training packages and little support and programmes for strengthening user organizations requirements. Help farmers to reduce the cost of cultivation by integrating developed irrigation opportunities with other complementary inputs like seeds, fertilizers, technologies etc.

Likely misuse of the scarce resource

In Bangladesh, number of STWs increased nine times in three years (1980-83) after the government subsidies eliminated. And the growth has been phenomenal ever since.

21

Box 1: Studies and reports related to STW Subsidies Study Irrigation Subsidy Studies, Nepal Irrigation Sector Project, , Royads Consulting Ltd, WB sponsored, February 2001 Major conclusions and recommendations While there is a need to protect the poorer farmers with continued (targeted subsidy), subsidy in STW should be reduced gradually on a scheduled basis even for group operation. Instead of providing subsidy in capital costs, provide subsidies in interest and diesel/electricity and intensify extension and training support services. Devise system/mechanism to provide subsidy targeting to poor and marginal farmers. The paper rejects the statements that the withdrawal of STW subsidy in July 2000 reduced the demand for STW credit from the Agricultural Development Bank of Nepal (ADBN) and that this had significantly affected and targets set by the Agricultural Perspective Plan (APP), 1995-2015. Arguments based on i) exploration of the evolution of the subsidy policy in Nepal and its impact on STW development, (ii) discussions on new trends in the development of shallow groundwater resources by farmers, (iii) analysis of the fiscal sustainability of the subsidy program and farmers' ability to invest in STWs without subsidy, (iv) the factors that are affecting the overall demand for STWs, and (v) comparisons of agricultural subsidies in Nepal with those in India as well as in developed countries are often misleading. There is a weak relationship between STW installations and rate of subsidy on STWs, indicating additional influencing factors of demand for STWs. HMGNs view that the demand for STWs has been drastically reduced only because of subsidy withdrawal is not valid. Lower the cost of STW following short-term strategies like increasing competition among producers/supplier of the different brands of pump sets, importing Chinese pump sets, collateralfree loans, improved extension services etc, and long-term strategies like promoting rural electrification, development of rural markets etc. The major constraints to groundwater market development in Nepal are lack of appropriate policies, limited availability of water-responsive technologies, and lack of interagency coordination. Groundwater use has been limited in spite of pump capacity due to high installation and operation costs, especially fuel. No credit policy exists to cover costs like fuel and procurement of accessories in case of pump break down. Policies on STW expansion should target medium-sized farms because farmers with small and marginal holdings and less likely to install STWs.

The Case Against Shallow Tubewell Subsidy (Siddiq Akma, Project Economist, ADB, May 2001)

A Study on Shallow Tube Well Demand Assessment , Tiwari, B.N. (September 2002), A study carried out for HMGN, ADB and CIDA

A Study on Ground Water Markets in Nepal, (K.C, D.B 2004), an unpublished Ph.D Dissertation

Above Table and Box tend to reinforce the debate/controversy than to solve it. This further suggests that there is no ready made solution to the long outstanding STW subsidy issue. Implications and conclusions from above table and Box will follow after a brief introduction to the CGISP, which, as stated earlier, is one of the critics of the capital cost subsidy. Community Groundwater Irrigation Sector Project - Initiated in 1999 with ADBs financing of 43 m US$, the purpose of Community Groundwater Irrigation Sector Project (CGISP) is to create an irrigation system owned, managed and run by local communities. The shallow tubewells are at the heart of the Project. It is designed to install 15,000 STWs covering 60,000 ha over the five-year period with a full-package service to the small and marginal farmers. The Project covers 300 Village
9 9

Loan No. 1609-NEP: Community Groundwater Irrigation Sector Project, with a total cost of $43 million, was approved in February 1998 and made effective in March 1999. 22

Development Committees in high quality groundwater resources rich 12 Terai districts of the eastern and central development regions ( Jhapa, Sunsari, Morang, Saptari, Siraha, Dhanusha, Mahottari, Saralahi, Bara, Parsa, Rautahat and Chitwan). More than 110,000 households, over 50% of whom live below the poverty line, are expected to directly benefit from this project. The project claims that the approach of this project is financially sustainable and provides for a long-term solution to the development of groundwater resources in the country. In this project the focus is on social mobilization and the organization of small and marginal farmers into groups who together can obtain and afford the credit necessary to invest in an STW. CGISP is flexible in that it would also service eligible individual farmers as well as those who would prefer to install boreholes only or invest in mobile pump sets. Groups are served through a credit programme requiring no formal collateral and credits for other inputs, i.e., seed and fertilizers are also available. The project has been spending considerable effort and resources for mobilizing farmers into groups, training and in establishing linkages with a range of service providers required for the target groups. Box 2 lists support available to STW farmers under the CGISP. Box 2: Support available to farmers installing STWs under the CGISP Individual Credit available, but collateral required Ensure the availability of seeds, fertilizer and agrochemicals. Group Social mobilization Group-guarantee basis, no formal collateral required Ensure the availability of seeds, fertilizer and agrochemicals Support in improving the existing farm-to-market roads Cost of constructing 2.8 km road @ Rs. 10,00,000 per km for each block of 50 tube-wells Tube well O and M support of US$50.00 per WUG (One group has one system)

Although direct capital cost subsidy on STWs is now eliminated, the government is still supporting this sector, albeit in different forms. Table below presents the physical achievement of the project. CGISP noted that it had a slow start during the first two years due to various constraints. One of the major reasons was delay in removal of capital cost subsidy in STWs by HMG. The project started to gain momentum after the subsidy policy was resolved, effective coordinating mechanism was established among the project stakeholders and PFI financing arrangements were settled. Comparing the project performance with other contemporary and past SW projects, CGISP claims that its approach is more cost-effective (see Table below)

Particulars

2000/01

2001/02

2002/03

2003/04

STWs/WUGs Command area (ha) No. of Households (Beneficiaries) Average land size (ha) Average group size

83 325 562 3.91 6.77

382 1,260 1865 3.27 5.07

537 (875) 1,711 2164 3.39 5.37

1330 4,256 4,927 3.20 3.70

2004/05 (as of March 05) 1200 3,840 4440 3.20 3.70

Total

3,532 11,392 13,958 3.23 3.95

Source: APP Newsletter, APPMAU, MOAC July 2005 Figures in parenthesis denote target

23

Providing collateral free loan for STW construction and enhancing farmers access to the improved technologies (improved seeds and fertilizers) and extension services is fine. Regardless, questions are often asked relating to the indirect support provided to the farmer groups, particularly farm road (2.8 km road/50 STWs), and the basis for fixing NRs. 10,00,000.00 per km road. Why 2.8 km, why not 5.6 km or 1.4 km? Why Rs 10,00,000.00? Why not more or less than that? Apart from this, a large sum of money goes to the NGOs and CBOs for social mobilization activities. These are not accounted. Many argue neither the government can provide this support through any project or from its own sources, and that this amount in itself will be a limiting factor for expanding the STWs as per the APP target (8,800 STWs/per year), similar to the past situation when there was capital cost subsidy. These issues were forcefully raised even in Bara district analysis. Comparison of STW Installation Under Different Projects, April 2005 Project Donor Name 1. ILC WB Cost/Ha Capital Implementation Duration STW Command Distribution ('000 cost period Years Number area (Ha) system Rs) subsidy 7591/92 - 96/97 5 112 1,120 30 BL & PH 80% 6097/98-02/03 5 8 80 30 BL,BP&PH 80% 3,618 715 9,045 4,855 20 30-50 20-25 12 BL & PH 60% 6085% 3090% 0 Number of districts 8

2. WB NISP 3. APP ADB/APL 98/99 Special 4. IFAD 94/95 - 99/00 5 CSTIP 5. Different 83/84-Ongoing ADB/N 6. 99/00 ADB/CIDA 4 CGISP Ongoing Source: CGISP, Internet Download

20 5 20 12

44,980 na 3,532 11,392

With the implementation of the CGISP, the ADB no more supports the APP special ground water project which was initiated in 1998 to provide irrigation facility as per the APP. The project was implemented through 8 ground water field offices at Biratnagar, Lahan, Mahottari, Birgunj, Butwal, Lamahi, Nepalganj and Dhangadi and was co-ordinated by Groundwater Irrigation Project Office at Parsa, Chitwan. However, in spite of such indirect subsidies questions arise: where will APP target stand with the above rate of installation even after such a large amount of indirect support provided to the farmers? How did this affect to the performance of other projects and institutions which were expected to be equivalent partners? The project had a provision to grant shallow Tubewells of 4" (10 mm dia) and covering at least 2.5 ha under 60% and 30% subsidy to group or individual farmers respectively. The remaining portion of cost will have to be borne by the farmers themselves or as a loan from ADBN or other financial institutions. The project had also a provision for other support such as agriculture road, agriculture extension services research and development, rural electrification program when a cluster area of 100-1000 ha demand for shallow Tube wells on priority basis as per APP. The following table has the details about this project: Project Period: Command Area: Total Project Cost: Foreign: Local HMG: Users: Progress up to 1998/99 1998/99 to 20 years 461,000 ha NRS 2.984 Billion 90% 10% 40% as per cost Construction and installation of 3618 shallow tube wells providing irrigation facility to 9,045 ha. 12 deep tube wells have been constructed. 2002/03- 120 STWs (300 ha)

24

Like the above project, ADB too has not been able to progress in terms of distributing credits to the farmers for installing STWs. Table below has the details. Year Loan distribution Target Achievement 2002/03 28625000 9965000 (311 STWs)* 2003/04 25975000 7200000 (225 STWS)* Source: ADB Nepal * Calculated on the basis of average Rs. 32,000.00 loan per system % 34.8 27.7

Aforementioned evidences are sufficient to suggest crumble in ground water achievements vs APP targets. And, reintroducing subsidies is also not likely to be sustainable and cant even proximate the APP target. Figure below indicates the installation of the shallow tube well by the ADB even when the capital cost subsidy was available. This fully suggest for the need to rethink not only on the irrigation target and strategies to achieve the target but also the roles and responsibilities of the extension service providers and research providers which, of course, will include the DOA and the NARC, among others.

Source: The Case Against Shallow Tube well Subsidy (Siddiq Akma, Project Economist, ADB, May 2001

25

Annex 2.3: Fertiliser

Annex 2.3.1: Import of fertilisers by sector and type of fertilisers
Year 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Total Public (AICL) Private (Other than AIC) Grant Aid (2KR Japan) Total Total Urea D.A.P Total Urea D.A.P MOP Others Total Urea D.A.P MOP Others Total Urea D.A.P MOP Others 49,660 10,000 59,660 17,550 0 0 0 17,550 11,440 11,440 78,650 10,000 88,650 77,857 50,132 127,989 91,049 0 0 0 91,049 0 168,906 50,132 219,038 30,000 10,000 40,000 61,347 31,173 92,520 7,000 14,817 1,500 23,317 98,347 55,990 1,500 155,837 24,189 30,415 54,604 76,354 12,365 88,719 11,820 10,920 5,140 27,880 112,363 53,700 5,140 171,203 12,500 12,500 79,350 21,004 3,000 103,354 16,220 13,820 4,300 34,340 95,570 47,324 4,300 3,000 150,194 0 0 0 45,190 28,187 10,062 83,439 17,830 10,255 28,085 63,020 38,442 10,062 111,524 4134 7,000 11,134 96,146 29,399 1,100 11,303 137,948 7,715 9,500 17,215 107,995 45,899 1,100 11,303 166,297 185,840 120,047 305,887 466,986 122128 1100 24,365 614,579 72,025 59,312 9,440 1,500 142277 724851 301,487 10,540 25,865 1062,743

Source: Annex 2.3.2: Consumption of plant nutrients and use in kg per hectare of arable land and cropped area Total plant nutrients, Total plant nutrients, kg/ha of cropped area* Total N (kg/ha) P (kg/ha) K (kg/ha) kg/ha of arable area 64,149 12.0 6.5 0.55 21.6 17.7 55,646 13.6 4.4 0.72 18.7 15.4 77,168 21.5 4.1 0.42 26.0 21.2 74,921 18.8 6.4 0.06 25.2 20.2 74,999 18.3 6.9 0.01 25.3 20.2 72,326 15.8 8.3 0.27 24.4 19.6 89,007 20.04 9.2 0.74 30.0 23.8 77,922 17.4 8.3 0.53 26.3 20.8 3.62 8.78 (1.45) 4.04 3.50

Year 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04

N 43,231 40,399 63,813 55,836 54,453 47,005 59,484 51,620

P 19,283 13,124 12,097 18,900 20,526 24,512 27,321 24,721

K 1,635 2,123 1,258 185 20 809 2,202 1,581

Annual Growth rate (5) 2.34 8.78 (1.45) 4.04 Source: *- Cropped area includes cereal and cash cropped areas only.

26

Annex 2.3.3: Investment in fertiliser

Year

1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Note:

$

Price subsidy (Budget)$ (a) 60,00,00 60,00,00 46,66,92, 26,96,60 -

Price subsidy (Paid/Actual) (b) 50,16,00 25,51,02 50,09,23 16,49,53* -

Transport cost subsidy (c ) 13,6875 49,998++ 55,462 42,035 30,926 31,452 37,368

NRs in 000 Total (b+c) 391,977 550,921 220,415 42,035 30,926 31,452 37,368

Price subsidy budget is an indication budget only. When AIC was sole importer, government used to balance subsidy amount to AIC within a cycle of three to four years having formed an Account Settlement Committee in the MOAC which comprised representatives from the MOF and Accountant General. Total loss of the AIC as a result of the price difference between AICs procurement cost and sale price was covered by the Government as a subsidy. This helped AIC to maintain a uniform pricing policy throughout the country. As the Government could neither increase the level of subsidy nor the price then, the Government covered AICs total loss within a cycle of three to four years, and the amount used to be huge. After the deregulation of fertiliser in November 1997, subsidy budget was managed by the Nepal Rastra Bank. It paid subsidy to fertiliser importers, be it AIC or private traders, only after the arrival of the fertilisers within the country and after submission of all necessary documents. As a result of this, still AIC and a few private traders have not been able to get back subsidy from the Government. Private traders have filed a case against the NRB in the Supreme Court, which is yet to make a decision. Rs. 64.93 million as price subsidy and Rs. 28.80 million as transport subsidy to be paid to AIC NRB declined to pay subsidy of Rs 7,76,49,485 to the fertiliser importers for delayed in importing fertilisers within the given time period and failed to submit required paper

++ *

Source:

27

Annex 2.3.4: Cross border flow of fertilisers

1. After the deregulation of fertiliser trade in 1997, Nepals fertiliser market is heavily affected by imports from India, officially and non-officially. While continuation of subsidy and concessions in fertiliser sector has created strong incentives for illegal fertiliser trade in Nepal, its positive gesture and support to Nepal during shortages of fertiliser in Nepals domestic market, has helped Nepalese farmers to meet their fertiliser demands to a certain extent. The ASPR farm household survey estimated that about two-thirds of the fertiliser used in Nepal comes through unofficial channels (Goletti, 2001) - equivalent to approximately 280 thousand tones. 2. Unofficial imports of fertiliser take place after hours at official border crossings and through unofficial border crossings. Fertiliser is transported by bullock carts, bicycles, pack animals, and by porter. Unofficial fertiliser is sold direct to farmers by small local importers or sold to dealers for resale to farmers. While Nepalese farmers benefit from access to cheap imports of Indian fertiliser, the lack of quality control and inappropriate use of unofficial imports are a cause for concern. 3. During the field survey conducted for this study, some traders and farmers questioned why the Government stops and seizes IFFCO Urea entering into Nepal through cross-border mechanisms whereas the National Co-operative Federation and other traders import it and sell at a much higher prices. Others even see a smell of corruption and play of commission. A trader satirically said, If this is done because of just quality, Government should not allow even NCF and other importers to make a deal with the IFFCO. He added, But IFFCO urea, whether it comes through official channels or through cross-border, is excellent. Farmers have been using both types of IFFCO urea and that they have no complains. Purchasing officially imported fertiliser, particularly, urea is farmers powerlessness and compulsion. 4. Farmers questioned, If quality is the issue, why does custom authorities auction fertilisers seized by them to use by the farmers. This is against the spirit of the FCO. This is cheating us. 5. Not only urea, all types of fertilisers enter Nepal through informal/illegal sources. If police or some law enforcing authorities find, they seize fertilisers and take legal actions against the offender. On the other hand, custom has problem with regard to unofficial import of fertilisers not because of quality but they are concerned with disposal issue. They question, Who will bear the cost of destroying those fertilisers? How to destroy those fertilisers? If it is destroyed, what will be its effect to the environment? Therefore, they prefer to auction fertilisers using related legislation. 6. Fertiliser inspectors, investigation officer designated by FCO, prefer to remain blind for they are less aware of legal tactics and do not want to confront, partly due to role conflicts and partly due to the lack of awareness and support from the higher authorities. Police, District Administration and Revenue Investigation Authorities would often seize such fertilisers, and take action using other relevant legislation rather than use the FCO. Whatever be the consequences, some traders have found their own ways and mechanisms to bring in fertilisers and sell to farmers. Unofficial imports of fertiliser are driven by periodic localised shortages of fertiliser and substantial fertiliser price differences between Nepal and India. Mainly three factors - availability, prices and effectiveness in border control measures determine the level of unofficial flows of fertilisers from India to Nepal. Nevertheless, due to quality reasons and many types of DAP are manufactured in India, Nepalese farmers would prefer to buy Nepalese DAP provided these are available and price differences are not substantial.

28

Annex 2.4: Technology

Annex 2.4.1: APP research agenda and implementation status SN 1 Area/input /Output Input Hills and Mountains APP Agenda/priority Implementation status Disciplinary share of Allocate 60% of the agricultural research budget agricultural research suggest Terai receiving a budget to the major research budget than development and the hills. extension of appropriate technology for the hills and mountains. No evidences for priority given to the soil fertility research and research on lead commodities. Soil fertility research and specialised activities on lead commodities Terai APP Agenda/priority Implementation status Shallow tubewell based Research and extension systems to prepare farming multiple cropping focused research yet not carried out systems for shallow tubewells multiple cropping An INGO, IDE has emerged as NARC to emphasize water a pioneer in the development harvesting and developing of water harvesting and micro sprinkler, water harvesting irrigation technologies, and the and developing sprinkler, drip, tribune pump and other DOI has established a new division in it. But the forms of water conserving involvement of NARC in this irrigation regard could not be traced. NARC and DOAD research geared towards ensuring No substantial initiatives from continuous, profitable, NARC to monitor growth in effective, and fertiliser use. environmentally sound growth in fertilizer use . The NARC and AIC should work in close cooperation in monitoring the growth in fertilizer use Expansion of research activities pertaining to the present major filed crops (rice, wheat, maize and potato). After first five years of the plan, emphasis need to include dairy animal nutrition, particularly fodder crop production and

29

SN

Area/input /Output

Hills and Mountains APP Agenda/priority Implementation status

Terai APP Agenda/priority utilization Priority package emphasizes food grain production, Development based on the selection of quick return blocks, and move on to next blocks in sequential manner. Move towards food grain self sufficiency Implementation status

Output

Single lead crop and a single lead livestock commodity per ecological 10 planning unit (EPU) Identified a number of subsidiary commodities in each EPU Extension to be channelled into the lead commodities

Lead commodity is yet to be identified and promoted within the EPU framework. Extension follows PPS approach and pockets identified based on district potentialities and not on lead commodities identified in the APP.

Situation of rice exemplifies that most of the modern rice varieties grown in Nepal are quite old and have degenerated. Our district analysis in Bara, a Terai district, showed poor performance of research in terms of its responsiveness to farmers needs and priorities (see Box 1 in the main text). Likewise, western Nepal, is dominated by Sarju 52 and Kanchi Mansuli, Indian Rice. In Chaite season, 96% of farmers grew CH 45 a variety which was released in 1959.

10

APP has identified 10 EPUs in 5 development regions.

30

Annex 2.4.2: HRP funded projects by APP research priorities

APP Research Priorities 1) Resource productivity a) Soil fertility b) High intensity farming system revolving around modern shallow tube well c) Integrated pest management 2) Basic food crops a) Rice b) Wheat c) Maize d) Potato 3) High value commodities a) Citrus b) Apples c) Livestock d) Vegetable e) Apiculture f) Sericulture Sub-total APP technology area Non-APP Priority area

Number of research project Number Percent 14 9 0 10.7 6.9 0.0

Investment Amount (Rs 000) Percent 38,804 24,071 0 9.6 5.9 0.0

Total

5 21 6 4 6 5 47 8 3 13 21 1 1 82 49 131

3.8 16.0 4.6 3.1 4.6 3.8 35.9 6.1 2.3 9.9 16.0 0.8 0.8 62.6 37.4 100.0

14,733 65,439 15,857 17,254 17,281 15,047 155,202 26,006 8,868 50,795 60,808 3,950 4,775 259,445 146,049 405,494

3.6 16.1 3.9 4.3 4.3 3.7 38.3 6.4 2.2 12.5 15.0 1.0 1.2 64.0 36.0 100.0

Note- Dropped/ terminated projects are also included in the table. Source: NARMA, 2004 Annex 2.4.3: Share of public sector agricultural research budget In million NRs.
FY 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Annual growth % GDP 289,798 330,018 366,251 393,566 405,632 435,531 472,424 7.4 AGDP 112,495 132,373 145,131 151,059 160,144 171,104 183,357 7.2 National Budget 62,022 69,693 77,238 91,621 99,792 96,125 102,400 8.2 NARC budget 322.8 315.7 372.6 486.6 577.8 297.8 300.6 0.9 NARDF Budget 3.5 6.2 Research budget as % of Total Research National GDP AGDP budget budget 322.8 315.7 372.6 486.6 577.8 301.3 306.8 1.2 0.11 0.10 0.10 0.12 0.14 0.07 0.06 0.29 0.24 0.26 0.32 0.36 0.18 0.17 0.52 0.45 0.48 0.53 0.58 0.31 0.30

31

Annex 2.4.4: Share of public sector in agricultural extension budget In million NRs.
FY 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Annual Growth% GDP 289,798 330,018 366,251 393,566 405,632 435531 472424 7.4 AGDP 112,495 132,373 145,131 151,059 160,144 171104 183357 7.2 National Budget 62,022 69,693 77,238 91,621 99,792 96125 102400 8.2 DOA 654.8 770.8 1,198.7 1,382.1 1,810.9 1212.2 1344.7 10.6 DLS 517.5 581.6 660.7 925.4 1,002.7 661.4 606.0 3.9 Total Extension budget 1,172.3 1,352.4 1,859.4 2,307.5 2,813.6 1873.6 1950.7 8.1 Extension budget as % of National GDP AGDP budget 0.40 0.41 0.51 0.59 0.69 0.43 0.41 1.04 1.02 1.28 1.53 1.76 1.10 1.06 1.89 1.94 2.41 2.52 2.82 1.95 1.90

Annex 2.4.5: Budget allocation and expenditure in technology (research and extension) In million NRs. Total (Technology)
Expenditure Expenditure %

FY
1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Annual Growth%

Research Total
Allocation

Extension Total
81.85 93.98 88.86 87.26 75.58 89.01 94.52 1,172.3 1,352.4 1,859.4 2,307.5 2,813.6 1,873.6 1,950.7 8.1 1,131.2 1,210.4 1,468.7 1,714.2 1,935.8 1,498.8 1,650.3 6.1 96.49 89.50 78.99 74.29 68.80 80.00 84.60

Expenditure Expenditure % Allocation

Expenditure Expenditure % Allocation

322.8 315.7 372.6 486.6 577.8 301.3 306.8 1.2

264.2 296.7 331.1 424.6 436.7 268.2 290 1.4

1,495.1 1,668.1 2232 2,794.1 3,391.4 2,174.9 2,257.5 7.0

1,395.4 1,507.1 1,799.8 2,138.8 2,372.5 1,767.0 1,940.3 5.3

93.3 90.3 80.6 76.5 70.0 81.2 85.9

32

Annex: 2.4.6: Major functions/roles of different of organisational units of DOA in the delivery of agricultural extension services (from bottom to the top)

S.N

1.

Responsible organisations (Key actors) Agricultural services centre/sub-centres

Major functions/activities Plan programs in consultation with farmer groups, CBOs etc. Submit requests to DADO Implement programs as approved by DADO Help farmers to adopt mproved agricultural technologies Help farmers to solve their farming problems Implement devolved agricultural services programs in the respective focus/command VDCs. - Review and submit district agricultural development program to District Council for approval in accordance with MOACs guidelines and NPCs budget ceiling. - Submit agricultural development annual plan and budget to DDC for approval as per MOACs instructions and guidelines - Field and supervise frontline extension workers (JT/JTAs) in the district - Implement, supervise and monitor agricultural development programs in the district - Provide technical backstopping to DADO - Co-ordinate agriculture (crops, horticulture and fisheries) programmes/units at the regional level - Supervise and monitor district programs - Administratively control DADO - Formulate national policies, strategies, plans and annual programmes in respective subject areas; - Undertake regular monitoring and evaluation of programmes/projects in respective subject areas; - Impart training and extension functions in respective subject areas - Facilitate private sector participation in the respective areas as appropriate and applicable

Remark

JTs provide leadership at the Service Centres and generally JTAs are fielded at ASCs

3.

District Agricultural Development Office (DADO)/ District Development Committee

Key actor for agricultural development (crops, horticulture and fisheries) in the district Each of the 75 districts of the country has a DADO Pursuant to LSGA, Department of Agriculture delegated authorities (financial/program) to DDC, who is to further delegate authority to DADO.

6.

Regional Directorate of Agriculture (RDA)

Each of the five regions of the country has a Regional Directorate of Agriculture

Programme Directorates

12 Programme Directorates operate under the DOA

33

S.N

7.

Responsible organisations (Key actors) Department of Agriculture

Major functions/activities

Remark

- Provide technical backstopping to DADO - Administratively control RDAs - Review and submit district agricultural programs to the Ministry for approval - Delegate financial and program implementation authorities to DADOs - Enhance DDC's capacities for planning and supervising district programs

The lead public sector agency for extension services in crops, horticulture and fisheries sector.

34

Annex 2.4.7: Major functions/roles of different organisational units in the delivery of livestock extension services S.N Responsible Major functions/activities organisations (Key actors) - Plan programs in consultation with Livestock farmer groups, CBOs etc. services - Submit monthly and periodic requests Center/subto DLSOs centres - Implement programs as approved by DLSOs - Help farmers to adopt improved agricultural technologies - Help farmers to solve their farming problems - Implement devolved livestock services programs District - Review and submit district Livestock livestock/veterinary development Development program to District Council for Office (DLSO)/ approval in accordance with MOACs District guidelines and NPCs budget ceiling. Development - Submit agricultural development Committee annual plan and budget to DDC for approval as per MOACs instructions and guidelines - Field and supervise frontline extension workers (JT/JTAs) in the district - Implement, supervise and monitor livestock /veterinary development programs in the district - Provide technical backstopping to Regional DLSO Directorate of - Co-ordinate livestock / veterinary Agriculture programmes/units at the regional level (RDA) - Supervise and monitor district programs - Administratively control DLSOs Programme - Formulate national policies, Directorates strategies, plans and annual programmes in respective subject areas; - Undertake regular monitoring and evaluation of programmes/projects in respective subject areas; - Impart training and extension functions in respective subject areas - Facilitate private sector participation in the respective areas as appropriate and applicable Remark

1.

- JTs provide leadership at the Service Centres and generally JTAs are fielded at LSCs

3.

- Key actor for livestock services/veterinary development - Each of the 75 districts of the country has a DLSOs - Pursuant to LSGA, Department of Livestock Services delegated authorities (financial/program) to DDC, who is to further delegate authority to DLSOs

6.

- Each of the five regions of the country has a Regional Directorate of Livestocj Services

- 4 Programme Directorates operate under the DLS

35

S.N

7.

Responsible Major functions/activities organisations (Key actors) Department of - Provide technical backstopping to DLSOs Administratively control RDAs Livestock - Review and submit district livestock Services programs to the Ministry for approval - Delegate financial and program implementation authorities to DLSOs - Enhance DDC's capacities for planning and supervising district programs

Remark

- The lead public sector agency for extension services in various livestock species and veterinary services.

36

Annex 2.5: Road

Annex 2.5.1: APP agricultural road target (physical and financial) Ecological Zone 20 years Target Physical km 3400 1950 850 6200 Financial Rs million 2805 4875 4250 11930 Phase I (first 10 years) Target Physical Financial km Rs million 3400 2805 1428 3570 318 1590 5146 7965 Phase II (second 10 years) Target Physical Financial km Rs million 0 522 1305 532 2660 1054 3965

Terai Hill Mountain Total Source:

Annex 2.5.2: Physical and financial targets and progress Fiscal year Target Km Physical Progress of the year km 0.00 48 94 172 150 250 140 840 Cumulative Progress up to the year against APP target Target Rs Million Financial Progress of the year Rs Million Cumulative Progress up to the year against APP target

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Total Source:

181 446 537 537 537 537 537 3312

25.36 %

224 811 1189 1190 1195 1195 1195 59235

0 53 70 130 108 61 93 515

4.3%

Annex 2.5.3: Construction of rural roads

Projects

Ninth Plan Progressconstruction of rural road length (Km),

2361 161

Tenth Plan Target

440 500

Remarks

Rural community infrastructure works Programe (RCIW) Rural Infrastructure Development Project Agricultural road

326

500

Local development construction programme Rural Infrastructure project Rural Access Programme Total Source:

1619 NA NA 2361

NA* 400 500 Km 2340

ADB loan (Baglung, Kavre and Tanahu) Rural Agricultural Road and Local Development Construction DDCs WB, 8 districts DFID (6 districts)

37

Annex 2.5.4: Major rural road sector programs S N Major Rural Road Project /Duration Funding agency Project Cost/ Budget for current Fiscal Year 2004/05 not fixed/ NRs 305 million

District Covered

Local Development Construction program, LDCP continued since 1976 District Road Support Program, DRSP II 2002-2006 Rural Access Program, RAP 2001-2007 Rural Infrastructure Development Program, RIDP 1997-2005 Decentralized Rural Infrastructure and Livelihood Program, DRILP 2005-2010

HMG

75 districts

SDC/ HMG/ DDC DFID/ HMG ADB/ HMG ADB/SDC/ HMG

6 districts: Kavre, Sindhupalchok, Dolakha, Ramechhap, Okhaldhunga, Sindhuli 6 districts: Bhojpur, Sankhuwasabha, Kotang, Dailekh, Achham, Doti 3 districts: Baglung, Tanahu, Kavre 18 districts:Darchula, Bajhang, Baitadi, Bajura, Kalikot, Mugu, Dolpa, Humla, Jumla, Jajarkot, Gorkha, Lamjung, Baglung, Myagdi, Okhaldhunga, Ramechap,Solukhumbu, Taplejung 20 districts:Kailali, Bardiya, Banke, Salyan, Nawalparasi, Rupandehi, Palpa, Kapilbastu, Syangja, Kaski, Dhading, Nuwakot, Makwanpur, Rautahat, Sarlahi, Siraha, Udaypur, Mahottari, Dhanusa, Rasuwa as per request by the districts

NRs 395 million/ NRs 95 million

NRs 1.4 billion / Rs 464 Million NRs 1.24 billion / NRs 223 million US$ 55.4 Million / not allocated

Rural Access Improvement and decentralization program, RAIDP 2005-2010

WB/HMG

US$ 43 million/ NRs 153 million

Rural Road Maintenance Fund, RRMP since 2000 Road Board Fund, RBF since 2004 Rural Community Infrastructure Works, RCIW 1996-2005 Decentralized finance and Development Program, DFDP 20002007

10

HMG/ Local Bodies HMG/ Local Bodies WFP/ GTZ/ HMG UNCDF/DF ID

not fixed/ NRs 99.4 million not fixed/ NRs 44.5 million NRs 3.37 billion / NRs 320 million US$ 10 million / NRs 40 million

as per the request by the districts

30 districts

11 12 13

People's Cost Sharing Development Program DDC capital grant VDC capital grant

HMG HMG HMG

20 districts: Achham, Rupandehi, kaski, kavre, Dolakha, Dhanusa, Udayapur, tehrathum, darchula, Baitadi, Bajhang, Kailali, Humla, Mugu, Jumla, Jajarkot, Kukum, Salyan, Solukhumbu, Taplejung 40 districts All districts All VDCs

not fixed/ NRs 400 million not fixed/ NRs 320 million not fixed/ NRs 1.46 billion

Source:

38

Annex 2.6: Rural electrification

Annex 2.6.1: Rural demand of electricity, by use category, Terai of Nepal 2014/15

Category Residential Commercial Irrigation Cottage Industry Others Total Source: APP

Nepal 2014/15 Megawatt Hours per year Percent 794,488 41 116,575 6 407,402 21 591,446 31 174,86 1 1,927,397 100
Annex 2.6.2: Proposed investment on rural electrification

Year A. Transmission line construction 1999/2000 2000/01 Total B. Subsidies for micro hydro 1997/98 1998/99 1999/00 2000/01 2001/02 5 yrs. Total Source: APP Interim Plan 1997

Cost in Rs. Million Length of Transmission Line (km) 76 142 218 Capacity 20KW 20KW 20KW 20KW 20KW 100KW 456 852 1308 1 1 1 1 1 5

Annex 2.6.3: Tenth plan budget allocation in rural electrification Rs, million

Particulars Other rural electrification Kailali, Kanchanpur electrification Rural electrification & distribution system reform Mid and Far western region rural electrification Project Rapti, Veri rural electrification Mechi Rural electrification Koshi, Sagarmatha, hill area rural electrification Western region hill area rural electrification Total
Source:

Expected Growth Rate Normal Growth Rate Total HMG NEA Total HMG NEA Allotment Source source Allotment Source source 3301.2 3301.2 0 2751 2751 0 1867.3 4074.8 812.6 4.2 4.2 4.2 7 10075.5 1263.2 3244.3 690.2 4.2 4.2 4.2 7 8518.5 604.2 830.5 122.3 0 0 0 0 1557 1556.1 1052.6 3395.7 2703.6 558.6 1.5 0.9 0.9 474.5 1.5 0.9 0.9 503.5 692.1 84.11 0 0 0

1.5 1.5 0 8266.2 6986.5 1279.71

39

Annex 2.7: Credit

Annex-2.7.1: APP estimates of credit requirement Phase III Phase IV
14,051 246 3911 9,894 1,750 11,518 1705 1343 30,367 246 ,3911 11,644 14,566 27.7 24,147 416 6898 16,833 1,710 18,548 2747 2163 49,315 416 6,898 18,543 23,458 45.0

Particulars Fertilizers Mountain Hills Tarai Shallow tubewells Livestock High value crops Agro-industry TOTAL Mountain Hill Tarai Unallocated % share
Source: APP 1995.

Current Phase I Phase II

316 3,618 83 984 2,551 2,000 4,440 659 517 11,234 83 984 4,551 5,616 10.3 7,523 142 2046 5,335 2,000 7,186 1060 832 18,601 142 2,046 7,335 9,078 17.0

Total
49,339 887 13839 34,613 7,460 41,692 6171 4855 109,517 887 13,839 42,073 52,718 100

% % share increase
45.1 0.8 12.6 31.6 6.8 38.1 5.6 4.4 100.0 0.8 12.6 38.4 48.1 12.8

105 661 98 77 1,257

28.2 31.7 31.8 31.7 23.0

Annex 2.7.2: Lending activities of ADBN on APP specified purposes, 2002/03 and 2003/04 (Rs. In million) Achievement/Target Particulars Total loan disbursement Loan on APP focused purpose STWs Fisheries HVC Livestock Agro-industry Share of APP loan
Source: APP 1995.

Target 10288 2421 29 18 421 875 1079 23.5

2059/60 2060/61 Achievement Target Achievement 2059/60 10115 4955 10 33 1349 1634 1930 49.0 10498 2521 26 22 529 867 1077 24.0 10151 4678 7 56 1218 1597 1799 46.1 98.3 204.7 34.8 183.1 320.6 186.8 178.8

2060/61 96.7 185.6 27.7 259.2 230.2 184.3 167.0

40

Annex 2.7.3: Lending activities of ADBN on APP specified purposes, 2002/03 and 2003/04.
2059/60 Particulars Total loan disbursement Cereal crops Cash crops Special crops Marketing Irrigation Land development Agro-industry Livestock Horticulture Tea and coffee Non-agro credit and service Micro-credit Target 407,4725 226,464 220,984 199,752 1030,168 127,588 88,884 1079,011 892,510 52,702 156,662 Achievement 8745,204 772,538 1091,805 257,166 2889,373 , 20,502 1929,612 1634,038 48,227 52,119 Target 4346,229 217,580 376,619 152,462 1109,925 84,900 55,017 1077,203 888,251 80,805 79,763 216,808 6,896 2060/61 Achievement 9312,240 708,572 990,401 227,305 3166,759 12,604 4,956 1845,786 1597,440 31,545 66,408 651,207 9,257 Achievement of Target (%) 2059/60 214.6 341.1 494.1 128.7 280.5 39.1 23.1 178.8 183.1 91.5 33.3 2060/61 214.3 325.7 263.0 149.1 285.3 14.8 9.0 171.3 179.8 39.0 83.3 300.4 134.2

Source:

41

Annex 2.8: Livestock

Annex 2.8.1: Average annual growth rate of milk production during 1997-2003

Ecological Zone Cow Mountain Hill Terai Nepal Mountain Hill Terai Nepal Mountain Hill Terai Nepal

Buffalo

Total

Average annual (GR) Quantity (Mt.) Percent 282.2 0.84 3532.4 1.97 4486.3 3.42 8304.8 2.42 1105.1 1.92 6477.3 1.45 15206.8 5.49 22789.3 2.92 1391.3 1.52 10009.7 1.60 19693.1 4.84 31094.1 2.77

Annex 2.8.2: Average annual growth rate of meat production during 1997-2003

Ecological Zone Mountain Hill Terai Total

Growth Rate Quantity (Mt.) Percent 291.2 1.74 1650.7 1.60 3637.9 4.85 5579.8 2.87

Annex 2.8.3: Average annual growth rate of meat animals/bird after APP implementation

SN

Species

Meat production Quantity (Mt) 2820.8 -9.6 1597.5 468.8 711.5 -7.9 5579.8 Percent 2.26 -0.29 4.23 3.08 5.37 -2.75 2.87

1 2 3 4 5 6 7

Buffalo Sheep Goats Pigs Fowl Duck Total

Per capita meat Production Quantity Percent (Kg.) 0.0 -0.02 0.0 -0.43 0.1 2.15 -0.1 -0.48 0.0 -0.26 0.0 -2.29 -

Population Number 83627 -6772 146719 31851 1095277 -2014 Percent 2.31 -0.8 2.26 3.49 5.53 -0.49 -

Annex 2.8.4: Average annual growth rate of poultry during 1997-2003

Species Egg Production

Egg production laying hen Number Percent Number Percent Number Percent (000) 23033.5 83.6 4.69 -0.53 276049.5 -1129.2 4.6 -0.52 0.0 0.0 0.05 -0.01

No.of laying hen

Per capita egg Production Number Percent -0.2 0 -0.91 -0.04

Fowl Duck

42

Annex 2.8.5: Trends in the poultry meat and egg production and business in Nepal Indicators 1 2 3 4 5 6 7 8 Number of Poultry Birds ('000) Meat Egg ('000) Sales value (Rs million) Number of farms (above 1000 birds) Association/Memb er Hatchery Employment (Household) Investment (million) Unit No M. Ton No Rs No No days Rs 1996-97 15,577 10,671 421,460 636 3,165 39,842 97-98 16,665 11,400 440,910 714 3,514 43,826 98-99 17,797 12,146 460,620 791 3,904 48,209 99-2000 18,620 12,659 480,799 868 4,338 53,030 2000-01 19,790 13,259 507,323 945 4,820 43 51,104 1,702 01-02 21,370 14,118 538,420 1,025 5,355 61 55,648 1,837 02-03 22,261 14,756 557,361 1,073 5,950 61 55,648 1,914 03-04 23,024 15,881 575,565 1,105 7,000 61 55,440 2,000 Percent change 6 6 5 9 15 5 5 2

Sources: M.N. Lohani and others "Commercial Poultry Production, Nepal, 1997 and Nepal Hatchery and Poultry Association, 2005 Note: Production of poultry meat and eggs as per private sector estimate in 2004 are 37,100 m. ton and 432,422 thousand eggs respectively which differs from the estimates of the Ministry of Agriculture.

43

Annex 2.8.6: Registered private dairies operating through the country

Region Eastern Central Western Mid-Western Far-Western Total

Number 15 73 37 4 2 131

Percentage 11.45 55.74 28.24 3.05 1.52 100

Annex: 2.8.7: DLS budget and expenditure during the post-APP period Rs. 000 Budget Year Central District 1997/98 307076 202915 1998/99 337652 231844 1999/00 384964 262154 2000/01 575923 350537 2001/02 581969 413414 2002/03 307645 337169 2003/04 298682 290720 Average 399130 298393 1.0 7.5 Percent Expenditure Central District 252049 190944 266318 209824 159163 254414 368375 326086 372775 338062 250891 322371 218312 277116 269698 274117 1.1 7.4 Total Budget Expenses 509991 442993 569496 476142 647118 413577 926460 694461 995383 710837 644814 573262 589402 495428 697523 543814 3.8 4.3 Percent (%) Central District 82.1 94.1 78.9 90.5 41.3 97.0 64.0 93.0 64.1 81.8 81.6 95.6 73.1 95.3

Annex: 2.8.8: Number of research projects and annual budget under NARC, Rs000 Sector Crop & Horticulture Related Livestock & Fishery Common Total ] Source-NARC No. 230 FY 2004/05 % Budget 51.8 38607 FY 2003/04 % Budget 50.5 34762 FY 2002/03 % Budget 50.4 31679

% 36.7

No. 201

% 35.0

No. 205

% 33.7

99 115 444

22.3 25.9 100

25455 41027 105089

24.2 39.1 100

96 101 398

24.1 25.4 100

24388 40141 99291

24.6 40.4 100

92 110 407

22.6 27.0 100

23057 39210 93946

24.5 41.8 100

44

Annex 2.8.9: Number of livestock related research project & budget (Rs OOO) under NARC
Discipline No. % FY 2004/05 Budget % No. % FY 2003/04 Budget % No. % FY 2002/03 Budget %

Animal Breeding Animal Nutrition Pasture & fodder Animal Health Fishery Other Animal Total

28 12 15 10 34 99

28.3 12.1 15.2 10.1 34.3 100

9956 1446 1565 1290 11198 25455

39.1 5.7 6.1 5.1 44.0 100

28 15 14 8 30 2 97

28.9 15.5 14.4 8.2 30.9 2.1 100

9775 1650 1368 1068 10395 137 24388

39.7 6.8 5.6 4.4 42.8 0.7 100

29 18 12 13 36 2 110

26.4 16.4 11.0 11.8 32.6 1.8 100

11771 2300 2408 1937 4524 117 23057

51.1 10.0 10.4 8.4 19.6 0.5 100

Source-NARC

45

Annex 2.8.10: International assistance after the APP implementation Sn 1 Name of the Project Third Livestock Development Project (TLDP) Donor/type Asian Development Bank/Loan Project Finance ADB/M $ mil. 17.55 AUS/AID- $ mil.- 0.75 HMG/N-$ mil. 3.8 Beneficiaries-$ mil. 2.3 Participating Bank-$ mil. 3.5 Total 27.9 (# million) EC- 8.7 mil Euro HMG- 0.4 mil Euro Total- 9.1 mil Euro Project Period 1997/982003/04 Components Intensive Livestock Development to increase livestock productivities. Develop Institutional capacity in public and private sector Support in livestock related agro processing marketing

Strengthening of veterinary services for Livestock Disease Control (SVLDC) projects

EC/grant

Oct 1995Sept 2002

DANIDA Support Project (DSP) to National Dairy Development Board Hills Leasehold Forestry and Development Project

Royal Danish Govt (DANIDA)/ Grant IFAD loan and Netherland Grant

DANIDA- 12.9 mil Danish Krooner and 120 mm of expertise service IFAD-$ mil 8.96 Netherlands-$ mil 12.0 HMG/N-$ mil 0.65 Farmers-$ mil 1.3m Total- $ mil 17.03m ADB-$ mil 20.0 HMG/N-$ mil 5.0 Rural micro finance company-$ mil 6.5 Beneficiaries$ mil 1.5 Total-$ mil 33.0

June 1996April 2001

1993/942002/03

Community Livestock Project (CLDP) (yet to b effective)

Asian Development Bank/ Loan

2004/052009/10

Legislative Programme Rinderpest eradication Strengthening of Veterinary field service. Disease Surveillance System. Manpower Development Vaccine production and supply Animal Health Awareness Information and communication Establishment of an autonomous NDDB Planning and coordinating the implementation of Dairy development Plan. Milk Cooperative development and quality milk production Formation of Farmers Group (Poor) Leasing the degraded forest to the farmers group. Support the farmers group for fodder production Credit facility from Bank Market/Demand led approach Gender main straining Public/Private partnership Project management Support to local bodies for decentralization

46

Annex 2.8.11 Nepals membership at the WTO and the dairy industry Many often advise Nepalese dairy industries to take advantage of quota of WTO for products of those countries in world market capable to produce high-quality milk and diary products at low cost. Theoretically, Nepalese dairy industry could give at least some relief to milk producers with regard to so called milk holiday, if they would be able to take the advantage of the WTO membership and start exporting milk and dairy products in international market. However, this seems easy in saying than done. Similar to many developing countries, lberalisation of world trade in dairy products11 under the new world trade regime has brought about new challenges and opened up new export opportunities for the dairy industry in Nepal. This necessitates Nepal to enhance its competitive economic advantage in dairy products, in terms of both cost and quality, and to enhance its credibility in international markets. However, Nepals dairy sector is in desperate stage. With regard to the cost of milk production. the cost of producing one kilogram of milk in Nepal is between NRs 13.5 and 15.5 depending on the type of farm, location etc. Internationally, the cost of milk production in Nepal is higher (by 50% or more) than in countries such as New Zealand and Australia. The cost of milk production is high because of factors such as low productivity per animal, poor feed and fodder supplies, inadequate extension services, poor research etc. Since, reduction in cost of milk production is not possible, the option available to reduce cost of production per unit of milk and thus keep domestic prices low is to increase the yield level of dairy animals. The average milk yield per animal in Nepal is one of the lowest in the world. Nepal has highest per capita livestock holding size and lowest productivity at least in Asia if not in the world. The other issue is about the quality of the milk produced. As reported by Joshi (2002), the relatively high cost of producing milk of a general low quality is a major Box 1: Proper Dairy Development Policy Needed constraint of the Nepalese dairy industry and aggravated by the lack On the fourth annual general meeting organised by of transparent, accountable and Nepal Dairy Product Corporation Association (NDPCA) open policy to promote and develop in Jhapa on October 24, 2004, majority of the the dairy sector (see Box 1). participants expressed their dissatisfaction with the government for not paying serious attention towards the promotion and development of dairy products. They The cost of raw milk is increased demanded for the suitable Act to enable them to due to the internal transport cost. compete in the international markets. They reiterated Private entrepreneurs are required that the failure of the government to introduce Dairy here to pay multiple local Development Act has resulted in severe difficulties to development taxes imposed by the farmers dealing dairy products. local/ district governments in the movement of goods for trade which goes against to the trade policy 1992. The policy states that no restrictions will be imposed on the movements of products for internal trade. This issue was repeatedly raised by the district chamber of commerce during district analysis in Bara. The internal transport tax imposed by DDCs has increased the cost of agri-business output. Business persons had no objection to pay tax but they had problems in paying taxes at multiple levels, which is not friendly to dairy industry and private sector development . National Diary Development Policy drafted by NDDB is yet to be approved by the government. Likewise, the effectiveness of the code of practices for dairy industry formulated by the NDDB is not yet known and how will the dairy industry will respond to

11

The new world trade regime concerning dairy products became effective on 1 July 1995. 47

it and adopt it is yet to be seen, The code was approved by the Government recently in FY 2004/05. With regard to the quality issues, the National Dairy Development Board (NDDB)/DANIDA Support Project (DSP)s 1999 survey on quality of milk and milk products in Nepal showed lack of standards, lack of pricing systems for raw milk and lack of monitoring of quality at all levels (Joshi and KC 2002). The study indicated about the weak implementation of the Food Act 1996 which was promulgated to protect consumers against hazards to their health from adulterated food; to protect and safeguard consumers against fraudulent and malfeasant practices in the food business; to ensure fair practice by food handlers; to help minimise dumping of hazardous and substandard food articles; and to determine and maintain the quality and standard of food. Dairy industries are often held responsible for their slackness to follow the minimum code of quality production during the manufacturing process. In order to benefit from the new trade opportunities, and protect growing domestic dairy Industries, Nepal needs to set and enforce high quality standards for various dairy products through an independent non-governmental authority. . For improving the quality of milk products, Nepal must adopt the latest processing and packaging technologies and professional management. Compliance with phytosanitary specifications will also be necessary in order to increase the export of dairy products. While Nepals open border with India places pressure on Nepalese producers and processors to be efficient and competitive to Indian market, at the current price structure, it seems impossible. The cost of raw milk is higher in Nepal than in India. As a result of this, increasingly imports of dairy products at cheap prices from India and neighboring countries pose a threat to Nepalese domestic milk production. In Nepal, many hold the view that the open border shared by Nepal and India is a major barrier for the growth of domestic agricultural industry. The open border always has been supportive for the inflow of Indian produce that has eventually dominated the local market. The most destructive act for the fast growing Nepalese dairy sector is the import of cheap and dubious milk powder from abroad. The government has allowed the import of powder and condensed milk from Denmark, Australia, Singapore and New Zealand because production of milk is not uniform: there is a surplus during the winter months and a summer deficit. If Nepal fails to improve its competitive advantage in milk production by improving milk yields, ensuring quality, better policy environment and reduction in per litre cost of production, there is strong possibility that WTO membership and the import of cheap and dubious milk powder are likely to bring nearly an end to Nepalese fast growing dairy industry. Seriousness is therefore required from all quarters at this stage, otherwise, in the near future, Nepal might become a dumping site for cheap milk powder. In order to remain competitive in the international market, Nepal needs to enhance productivity of milch animals and to introduce measures to improve sanitary standards with legal back-up in the milk production and processing sectors in the global free trade regime.

48

Annex 2.8.12: Policy reforms in the livestock sector

Focus area APP Promote private farmers and business people to compete efficiency in the commercialisation process of livestock production system 9th Plan More attention for commercialisation of agriculture production system including livestock; Implementation of extension programme through pocket package Agri. Extension not to limit only on production but to take care of agribusiness promotion and market interaction 10th Plan Involvement of private and nongovernment organizations in production marketing and processing in the feasible area. Promotion of local farmers and business organizations for the supply of inputs. Launching of extension and research programmes through partnership with private local community organization, NGO. Introduce concept of contract farming. N. Agriculture policy Commercialisatio n of agriculture production system. Privatisation of agriculture Extension service in the commercial areas by involving NGO, cooperative etc. Promote contract farming Implementation Status MOAC adopted the concept of Partnership Programme which has been incorporated in the annual programme of DLS. Systems Learning Approach introduced to focus farmers as a primary stakeholder through ADB supported Third Livestock Development Project

Reforms in service delivery approache s and methodolo gy

Integrate livestock development with infrastructure development like road, electricity. Improve services veterinary

Emphasize Pocket Package Strategy

Pocket Package Strategy formulated in 1998/99, which is reflected in the annual programme of DLS thereafter. Privatisation of animal health service could not move smoothly despite support by the two externally assisted

Privatisation of health services.

animal

49

Focus area

APP

9th Plan

10th Plan

N. Agriculture policy

Implementation Status projects, TLDP and (SVLDC). Nearly 4000 VAHWs involved in providing animal health services in the rural areas (Table K) By the end of FY 2004/05 there are 2426 no of veterinary medicine shops established by farmers group under government scheme and private business people (Table K) Animal Health and Livestock Service Act 1999 and The Animal Health and Livestock Service Rule 2000 enforced, Slaughter House and Meat Inspection Act 1999 promulgated and Slaughter House and Meat Inspection Rule 2001 issued but implemented only in Makawanpur district presently. Enforced the Nepal Veterinary Council Act 1999 and the Nepal Veterinary Council Rule 2001.

Removal of all subsides in livestock processing and marketing

No financial subsidies available to livestock processing and marketing at the public sector

50

Focus area

APP Setting and enforcement of grade and standards and establish market information system.

9th Plan

10th Plan

N. Agriculture policy

Implementation Status Directorate of Livestock Marketing Promotion and Livestock Quality Management Laboratory, and Veterinary Quality Control and Drug Administration Office under the DOLS established in 1999/00 and 2002/03 respectively. Seasonal pricing policy implemented for one and half year (July 1999 to January 2000) but discontinued thereafter. Exempted VAT in transportation of fresh milk and yoghurt, but still imposed in other dairy products No Local Tax in transportation of Livestock Product except poultry products, feed and feed ingredients. Despite inclusion of the DDC under the privatisation list, it is yet to be privatised. However, Pokhara Milk Supply Schme, under the DDC sold out to a private businessman in 2004 as a par of governments fulfilment for the loan conditionality of the CLDP Process for privatization of Animal Feed Development Company, Hetuda not yet

Governme nt support

Introduction of seasonal pricing policy in the milk collection by DDC.

Removal of restriction in the movement of livestock commodities across district

Exemption of local tax VAT in livestock products

Privatizati on

Privatization or provide free standing to public sector institutions

51

Focus area

APP

9th Plan

10th Plan

N. Agriculture policy

Implementation Status initiated Milk Producers Cooperatives entrusted responsibility to collect milk for the DDC. 933 milk cooperatives operational at the end of FY 2002/03 NDDB developed code of practices for diary industry which has been approved by Government in FY 2004/05 Support Cooperatives to established mini dairies in Jhapa, Morang, Dang amd Banke districts. Support cooperatives and private business to established 71 chilling vats. Organization training program in quality milk production, product diversification and maintenance of dairy equipments. National Diary Development Policy drafted by NDDB is still to be approved by the government Aquatic Life Conservation Act amended in 1998 and the corresponding rule is still to be approved by the government.

Institution al reforms

NDDB to play positive role in promoting the private sector in the milk processing and marketing.

Legislation

Firmly enforce The Aquatic Life Conservation and Utilization Act 1993.

52

Annex 2.8.13: Number of livestock groups formed after APP implementation

Year 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03

Male 3170 3407 3416 2670 2776 2861

Farmers Group Female Mixed 903 844 1114 922 1439 1139 1774 2457 1768 2395 1885 2208

Total 4926 5443 5994 6901 6939 6954

Percentage of Female 18.3 20.5 24.0 25.7 25.5 27.1

Annex 2.8.14: Number of production pockets formed after APP implementation

Region Eastern Central Western Mid-Western Far-Western Total (%)

Cattle Buff Goat Sheep Pigs Poultry Total 28 26 80 1 31 2 168 5 43 80 3 33 164 33 83 118 2 40 19 295 2 23 56 4 14 99 2 20 48 1 6 3 80 70 195 382 11 124 24 806 8.68 24.19 47.4 1.38 15.38 2.97

(%) 20.8 20.4 36.6 12.3 9.9 100

53

Annex 2.9: High Value Commodities

Annex 2.9.1: Targets and achievements of high value commodities in ninth plan Base year Ninth Plan Anticipated Year wise achievements Annual 1996/97 Target Growth 1997/98 1998/99 1999/2000 2000/01 2001/02 Growth % 2001/02 Rate (%) Citrus Area ( 000 ha) 15.9 20.9 5.6 17.0 18.0 19.0 20.7 22.4 7.10 Production (000 Mt) 93.0 126.0 6.3 100.4 107.3 115.1 121.7 130.9 7.08 Apple Area (000 ha) 4.7 6.9 8.3 4.8 5.0 5.2 6.3 6.6 7.29 Production (000 Mt) 28.6 31.4 1.9 29.4 30.5 31.2 31.8 32.3 2.47 Vegetable Area (000 ha) 145.0 160.0 2.0 150.0 14018.0 149.0 157.2 161.1 2.13 Production (000 Mt) 1350.0 1716.0 4.9 1449.5 1342.6 1489.7 1653.0 1738.1 5.18 Off sea. veg Production (000 Mt) 10.8 25.0 18.3 Na Na Na 18.76 Na 14.80 Veg. Seed Production (Mt) 261.0 700.0 21.8 Na Na Na Na Na Na Apiculture Honey prod (Mt) 60.0 85.0 7.2 100.0 129.0 150.0 155.0 Na 26.78 Sericulture Cocoon prod (Mt) 24.5 44.0 12.4 18.0 20.0 26.0 31.0 Na 6.06 Source: The ninth plan, His Majestys Government, National Planning Commission. 1997-2002 Agricultural Sector in the Ninth Plan, a statistical review of sub regions. 1997-2002 PC, Ninth Plan Mid term Progress,2001 Crops Description

54

Annex 2.10: Agribusiness

Annex 2.10.1: Trends of selected agricultural production (1996-97 to 2003-04)

Quantity in M.Ton.
Commodity Cereal Crops Oilseed Sugarcane Legumes/Pulses Potato Fresh Vegetables Fruit Milk Tea Coffee Meat Fish Cardamom Poultry Meat Veg Seeds Eggs (number in thousands) Honey 1996-97 6,425,640 119,250 1,629,300 223,000 997,400 1,357,435 406,092 1,012,163 290 3 174,268 23,200 3,423 10,671 421,460 6 1997-98 6,360,789 110,226 1,762,580 211,250 971,680 1,449,475 447,440 1,048,040 3,021 56 180,675 24,866 3,852 11,400 271 440,910 100 1998-99 6,465,318 119,731 1,971,646 228,840 1,091,218 1,342,567 437,090 1,072,945 4,493 48 185,035 25,780 433 12,146 271 430,620 129 1999-2000 6,985,277 122,751 2,103,426 237,325 1,182,500 1,489,665 478,479 1,097,023 5,085 72 189,166 31,723 6,530 12,659 717 480,799 150 2000-01 7,171,781 132,331 221,178 243,243 1,313,717 1,652,980 462,147 1,124,132 6,638 89 194,257 33,250 6,080 13,259 588 507,323 155 2001-02 7,247,289 134,950 2,247,990 250,400 1,380,196 1,738,087 473,490 1,158,780 7,518 139 198,895 35,000 617 14,118 700 538,420 2002-03 7,360,400 124,931 2,343,054 256,900 1,401,710 1,799,973 518,864 1,195,931 203,899 36,530 14,756 700 557,361 2003-04 7,746,352 132,865 2,305,326 265,360 1,430,270 1,890,100 511,397 1,231,853 11,651 217 208,412 39,947 5,983 15,881 708 575,565 577 % 2.56 1.42 5.10 2.37 5.42 4.90 3.24 2.71 490 890 2.44 9.0 9.3 6.10 23.0 4.57 1189

55

Annex 2.10.2: Comparative performances of agri-business enterprises In Nepal (1996-97 To 2003-04) 1996-97 Performanc e Indicators All manufact uring establish ments
3,557

2001-02 % of Agribusiness establish ments

49

% Change % of Agribusiness establish ments

43 -6

Agribusiness establish ments

All manufac turing establish ments

3,213

Agribusines s establis hments

1,377

Number of Enterprises Persons Employed Investment (Rs. million) Output (Rs. million)

1,740

187,316

114,674

61

181,943

93,663

51

-10

33,052

20,372

62

62,206

34,808

56

-6

54,927

35,299

64

94,811

56,080

59

-15

Source: Central bureau of Statistics 1997-1998 and 2001-02

56

Annex 2.10.3: Trends in the vegetable seeds production and business in Nepal

Indicators 1 2 3 4 5 6 7 8 9 Vegetable Seeds Areas Seeds Production Sales Volume (million) Export Value (million) Number of Companies
Association/Members

Unit Ha Ton Rs Rs No No No Rs Rs

1996-97 NA NA NA NA NA NA NA NA NA

97-98 100 271 20 1.5 15 102 306 22.5 642

98-99 365 271 20 2.6 18 112 336 27 771

99-2000 90 717 30 9.4 20 124 373 30 857

2000-01 518 588 50 4.7 30 147 441 45 1,285

01-02 610 763 73 NA 25 150 450 37.5 1,071

02-03 610 700 73 2.5 35 158 474 52.5 1,500

03-04 610 707 75 5 35 162 486 52.5 1,500

Growth % 63 20 34 29 16 7 7 16 16

Employment (days)
Total Investment (million) Investment per seed company (thousands)

Sources: Seed Entrepreneurs Association of Nepal, " A Report on Vegetable Seed Trade Survery",2003-2004 and AEC Commodity Reports, Kathmandu, 2005

57

Annex 2.10.4: Trends in flower production and business in Nepal

Indicators 1 Area under Flower Production of Stems (per day) Number of Nurseries Export (Rs/million) Association/Member Sales value (Million) No of flower shops in Kathmandu Employment (No)

Unit Hectare

199697 NA

97-98 5

98-99 10

992000 10

200001 12

01-02 20

02-03 25

03-04 27

Growth % 55

No

4,000

5,075

7,725

7,725

10,775

10,775

10,850

11,750

24

3 4 5 6

No Rs No Rs

80 NA 55 30

120 4 82 40

200 101 56

200 1.5 120 61

250 4 133 70

250 25 133 70

450 18 187 170

550 11 192 200

73 21 31 70

7 8 9

No Days

14 240

14 360

22 600 15,000

33 600 15,000

36 750 18,750

38 750 18,750

50 1350 33,750

56 1650 41,250

37 73 73

Total Investment in Rs 6,000 9,000 '000 Rs Sources: Floriculture Association of Nepal, 2005 and AEC

58

Annex 2.10.5: Trends in the tea production and business in Nepal

Indicators Tea Area in Hectares Production Sales volume (Rs million) Export (Rs/million) Number of Companies Association/Me mber Employment Total Investment on working capital (million)

Unit

1996-97

97-98

98-99

99-2000

2000-01

01-02

02-03

03-04

Growth % 41

Ha M. Ton Rs Rs No No days

3,502

4,515

10,250

10,250

11,997

12,346

12,643

15,012

2,906

3,019

4,493

5,085

6,638

7,518

8,198

11,651

37

3 4 5 6 7

320 22 NA NA 8,750

354 12 20 NA 11,280

568 30 132 7 25,620

646 26 98 7 25,620

683 24 120 19 29,990

859 28 192 19 30,865

859 54 192 19 31,600

2,000 104 173 19 37,560

65 46 95 21 41

Rs

174

181

269

305

398

452

492

699

37

Source: Nepal Tea and Coffee Development Board and AEC 2004

59

Annex 2.10.6: Table: Trends in dairy production and business in Nepal

Indicators 1 2 3 4 Milk Production Dairy Processing Litre/Day Sales Value (Rs/million) Number of Dairy Enterprises Association/Mem bers Employment (Households) Investment (million) Milk Cooperatives

Unit M. Ton M. Ton Rs No

1996-97
1012163

97-98
1048040

98-99
1072945

99-2000
1097023

2000-01
1124132

01-02
1158780

02-03
1195931

03-04
1231853

Growth % 3 147 66 41

37,000 635 52

90,000 657 -

94,000 686 -

99,000 723 -

370,000 2,971 131

381,000 3,059 -

393,000 3,156 -

474,000 4,000 225

No

NA

100

100

No

60,000

75,000

95,000

7 8

Days Rs

416 NA

5,550 1,000

7,110 1,365

201 4

Sources: National Dairy Development board 2005 and AEC

60

Annex 2.10.7: Trends in the poultry meat and egg production and business in Nepal

Indicators 1 2 3 4 5 Number of Poultry Birds ('000) Meat Egg ('000) Sales value (Rs million) Number of farms (above 1000 birds) Association/Mem ber Hatchery Employment (Household) Investment (million)

Unit No M. Ton No Rs No

1996-97 15,577 10,671 421,460 636 3,165

97-98 16,665 11,400 440,91 0 714 3,514

98-99 17,797 12,146 460,62 0 791 3,904

99-2000 18,620 12,659 480,799 868 4,338

2000-01 19,790 13,259 507,323 945 4,820

01-02 21,370 14,118 538,420 1,025 5,355

02-03 22,261 14,756 557,361 1,073 5,950

03-04 23,024 15,881 575,565 1,105 7,000

Growth % 6 6 5 9 15

No

43

61

61

61

days

39,842

43,826

48,209

53,030

51,104

55,648

55,648

55,440

Rs

1,702

1,837

1,914

2,000

Sources: M.N. Lohani and others "Commercial Poultry Production, Nepal, 1997 and Nepal Hatchery and Poultry Association, 2005

Note: Production of poultry meat and eggs as per private sector estimate in 2004 are 37,100 m. ton and 432,422 thousand eggs respectively which differs from the estimates of the Ministry of Agriculture.

61

Annex 2.10.8: Nepals agriculture trade Fiscal Years Food and Live Animals (0) Total Exports Tobacco and Beverages (1) Exports Animal and Vegetable Oil and Fats (4) Total Imports Imports Animal and Vegetable Oil and Fats (4) 7 7 8 31 22 26 93 64 66 79 123 102 176 353 343 476 742 802 1,085 1,457 2,056 2,831 2,328 2,026 3,329 4,446 5,589 7,888 7,751 8,634 Food and Live Animals (0) 243 291 249 323 292 413 601 619 925 728 783 971 1,029 1,524 1,333 1,608 1,821 2,948 3,025 4,085 4,464 4,786 5,401 4,929 7,170 10,839 5,994 6,333 9,371 8,554 Tobacco and Beverages (1) 19 42 20 44 36 26 25 36 63 72 79 113 144 172 197 227 257 288 469 368 501 509 591 800 846 907 906 717 792 1,027

1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04

890 1,186 1,165 1,046 1,297 1,151 1,609 1,492 1,132 1,704 2,741 3,078 2,991 4,115 4,195 5,156 7,388 13,707 17,267 19,293 17,639 19,881 22,637 27,514 35,676 49,823 55,654 46,945 49,931 25,536

518 804 600 405 489 307 589 736 328 584 992 836 704 804 578 616 987 1,942 1,863 1,163 1,563 1,947 2,662 3,123 3,725 4,240 4,777 5,094 6,101 3,031

0 4 12 11 14 3 15 18 13 5 5 0 4 10 7 4 11 14 13 13 11 10 15 23 50 117 76 146 139 6

2 2 5 6 17 20 38 40 42 68 57 61 117 171 100 20 202 160 176 138 215 251 313 2,136 3,597 3,230 4,104 7,421 4,279 1,358

369 376 548 624 778 821 967 693 749 1,047 1,686 2,181 2,167 3,129 3,511 4,516 6,188 11,591 15,214 17,979 15,851 17,674 19,647 22,231 28,305 42,235 46,698 34,284 39,412 21,141

Other Exports

1,815 1,982 2,008 2,469 2,885 3,480 4,428 4,930 6,314 6,514 7,742 9,377 10,905 13,870 16,084 18,325 23,227 31,940 39,206 51,571 63,679 74,455 93,553 89,002 87,075 108,505 115,687 107,389 124,352 136,277

62

Annex 2.10.8: Agreements made by Nepal with WTO in relation to agriculture

Terms of accession of goods

1 Customs tariffs (para.37 and Goods Schedule) 2 Other Duties and Charges ODCs (para. 41) 3 Export Restrictions (para 80,81,84) Nepal has bound all tariffs lines except on arms, cement and petroleum product The average applied tariffs rate us about 11% The average tariffs bound rate is 39% at the date of accession subject to lowering it down to 24% in the long run The harmonized system of commodity classification (HS system) is in vogue in Nepal Nepal has committed to gradual elimination of ODCs between two and ten years time from the date of accession After ten years ODCs will be bound at zero For ten years Nepal shall apply ODCs subject to gradual reduction 2.5 4.5%on imports of agricultural goods have been levied as ODCs at the date of accession 2.5 11.5% on imports of industrial goods have been levied as ODCs at the date of accession Nepal has also committed not to introduce new ODCs Nepal has confirmed that it would continue export restrictions on exhaustible natural resources such as logs, timber and mamira. The restriction is also imposed to fulfill the obligations arising from different MEAs to which Nepal is a party. Nepal also said that it would not allow export of those flora and fauna that are prohibited for export to respect the obligations arising from the CITES. Export restriction on raw hides, skins and raw wool is temporarily applied and Nepal would lift the ban at an appropriate time. Nepal would review the export ban on imported raw materials, parts and capital goods in the light of Article III and XI of GATT 1994. Nepal did not provide direct payment of incentives to any industry. Nepal provides certain exemptions in terms of income tax, sale tax, excise tax, excise duty and customs duties to the industries qualifying under the conditions stated in Industrial Enterprise Act, 1992. Nepal has committed to identify subsidy measures incompatible with the WTO and eliminate them. Upon the entry into force of the Nepal's Accession Protocol, Nepal has committed to notify the Committee on Subsidies all the necessary information in the regard. Nepal has committed to administer its subsidy

Subsidies (paras. 87,88,89)

63

Sanitary and Phytosanitary Measures (para. 103, 106, 107)

programmes in full conformity with WTO Agreement on Subsidies and Countervailing Measures. Nepal is a party to different international instruments and has different laws to harmonise and implement the sanitary and phytosanitary measures. Nepal is also a member of different international organizations and follows international standards including Codex Alimentarius and has different laws to adopt and implement the sanitary measures. Nepal has also informed about lack of technical expertise to implement the SPS Agreement. Ministry of Agriculture and Cooperatives (MoAC) would establish an SPS enquiry point by 1 January 2004. Nepal would fully implement the SPS Agreement by 31 December 2006. Nepal has confirmed to review laws and regulations relating to SPS Measures and accordingly amend necessary legislation. Nepal has committed to apply existing measures in a non-discriminatory manner to all imports. Measures already in conformity with SPS would not be subject transition period. Nepal has made a commitment to ensure that any changes during transitional period would not result in a lesser degree of consistency with the provisions of the SPS Agreement than existed on the date of accession. Technical regulations and other measures adopted during this period would be developed in conformity with the provisions of the SPS Agreement. Nepal has also committed to notify existing SPS measures to the Committee on Sanitary and Phytosanitary Measures. Nepal has expressed its interest for technical assistance. Nepal has established an Inquiry Points in the Department of Food Technology and Quality Control (DFTQC) under ministry of Agriculture and Cooperatives before the deadline of June 2003. Nepal would fully participate in the work of the SPS Committee.

64

Terms of accession on Trips

1 Membership (Paras.12) Nepal is a member of WIPO since 4 Feb. 1997. Nepal is a member of Paris Convention since 22 June 2001. Nepal has committed to join Berne Convention by December 2005. Nepal has committed to join Rome Convention and Treaty on Intellectual Property Rights by December 2006. Nepal has also said that it would also look at other WIPO and IP related Conventions e.g. Geneva Phonograms Convention, WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty in terms of national interest and explore the possibility of joining them in the future, as appropriate.

65

Annex 2.11: Forestry

Annex 2.11.1: Area coverage of CFs Area in ,000 ha % of potential CF Handed % of handed over as CF area of total over Forest CF area to potential forest area Area *** CF area EDR 951.3 677.8 71.3 299.3 44.16 CDR 1,634.4 574.0 35.1 249.0 43.38 WDR 991.2 932.5 94.1 171.2 18.36 MWDR 1,152.4 871.8 75.6 279.9 32.11 FWDR 1,098.7 522.6 47.6 139.8 26.75 Nepal 5,828.0 3,578.7 61.4 1,139.2 31.83 Mountain 1,954.3 1,408.9 72.1 217.8 15.46 Hills 3,386.4 1,952.2 57.6 769.6 39.42 Terai 487.3 217.6 44.7 151.8 69.76 * Computed from Forest and Shrub Cover of Nepal 1994, Department of Forest Research and Survey, 1999 ** Computed from Community Forestry Manual, *** Computed from Community Forestry Database (As on 31st March, 2005) Total Forest area* Potential CF** Area

Annex 2.11.2: Area and households coverage of CFs by development and physio-graphic region
CF Number Area Households % of CF CF member % of total Members HHs HHs HHs 319,281 31.5 20.3 389,094 26.4 24.7 405,864 47.0 25.8 278,313 52.1 17.7 182,960 49.8 11.6 1,575,512 37.0 100.0 234,229 86.8 14.9 1,099,177 54.1 69.8 242,106 12.4 15.4

EDR CDR WDR MWDR FWDR Nepal Mountains Hills Terai

Number 2,579 3,250 3,638 2,517 1,807 13,791 2,336 10,348 1,107

Percent 18.7 23.6 26.4 18.3 13.1 100.0 16.9 75.0 8.0

Area 299,347 249,040 171,169 279,890 139,788 1,139,233 217,845 769,572 151,817

Percent 26.3 21.9 15.0 24.6 12.3 100.0 19.1 67.6 13.3

Total HH 1,012,968 1,475,477 863,045 534,310 367,420 4,253,220 269,769 2,032,871 1,950,580

66

Annex 2.11.3: Cumulative average annual growth rate of CFUGs number Development Region Number Up to 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Growth rate (%) EDR 1,642 1,884 2,058 2,217 2,308 2,376 2,473 2,553 2,579 5.0 CDR 1,565 1,857 2,124 2,349 2,655 2,903 3,087 3,241 3,250 8.7 WDR 1,967 2,324 2,647 2,923 3,119 3,273 3,453 3,638 3,638 7.0 MWDR 1,278 1,629 1,887 2,165 2,306 2,383 2,460 2,510 2,517 7.0 FWDR 1,065 1,276 1,410 1,544 1,664 1,714 1,763 1,807 1,807 5.8 Nepal 7,517 8,970 10,126 11,198 12,052 12,649 13,236 13,749 13,791 6.8 Physio-graphic Region Mountains 1,304 1,584 1,772 1,919 2,078 2,174 2,277 2,336 2,336 6.5 Hills 5,831 6,843 7,685 8,502 9,130 9,543 9,954 10,320 10,348 6.5 Terai 382 543 669 777 844 932 1,005 1,093 1,107 11.0

Annex 2.11 4: Cumulative average annual growth rate of CFUGs area handed over Development Region CDR WDR MWDR 114,783 88,238 136,647 144,729 107,797 173,992 161,769 125,211 203,320 175,749 140,550 232,552 201,584 149,094 255,206 222,143 154,445 264,728 235,505 162,185 274,293 247,411 171,169 278,739 249,040 171,169 279,890 8.9 7.2 7.6 Physio-graphic Region Mountains Hills Terai 119,959.3 406,293.0 55,479.1 149,847.4 487,919.4 81,076.6 160,226.6 559,558.7 98,584.1 173,683.4 627,588.7 110,361.2 194,414.6 680,516.2 121,689.1 205,705.0 710,635.0 131,956.9 213,853.7 739,418.8 138,835.4 217,844.5 764,877.9 149,333.8 217,844.5 769,571.5 151,816.6 6.7 7.1 10.0

Area Up to 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Growth rate (%)

EDR 165,276 195,004 221,035 242,839 259,721 271,350 282,689 294,949 299,347 6.6

FWDR 76,787.0 97,321.2 107,034.5 119,943.4 131,014.7 135,632.6 137,435.6 139,787.7 139,787.7 6.3

Nepal 581,731.4 718,843.3 818,369.4 911,633.3 996,619.9 1,048,296.9 1,092,107.9 1,132,056.2 1,139,232.6 7.4

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Annex 2.11 5: Annex 3 Table 5: Cumulative average annual growth rate of households coverage of CF programme Development WDR 226,810 265,289 301,283 332,423 352,399 368,993 386,276 405,864 405,864 6.6 Physiographic Hills 612,547 722,714 811,762 901,856 965,902 1,011,900 1,056,791 1,094,819 1,099,177 6.6

Households Up to 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Growth rate (%)

EDR 183,657 217,950 242,809 262,789 275,314 288,411 302,911 315,018 319,281 6.1

CDR 187,493 223,023 250,638 277,784 314,882 344,101 368,747 387,409 389,094 8.8

MWDR 136,327 175,329 204,103 233,566 250,601 258,772 267,724 275,902 278,313 7.4

FWDR 102,848 126,176 143,526 157,660 168,627 175,841 179,115 182,960 182,960 6.1

Nepal 837,135 1,007,767 1,142,359 1,264,222 1,361,823 1,436,118 1,504,773 1,567,153 1,575,512 7.1

Mountains 127,819 156,874 176,871 192,380 208,260 218,207 228,137 234,229 234,229 6.6

Terai 96,769 128,179 153,726 169,986 187,661 206,011 219,845 238,105 242,106 9.9

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Annex 2.11.6: Status of private forests PF Number

EDR CDR WDR CDR MWDR Total Mountains Hills Terai 883 996 308 157 58 2,402 53 426 1,923

Area Percent
36.8 41.5 12.8 6.5 2.4 100.0 2.2 17.7 80.1

ha
1,141.7 772.5 258.4 95.4 65.1 2,333.0 40.6 671.0 1,621.4

percent
48.9 33.1 11.1 4.1 2.8 100.0 1.7 28.8 69.5

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Annex 2.11.7: Cumulative average annual growth rate of PF area Development region CDR WDR MWDR 546.3 200.4 63.5 649.5 243.0 69.9 699.2 245.8 75.9 719.6 251.0 77.5 745.2 251.0 79.1 752.1 252.0 87.9 752.1 252.9 91.9 772.5 258.4 95.4 3.9 2.3 5.5 Physiographic region Mountains Hills 37.1 596.5 37.1 641.0 40.6 649.2 40.6 658.3 40.6 659.5 40.6 663.8 40.6 665.5 40.6 671.0 1.3 1.3

Upto 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 Growth rate (%)

EDR 897.8 1,025.9 1,089.7 1,096.7 1,109.6 1,131.7 1,139.8 1,141.7 2.7

FWDR 22.6 29.1 37.3 46.5 53.7 64.2 65.1 65.1 14.0

Nepal 1,730.6 2,017.4 2,147.9 2,191.3 2,238.5 2,287.9 2,301.7 2,333.0 3.4

Terai 1,097.1 1,339.4 1,458.1 1,492.4 1,538.4 1,583.5 1,595.6 1,621.4 4.4

Annex 2.11.8: Cumulative average annual growth rate of LF groups

Development region Number Upto 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 EDR 24 66 101 55.3 CDR 544 880 1,143 1,304 1,390 1,390 1,478 1,530 10.6 WDR 25 97 162 250 272 272 315 345 20.2 MWDR 10 48 78 57.1 FWDR 10 49 67 56.2 Nepal 569 977 1,305 1,554 1,662 1,706 1,956 2,121 13.7 115 156 181 201 217 217 242 252 9.1 Physiographic region Mountains Hills 428 751 1,004 1,203 1,285 1,329 1,544 1,689 14.3 Terai 26 70 120 150 160 160 170 180 15.7

Growth rate (%)

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Annex 2.11.9: Cumulative average annual growth rate of area coverage of LF programmes

Development region Area Upto 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 EDR 57.3 167.6 265.5 55.7 CDR 2,470.6 3,928.2 4,941.0 5,645.6 6,065.7 6,065.7 6,425.0 6,602.7 10.2 WDR 88.3 303.5 535.7 877.0 978.5 978.5 1,149.0 1,233.0 21.2 MWDR 59.8 148.4 233.9 55.1 FWDR 24.6 147.0 171.9 55.8 Nepal 2,558.9 4,231.8 5,476.7 6,522.6 7,044.2 7,185.9 8,036.9 8,506.9 12.7 428.4 585.5 701.5 824.9 888.5 888.5 1,003.2 1,026.3 10.4

Physiographic region Mountians Hills 2,039.3 3,371.4 4,307.2 5,107.6 5,482.9 5,624.5 6,302.7 6,718.0 12.6 Terai 91.2 274.9 468.0 590.1 672.9 672.9 731.1 762.6 17.1

Growth rate (%)

Annex 2.11.10: Cumulative average annual growth rate of household coverage of LF

Development region Households Upto 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 EDR 155 452 733 55.8 CDR 3,785 6,088 7,894 9,106 9,838 9,838 10,535 10,928 11.0 WDR 142 533 935 1,489 1,649 1,649 1,982 2,173 21.4 MWDR 92 357 616 57.0 FWDR 53 367 642 58.2 Nepal 3,927 6,621 8,829 10,595 11,487 11,787 13,693 15,092 14.3 880 1,220 1,417 1,577 1,717 1,717 1,948 2,028 9.7 Physiographic region Mountain Hills 2,886 4,964 6,657 8,060 8,732 9,032 10,627 11,876 15.0 Terai 161 437 755 958 1,038 1,038 1,118 1,188 16.4

Growth rate (%)

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Annex 2.11.11: Preparation of OFMP for commercial forest management Year of plan approval 1995 1996 1997 1998 1999 No of Plans 2 4 0 10 3 Districts Terai Rautahat and Bara Parsa, Nawalparasi, Rupandehi Jhapa, Morang, Sunsari, Sarlahi, Banke, Bardiya, Kailali, Kaplivastu Chitwan, Kanchanpur and Dhanusha Inner Terai Makwanpur Ilam, Udaypur

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Annex 2.11.12: Achievements of soil and watershed conservation programmes

Unit Land use development planning Preparation of sub watershed plan Preparation of forest work plan per unit per unit 1995/96 16 75 1996/97 15 58 1997/98 29.35 18 1998/99 46 173 1999/00 20 12 101 56 30 24 72 39 44 66 54 31 56 53 87 8 5 46 2000/01 12 13 65 20 0 79 2001/02 9 5 471 0 5 39 117.61 65.6 7.03 4 257.16 615.9 13 53.7 83 22 133 880 65 7.6 2.5 295 617 68 57 99 19 146 913 44 48.81 14.9 1 219.25 420.5 19 7 50.24 8.6 146 1345 35 8 6 20 35 31.7 16 40880 5 42590 4 26830 7 25 216 5 34911 5 29950 1309 51.93 4.3 1 189 329.7 37 27.5 147 19 173 1890 20 10 136 3095 98 14 185 4254 105 17 252 2045 117 3125 51 75 105 300 300 183 241 2659 439.42 24 5 12.25 10 5 4 19 4 9 2002/03 23 59 Growth rate % -3.3 -12.8 87.1 -30.4 -28.2 1.1 -186.8 -29.5 -1.1 -49.4 4.1 -23.7 79.8 -35.4 -2.6 -5.4 3.7 17.0 -22.8 116.3 94.6 -27.3 -8.4

Preparation of land use and community development plan per unit Natural disaster control Control Galley erosion Control landslide Construction of conservation pond Bioengineering/torrent control Development infrastructure protection Irrigation canal River sides Shelter belt/ greenbelt Land productivity conservation Terrace improvement Rehabilitation of degraded land Cultivation of fruit plant Fodder/grass cultivation Community soil conservation Programme Water source protection Demonstration of Small watershed Conservation education in School level Soil conservation Tour/training for farmers Community Development programme Income generating programme Community soil conservation special programme Establishment of Nursery Extension materials per unit Ha. per unit KM KM KM KM Ha. Ha. Ha. Ha. per unit per unit times Person Community HH Place per unit unit

73

Annex 2.11.13: Level of investment on APP priority programmes up to 2004

APP requirement Up to 2004 (Rs Million) 1444 1293 650 609 3996 Actual investment Up to 2004 (Rs Million) 342 248 155 16 760

APP priority programme Community forestry National Forestry Private and leasehold forestry Supportive programs Total

Percent 23.7 19.2 23.8 2.6 19.0

Annex 2.11.14: Average annual growth on budget allocation, release and expenditure of APP priority programmes after APP implementation
HMGN Budget Allocation Expense Release Foreign aid Expense Release Budget Budget Total Expense 2.6 (17.4) (1.7) (18.9) (4.1) Release 2.8

Community forestry Leasehold forestry National Forestry and leasehold forestry Supportive programs Total

(11.3) 35.1 (2.0) (16.1) (3.5)

(11.7) (3.1) (1.1) (30.2) (2.9)

(11.7) (3.6) (3.1) (36.7) (1.4) (1.1) (30.2)

5.5 (19.5) (0.3) 0.4 50.0 (4.1)

5.2 (19.5) (0.3) 50.0 (4.4)

(4.6)

(31.8) (17.4) (3.1) (1.3) (6.1) (18.9) (9.1) (3.6)

(3.7) (12.6)

Source: Computed from Annual report of DOF Annex 2.11.15: Expenditure on forestry sector Unit: Million Rs Total 976.7 950 1212.3 1309.9 1308.3 1638.7 1645.1 9.6

Year 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 Annual growth rate %

Development 463.8 410.4 480.5 519 478.9 630.9 623.9 6.4

Regular 512.9 539.6 731.8 790.9 829.4 1007.8 1021.2 11.8

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Annex 2.11.16: Foreign aid on forestry sector Grant Aid 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 Slope Average Percent 168.1 111.4 76 172.7 96.7 227 302.6 23.407 164.93 14.2 Loan Aid 51.1 81.1 113.2 37.3 26.4 0 18.8 -12.354 46.843 -26.4 Total 219.2 192.5 189.2 210 123.1 227 321.4 11.054 211.77 5.2

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Annex 2.11.17: Donor assisted projects on forestry sector

Name Nepal Australia Community Resource Management Project Nepal Denmark Watershed Management Project Nepal Denmark Natural Resource Management Sector Assistant Programme Bagmati Integrated Watershed Management Project Phase Ii Community Development and Forest Watershed Conservation Project Phase Ii Nepal Swiss Community Development Programme Dhading Resource Management Project

Sector Forestry

Initiated Year

Complete Funding d Year Agencies 2002 AusAid

No of District 2

Remark

1997 Watershed Mgmt. Watershed Mgmt. 2003 1997 2003 DANIDA 20 DANIDA 3

Started from 1992

1997 Watershed Mgmt. 1997 Watershed Mgmt. 1999 2000 2004 JICA 2004 Swiss Government 2003 UNM/USAID 2003/04 GTZ 2011 2006 2006 2006 2006 DFID WWF CARE/Nepal The Netherlands USAID 2 3 Started from 1990 1 3 15 14 2 8 4 Started from 1992 2003 EU 6

Forestry Forestry Forestry

Churia Forest Development Programme Livelihoods and foresty Forestry project Terai Arc Landscape project Forestry Watershed Chure Watershed Mgmt. management Project Forestry Biodiversity Sector Programme-Siwalik-Terai Strengtheinign Advocacy for Forestry governed utilisation of Natural Resource Programme (SAGUN) BIo-diversity sector Watershed Programme for Shiwaliks Mgmt. and Terai BISEP-ST Forestry Nepal Australia Community Resource management and Livelihoods Programme Nepal Australia Community Watershed resource Management and Mgmt. Livelihoods Natural Resource Sector Forestry management assistance programme

2000 2001 2001 2001 2001 2002 2002

2002

2006

SNV/Nepal

2003

2009

AusAid

2 Started from 1992

2003

2009

AIDAB

2004

2005

DANIDA

38

Tree Improvement and Forestry 2003 Silviculture Component 1998 Community Forestry Forestry 2003 Development Programmecenter 1999 Community Forestry Forestry 2003 Development Programmedistrict 1999 Source: Computed from Annual report of DOF and DSCWM

DANIDA DANIDA

75 0

Started from 1982

DANIDA

38

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Annex 2.11.18: Policy reforms within forestry sector after APP implementation SN 1 Policies and procedures BZ Management Guidelines, 1999 CF inventory guideline, 2000 Leasehold forestry policy, 2002 CF guidelines, 2002 National Biodiversity Strategy, 2003 Monitoring and evaluation concepts and strategies, 2003 Collaborative forest management guidelines, 2003 Forest products auctioning procedures, 2003 Terai Arc landscape board strategies, 2003 Working procedures for involvement of NGOs on management of Protected areas, 2004 Wild life farming, reproduction and research policy, 2004 Non government service provider guidelines, 2004 Herbs and Non timber forest products development policy, 2004 Forest Sector Foreign Aid policy guidelines, 2004 Human Resources Strategy, 2004 Guidelines for Initial Environmental Examination in forestry sector, 2004 Year 1999 Focus Made provisions directing 30-50 percent of Protected area revenues for community development activities in the Buffer Zone Provides guidelines for growing stock assessment Involvement of poor households and enterprises on forest management and utilisation; emphasis on ecotourism and private sector participation Handing over procedures and steps of CF; emphasised on social mobilisation Biodiversity conservation and economic development; Involvement of NGOs in conservation Monitoring and evaluation

2 3

2000 2002

4 5 6

2002 2003 2003

2003

2003

Sustainable forest management in Terai; collaboration and partnerships with local governments on forest management; Competitive marketing of forest products

9 10

2003 2004

Biodiversity conservation at landscape level and livelihoods promotions Streamlining government role on conservation; NGOs involvement in conservation

11

2004

12

2004

13

2004

Biodiversity conservation, income generation; private sector involvement in conservation and poverty reduction Involvement of NGOs in provision of services in forestry sector development, sustainable forest management Promotion of MAPs and NTFPs through polycentric organisations; enterprise development, poverty reduction, better forest management Sector wide approach in foreign sector development, donor coordination; sustainable forest development and poverty reduction Training and organisational development, sector wide approach in forestry G

14

2004

15 16

2004 2004

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Annex 2. 11.19: Forestry sector analysis Particulars A. Physical Target (a) Community forestry Focus on 51 hill districts, Expanded to 74 districts, except Mustang In Terai 68% of the potential CF handed over to FUGs, comparative figures for Mountains and Hills are 15 and 39 % respectively covering 87% and 55% households Average cumulative growth rate of CFUGs number, area of handed over forests and households coverage under CF increasing annually at the rate of 6.8 %, 7.4% and 7.1 % respectively. APP Policy, Directives, Guidelines and Target etc. Performance/achievements/ deviations Remarks/comments None for the forestry sector, suggest to follow FSMP Moved beyond APPs focus This figures seem inadequate and too little considering the potentialities and demands of the local people. Still many applications are pending with the DFOs. Contemporary literatures show, however, serious problems with elite dominance (elite capture), primarily by men over women, the wealthy over the poor and dominant castes over other castes. CFUGS often challenge the government on policy related and legal issues as empowered within the framework of FECOFUN. This figures seem inadequate and too little considering the potentialities and demands of the local people.

(b) Private and leasehold forestry

(a) Commercial forestry management in Terai

Encouraged both pure plantations or intermixed with agricultural crops in the form of agroforestry. Endorsed leasehold forestry (LF) for the expansion of forage and pasture area to enhance production of the livestock sector, Focus on 24 Terai and Inner Terai Districts

Average cumulative growth rate of PF area in Terai, Hills and Mountains recorded at 4.4, 1.3 and 1.3 percent respectively, and national average-3.4%. Above figures could be misguiding because many people reluctant to register PF. Encouraging performance- by April 2005, 2,121 LH groups formed and handed over 8507 ha of forestlands to 15,122 families. Despite 19 OFMPs prepared, not fully implemented. FECOFUNs legal protests for continued access of the communities to forests in Terai, Inner Terai and Churia hills impeded the implementation. Government shifted to collaborative forest management.

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Particulars B. Investment

APP Policy, Directives, Guidelines and Target etc. Sought foreign assistance for the commercial management of the Terai forests.

Performance/achievements/ deviations No direct assistance available for commercial forest management. Donors such as DFID and SNV supported for piloting collaborative forest mgt. The budget allocated for APP priority programmes on forestry sector until 2004 is 19 percent of amount envisaged by APP. By component wise, 24 percent in CF and leasehold forestry programme, and just 2.6 percent for supportive programmes. Total investment=760 million Number of donor supported projects increased- 18 projects undertaken after APP. Some were continued projects with new name and focus areas. e.g, NUKCFP-LFP. donor support has now shifted from forest development to forestry sector development Still Forest Act conflicts with the LSGA and sectoral legislations in several fronts, Forest Act 1993 conflicts with Leasehold Forest Policy particularly with regard to the powers of the DFO to handover forest to the leasehold groups NGOs are involved in the CF but under different policy regime, no rules and regulations exist to contract out or outsource NGOs to organize community forestry, but they have roles in activities such as OP revisions, social mobilization and facilitating hand over processes.

Remarks/comments

APP projection-3996 miiion

C. Policy measures

Resolve conflicts with existing acts, rules and regulations regarding the management, harvesting and utilization of the forest products, ownership of the forest resources in the district. Expand the roles of the NGOs in organizing community forestry through large scale contracting for services under strict quality control measures

Forest authorities are directed by Master Plan for forestry Sector (MPFS) 1989, Forest Policy and Forest Act. At least 16 policies, guidelines or directives which among others include National Biodiversity Strategy 2003 and Revised Forest Policy 2000, approved by the government in the forestry sector, of which some relate to the APP and others are not directly dealt by it. These policies mostly follow changing development paradigm for the forestry sector (Principles of sustainable development, polycentric institutions, decentralization and people's participation in natural resource management). Some gaps between policy objectives and accomplishments observed, particularly in

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Particulars

APP Policy, Directives, Guidelines and Target etc.

Performance/achievements/ deviations

Remarks/comments in revenue sharing mechanisms among and between user groups, local government bodies and central government.

D. Institutional aspects

Not envisaged any major institutional reforms in forestry sector for delivery of services. Emphasized for establishing institutional linkages between Forestry Research and Services Center, now Department of Forest Research and Survey (DFRS) and NARC for conducting research in agroforestry system.

No institutional arrangement developed for undertaking joint researches on agro-forestry by these two institutions. Forest sector coordination committees formed at central, regional and district levels. This could duplicate the roles and responsibilities APP coordination committees, and may dilute the importance of APP committees, particularly in relation to agriculture and forestry.

Above provide reasons for study teams assessment for forestry sector as follows- Physical achievement- Partial, Investment- Inadequate and too little, Policy reforms- forward looking, advanced to APP, but still conflicts and contradictions with sectoral legislations and LSGA, and institutional aspects- not supportive to the APP concerns, and many innovative measures introduced. Forestry sector more advanced and progressive than that of APP with the inclusion of development concepts like livelihoods forestry, collaborative forestry, Terai Arc Landscape, Churia Action Plan, forestry sector planning, and little attention to soil and watershed conservation issues and integration of development and conservation issues being addressed under the buffer-zones of the protected areas.

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Annex 3: State of APP Impacts Annex 3.2: Poverty reduction

Annex 3.2.1: Trends in rural poverty with and without APP, 1991/92 to 2014/15 (Incidence in percent and number of poor in millions) Region Mountains Incidence Number of poor Hills Incidence Number of poor Terai Incidence Number of Poor 1991/92 64 (64) 1.0 64 (64) 5.1 34 (34) 2.8 1994/95 62 (62) 1.0 63 (63) 5.3 33 (33) 3.0 1999/00 56 (58) 1.0 53 (56) 4.9 26 (33) 2.7 2004/05 44 (49) 0.8 40 (50) 3.9 19 (29) 2.3 2009/10 29 (43) 0.5 27 (45) 2.8 14 (25) 1.9 2014/15 19 (34) 0.4 19 (39) 2.1 9 (21) 1.3

Nepal Incidence 49 (49) 49 (49) 40 (45) 30 (39) 20 (34) 14 (29) Number of poor 8.9 (8.9) 9.3 (9.3) 8.5 (9.5) 7.0 (9.3) 5.2 (8.9) 3.8 (8.4) Source: APPROSC, Kathmandu and John Mellor Associates, Inc., Washington DC, 1995 Note: Figures in parentheses refer to case without APP Annex 3.2.2: Poverty measures for Nepal based on Nepal Living Standards Survey (NLSS): 1995/96 and 2003/04 Region Head-count Index (proportion of population below poverty line) 1995/1996 2003/04 32.6 34.5 27.6 9.6 34.6 30.85

Ecological Zone Mountain 57.0 Hills 40.7 Terai 40.3 Sector Urban 21.6 Rural 43.3 National Average 41.8 Source: NPC 1998; CBS 2005 (based on work in progress)

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Annex 3.2.3: Incidence of poverty among rural household groups Household Types Small Farmers-Mountains Small Farmers- Eastern-hills Small Farmers Western Hills Small Farmers Terai Medium Farmers Terai Medium farmers Eastern Hills and Mountains Medium farmers Western Hills and Mountains Large Farmers Agricultural Laborers Non-farm Terai Non-farm -Other Total Poor household (%) 29.03 42.56 35.05 25.10 17.35 35.98 18.31 18.93 45.64 19.96 31.61 29.70 Poor HH as a % of total rural population 4.76 16.88 17.58 14.47 4.91 6.19 2.26 4.71 13.25 6.23 9.43 100.0 Per Capita Incomes (1995 NRs.) 7,652 6,881 7,323 8,832 8,670 7,737 9,365 11,211 5,922 11,402 10,493 8,596

Source: CBS 2005 (preliminary work in collaboration with the World Bank, based on NLSS 2003/04)

Consumpti Crop on Quintile Group

Lowest Q2 Q3 Q4 Q5 Total

28.50 28.77 28.46 28.85 21.07 25.54

Annex 3.2.4: Income shares in rural Nepal (2003/04) (All in percent except mentioned explicitly) Livesto Agric NonNonRemitt Other Real per ck ultural Agricu farm ances capita Wage ltural self income labour Wage emplo (95/96 NRs) labour yment 9.65 21.56 17.7 5.1 10.3 7.2 3730 12.18 15.41 16.6 6.3 12.6 8.1 5293 11.77 9.45 15.0 7.5 18.1 9.7 7094 12.17 6.92 12.45 9,15 16.9 13.5 9153 9.42 1.73 14.3 14.2 19.9 19.3 17693 10.75 7.51 14.6 10.3 17.2 14.1 8596

Source: CBS / World Bank, 2005

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Annex 3.3: Food Security

Annex-3.3.1: Per capita edible food supply targets of APP Description 1991/92 1994/95 1999/00 2004/05 2009/10 2014/15 Source: APP 1995 Mountain 163 163 178 197 222 245 Hill 233 229 259 300 347 380 Terai 338 337 379 417 452 482 NEPAL 277 276 312 352 393 426

Annex 3.3.2: Food balance situation in Nepal, 1996/97 to 2003/04. 1996/ 97 1997/ 98 1998/ 99 1999/ 00 2000/ 01 2001/ 02 2002/ 03 2003/ 04

Total cereal production ( 000 mt) 6,426 6,361 6,465 6,985 7,172 7,247 7,360 7,746 Total edible cereal (mt) 3,973 4,027 4,098 4,452 4,513 4,543 4,641 4,836 Population (million) 2.09 2.13 2.18 2.23 2.29 2.34 2.39 2.45 Per capita edible cereal (kg) 190 188 187 198 197 194 194 197 Total edible cereal requirement (000 mt) 4,079 4,178 4,279 4,383 4,430 4,463 4,566 4,683 Surplus/deficit (000 mt) -107 -151 -182 68 83 80 76 153 Proportion edible (%) 0.618 0.633 0.634 0.637 0.629 0.627 0.631 0.624 Edible (000 mt) Rice 2,003 2,036 2,074 2,259 2,357 2,294 2,271 2,426 Maize 895 941 920 1,007 1,001 1,000 1,060 1,123 Wheat 827 807 856 935 915 1009 1069 1049 Millet 237 234 239 242 232 232 232 230 Barley 11 10 9 8 8 8 9 8 Total 3,973 4,027 4,098 4,452 4,513 4,543 4,641 4,836 Raw (000 mt) Rice 3,711 3,641 3,710 4,030 4,217 4,165 4,133 4,456 Maize 1,317 1,367 1,346 1,445 1,484 1,511 1,569 1,590 Wheat 1,072 1,030 1,086 1,184 1,158 1,258 1,344 1,387 Millet 289 285 291 295 283 283 283 283 Barley 37 37 32 31 31 31 32 30 Total 6,426 6,360 6,465 6,985 7,173 7,248 7,361 7,746 Proportion edible Rice 0.540 0.559 0.559 0.561 0.559 0.551 0.550 0.544 Maize 0.679 0.688 0.684 0.697 0.675 0.662 0.675 0.706 Wheat 0.772 0.783 0.788 0.790 0.790 0.802 0.795 0.756 Millet 0.819 0.820 0.820 0.820 0.820 0.820 0.820 0.811 Barley 0.290 0.276 0.274 0.275 0.271 0.275 0.272 0.259 Total 0.618 0.633 0.634 0.637 0.629 0.627 0.631 0.624 Source: CBS 2003, The Statistical Yearbook of Nepal 2003, Central Bureau of Statistics, HMG/N

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Annex-3.3.3: Food balance situation 2002/03 (in mt) Belt Hills Mountain Terai EDR CDR WDR MWDR FWDR NEPAL Population 1728,288 10568,028 11665,965 5497,697 8358,860 4705,923 3116,620 2283,181 23962,281 Rice 55,763 522,202 1693,949 782,296 704,879 414,435 197,758 172,546 2271,914 Wheat 1069,257 348,512 663,395 211,826 350,372 208,959 172,982 125,118 2081,164 Maize Millet BY ECOLOGICAL BELT 1059,751 231,931 816,005 176,696 144,052 9,615 BY DEVELOPMENT REGION 260,185 57,815 310,969 56,636 272,947 90,426 184,538 18,188 31,112 8,866 OVERALL 2019,808 418242 Barley 8613 3913 363 559 1,035 1,434 4,031 15,54 12889 Total 262764 1867328 2511374 1312,681 1423,891 988,201 577,497 3391,96 4641,466 Reqmt 330,103 2124,174 2111,540 1032,753 1592,605 909,116 597,585 433,758 4565,816 Balance -67,339 -256,846 399,834 279,928 -168,714 79,085 -20,088 -94,562 75,650

Source: CBS 2003

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Annex 3.4: Environment

Annex-3.4.1: APP assumptions on sectors/theme influencing environment SN 1 2 Sectors Poverty Reduction Better land Use Assumptions The most environmentally positive consequence of the APP is a radical reduction in Poverty. As rural income increase, farmers will stop cultivating the most fragile land and relocate such land to grasses and trees. Expanded community and Sal forests would have a particularly beneficial impact in the Siwaliks, since they would check and reverse the worsening land degradation there. High-Value commodities prioritized by the APP will provide a soil-conserving tree cover. High value of output per hectare from fruits and sericulture will assist in withdrawing cereals production from marginal lands, restoring tree plantation on slope-lands, and promoting soil conservation. The situation of converting existing terai forest into arable agriculture does not arise for APP for at least twenty years because of rapid expansion of terai irrigation, which is expected to play a key role in boosting income. Effective management of both grass and tree fodder has a strong interactive relationship with community forestry. The community forestry thus becomes a means of integrating grassland management with trees. 3 Dispersed urbanization The increased income under the APP will check the migration trend by providing employment opportunities in the newly emerging urban centers dispersed across the country. None The most important measure for protecting environment is education. None Women are the principal managers of natural resources, and they play a key role in sustainable development None

4 5 6 7 8

Resource Management Education Legislations Gender Institutional Capacity

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Annex 3.4.2: APP sectoral targets on environmental impact SN 1 Sectors Poverty Reduction Targets With the growth that is expected to emanate from the improved productivity of land and labor over the next twenty years, the incidence of poverty should decline from initial 49 percent to 14 percent. The number of poor would decrease to less than 4 million at the end of the APP period. Increasing in the profitability of environmentally sound farming systems through strong measures in research and extension in collaboration of farmers. Increased irrigation in the Terai will lead to decrease in the conversion of forestland into arable lands. Strict regulations should be made on grazing of steep slopes, marginal lands, and Churia ranges that are environmentally fragile and of low agricultural productivity. Churia range should be given particular priority as a protected area under an appropriate management programme. Integrated Plant Nutrition System (IPNS) should be implemented through the collaboration between DOAD and NARC. Farmers should be educated about the importance of a balanced use of chemical fertilizer and organic plant nutrient sources; and it should promote the use of appropriate ratio of nutrients (N:P:K) in the form of chemical fertilizers that will increase the uptake efficiency of plants and reduce leaching into the water table. Balance between removal of nutrients and replacement should be done through the use of farmyard manure, chemical fertilizers, and mulching with crop residues; the use of agriculture lime on acidic soils; and in the hills and mountains; conservation-farming techniques such as contour cultivation. Integrate the management of watersheds, livestock and rangelands, and forest. IPM should be implemented on a crop-specific basis, by combining chemical, biological, and cultural methods of controlling pest; developing and promoting resistant varieties; and rotating crops. Combination of biological measures and locally available materials to minimize soil erosion and landslide should be done. Green belt should be made on either side of the agriculture road. Development of forests and other permanent vegetation covers in catchment areas of hydro-powers dams, upper watersheds and water sources should be done. Incorporation of ecological and environmental courses in the syllabi of schools and universities with effective teaching materials. Implementation Action Plan of NEPAP should be made. Development projects on roads, irrigation canals, hydropowers dams, and agro-industries should undergo both an initial environmental assessment and an environmental impact assessment. Promote the use of alternative sources of energy such as biogas and fuel-efficient cookstoves to save womens time and protect the environment. Expand income-generating activities such as sericulture, fruit farming, and the planting of fuelwood trees, which are especially easy for women to fit into their time frame. Preference must be given to women farmers in the protection,

Better land Use

3 4

Dispersed urbanization Resource Management

Education

Legislations

Gender

86

SN 8

Sectors Institutional Capacity

Targets conservation and management of CF. Highest priority should be given to strengthening the capacity of NARC and DOAD. The capacity of the Ground Water Board and DOI should be enhanced. DOAD, DOI and NARC need to expand their institutional linkages with universities, research organizations and NGOs. International assistance is needed to strengthen research facilities, improve data management and information system. Research must focus on the proper selection, timing, and application rates of nutrients and farmers must participate in the research and extension processes. Undertake vigorous research and extension programme that can point the way to sound environmental management. rigorous research and extension on IPM The permit system should be strengthened to limit the extraction of ground water. None

New Problems 1 Fertilizers

2 3 4

Pesticides Ground Water Biodiversity

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Annex 3.5: Gender

Annex 3.5.1: Gender concerns of the APP by priority Inputs and Outputs, and Impacts Theme Inputs Priority Areas Irrigation Gender concerns Emphasises on the role of women in irrigation development Women farmers to be encouraged and given priority in forming water users groups and in training directed at the organization and management of irrigation systems. Some measures also suggested to expand the participation of women Improved access of women to credit, and provision of at least one woman in ADBNs fertilizer cell Involve women farmers in the dissemination of fertiliser knowledge Research to understand womens time allocations and input of labor-saving devices, particularly for household and livestock activities Technology improvements be designed to relieve women farmers from their time burden Appropriate banking system to be developed to provide women with easy and direct access to financial institutions None Given the high growth rates expected of the livestock sector, efforts to improve rural women should be targeted Develop a sound planning system to enable women farmers to participate in all stages of the planning cycle for livestock production and marketing and in extension education activities Specific attention to be given to lending to women Institutional structure relating to HVCs be open to women and structured to service them The major probes of risk and risk aversion need to be addressed particularly from the point of view of women NARC to make a specific effort to involve women in trials of high value commodities and to find work to reduce the labour burden on women Provide opportunities for women farmers to achieve some degree of economic independence Need for research and technology policy that deliberately involves women in every aspects of research by relating to their specific socioeconomic and agroecological condition. Train women in entrepreneurial and operational skills, and identify the specific training needs of different categories of women (depending on ecological region, ethnic community, and economic status) Improved access of women to credit Suggested to include women in community forestry for seemingly benefits for the forestry and women themselves (win-win situation) Provide opportunity for the involvement of women in agroforestry APP will contribute to uplift the status of women, and help to gain access to resources, particularly land. Womens share in income from livestock, horticulture and agroindustries increased.

Fertiliser

Technology

Outputs

Roads and power Livestock

High Value Crop

Agribusiness

Forestry

Impact

Poverty

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Theme

Priority Areas Environment

Hills and Mountains

Terai

Gender concerns Promote womens participation in all community organizations and in all development and environment related projects. Make women central to that efforts on exploration, revival and improvements on indigenous techniques that have been locally adapted Specific programs for integrating environment-related activities and messages in the training and extension programmes of the DOA Promote the use of alternative sources of energy such as biogas and fuel-efficient cookstoves to save womens time and protect the environment; Give preference to women in the protection, conservation, and management of community forestry Expand income generating activities such as sericulture, fruit farming, and the plantation of fulewood trees Promote local womens institutions dedicated to the sustainable development and management of agriculture and the environment.. Special emphasis to be given to the needs of women, particularly in forming groups in priority inputs, priority outputs, obtaining credits, and in training in plucking, picking, grading and packing fruits and vegetables. SIDAP (equivalent to DADC) may wish to impose sanctions on agencies that do not include women in their programs, Special emphasis to be given to the needs of women, particularly in forming irrigation groups, obtaining credits for fertilizer, constructing shallow tubewells, producing livestock and in training in plucking, picking, grading and packing fruits and vegetables.

89

Annex 3.5.2: Female participation in group activities, 2003 Group Members Male Female No. % No. % 111839 76 35932 24 39916 236566 56335 15942 66 51 38 47 20314 223134 90467 17843 34 49 62

S.N.

Particulars

Total

1 Community Forestry Programme 147771 Rural Community Infrastructure Work (Food 2 60230 for Work) Participatory District Development 3 459700 Programme (PDDP) 4 Farmer Groups (DOA) 146802 Sustainable Soil Management Project 33785 5 (SSMP) 6 Miscellaneous Cooperatives 372250 Total 1220538 S.N. Particulars Total 6206 3325

53 321996 86 50254 14 782594 64 437944 36 Executive Members Male Female No. % No. % 5795 1499 93.4 45.1 411 1826 7 55

1 Irrigation Water User Associations Sustainable Soil Management Project 2 (SSMP)

Total 9531 7294 76.5 2237 23 Source: An Exploratory Study of Gender, Social Inclusion and Empowerment through Development Groups and Group-Based Organisations in Nepal: Building on the Positive, Stephen D. Biggs, Suitra M Gurung, Don Messerschemidt, November 2004

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Annex 3.5.3: Mainstreaming gender considerations into national plan and sectoral policies Policies/Plan
Tenth plan (2002-07)

Mainstreaming Gender Considerations

Emphasis will be laid on womens skill development and business enhancement by including them in mainstream of agricultural and livestock service promotion To enhance the knowledge, level of skill and to raise the standards of living of women and the farmers of underprivileged community, on-site training will be provided through mobilization of specific programs. The families of J.T. and J.T.A. will be encouraged to open agrovet where they are posted to provide services to the farmers. The greater participation of the cooperatives, the private sector and women group will be encouraged in market management and operation.

Tenth plan (Forest policy)

National Agriculture Policy, 2004

Rural Infrastructure Policy, 2004

Irrigation policy, 2003

Forest sector policy 2000

Agri business promotion policy (Proposed)

Contribution to Gender Equity through the programs and policies The involvement of women in the agricultural programmes on and average will be 40% while it will be more than 60% in programmes like vegetable farming, horticulture and silk farming Participation of women will increase because of the skills and expertise of women cooperatives and women groups in different cooperatives Effective participation of women in the management of forest and use of forest resources will be increased. The participation of women in the leadership level shall be increased to discourage gender inequity by raising awareness about the gender equality in all forest related and community related development programs The aspect of gender equality will be taken into consideration in the trainings on human resource development in forestry sector Womens involvement and participation will be raised to 50 percent in the implementation of all agricultural programmes where it is possible Womens involvement and participation will be raised to 50 percent in the implementation of all agricultural programmes where it is possible. With respect to womens training, arrangements will be made, as far as possible, to conduct mobile training programmes to take training programmes closer to villages and households. The flow of information and data relating to the involvement of women in the programmes will be ensured. Special emphasis will be given to gender equity in the planning, implementation, and operation of rural infrastructure projects. In the first place, gender policy will be adopted so as to increase women participation in the projects and reflect the benefits/welfare of women in the development of projects.. Following working strategies will be followed for gender equity Following working strategies will be followed for gender equity: To analyze the labour, quantity, resources of women, men, and dalits for their benefits in the projects To increase participation and involvement of women, men and dalits during planning and implementation To implement those programmes which will increase peoples awareness on the benefits of projects, train, improve access to information and increase social understanding by enhancing participation of women, men and dalits User association shall be composed of with at least thirty three percent of the women representation as well as, there shall be representation of dalit, downtrodden and backward ethnic communities in such association. The principles of decentralization will be applied in the forestry sector through community forestry, which, according to the Forest Act of 1993 and the Forest Rules of 1995, has a priority over other forest management strategies. Priority will be given to underprivileged communities, or to the underprivileged people within a community. A discount of 50% in interest rate will be provided in credit flow for unemployed, disadvantaged groups and women to establish and run agri business

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Annex 4: Policy, Institutional and other Contextual Environment Annex 4.3: Institutions
Annex 4.3.1: Agriculture sector institutions by type and function
Function\Type Macro policy and coordination Public Sector NPC Semi Government NARC NDDB ADBN NIDC NGO and private sector NGO Federation FNCCI INGOs NGOs Commercial Banks FNCCI, Ag. Enterprise Centre (AEC), Ag. Industry Associations Not Applicable

APP coordination and Monitoring Development finance

MOAC MoFin

Sub-sector (theme) specific and micro-policies formulation, implementation, coordination, monitoring and evaluation (National level) Administration, Regulation

MFSC MOWR MLD

DOA, DLS DOC, DOF DOI, DOFTQC

Technology (Research & extension)

Training

DOA, DLS NARDF DOFTQC DDC DOA, DLS DOF, DOI, DOFTQC DOLIDAR, DOI, DDC -

National Coop. Assoc. NCDB, NDDB NTCDB National Seed Committee AFPDB NARI NASRI IAAS

INGOs, NGOs

IAAS, CATC, RATCs CTEVT

Rural Infrastructure Rural Credit

ADBN

Input supplies

Processing

DOA DLS DOF -

Marketing outputs

Sub-sector (theme) specific and micro-policies formulation, implementation, coordination, monitoring and evaluation (District level)

DDC District unit of the concerned line ministries

AICL ALI AFPDB DDC, AFPDB TCN, NRTC, HPPC CDC DDC NFC TCN, NRTC, HPPC District unit of concerned agencies

INGOs, NGOs Private training institutions INGOs, NGOs, CBOs, private contractors INGOs, NGOs Cooperatives, Grameen Bank, Commercial Banks Private moneylenders, SC groups Private sector (agrovets, commercial suppliers) Private sector small, medium and large scale Private sector small, medium and large scale NGOs, CBOs, District Chambers of Commerce etc.

92

Annex 4.3.2: Classification of production pockets S.N. 1 Type Crop production Categories Area with road access and availability of irrigation, and electricity; Area with availability of irrigation and road access; Area with irrigation facilities Areas with road access Other feasible sites (Traditional agricultural areas) Area with road access and availability of electricity and feed / fodder; Area with road access Other feasible sites (Traditional agricultural areas)

Livestock and livestock originated products

Source: PPS, 2055, pp. 4

Annex 4.3.3: Size of the agriculture pocket area Region Tarai Type of crops Cereal and cash crops Area (ha) Approx. 1000 ha irrigated land or command area of approx. 400 STWs Approx. 150 ha Approx. 100 ha Approx.10 ha including lakes of varied size Approx. 100-150 ha Approx. 60-70 ha Approx. 30-40 ha Approx. 40-50 ha

Fruit Vegetable Fish Hills Cereal and cash crops Fruit Vegetable Mountain Fruit Source: PPS, 2055, pp. 4

Annex 4.3.4: Size of the livestock pocket area Livestock type Cow and Buffalo Size of the pocket area Approx. 50-75 cattle/buffalo raised by approx. 5 groups of 10-15 members per group and each group member's family raising at least one improved productive cattle/buffalo. Approx. 100-150 goat/sheep/pig raised by approx. 5 groups of 10-15 members per group and each group member's family raising at least two improved productive goat/sheep/pig. Approx. 1750-3000 chicks raised by approx. 5 groups of 10-15 members per group and each group member's family raising at least 35-40 chicks.

Goat, sheep and pig

Chicken

Source: PPS, 2055, pp. 4

93

Annex 4.3.5: PPP type, key elements and objectives Package type Basic Key elements Agricultural inputs, agricultural technology and institutional structure Agricultural inputs, agricultural technology, institutional structure, technology, agricultural loan and storage facilities Agricultural loan, agriculture stores, market development and agro-based industries; irrigation, electricity and agricultural roads. Irrigation, road and electricity Objectives Strengthening food security situation in production pockets in the hills and the mountains Area orients towards commercialisation on basic packages starts to generate marketable surplus and these packages are required to attain certain economy of scale. Ensure agricultural commercialisation motivating farmers on investment on technology and value addition. These three elements are considered to be a prerequisite for leapfrogging agriculture development.

Commercial oriented

Commercial

Infrastructure

Source: PPS, 2055, pp. 4

Annex 4.3.6: Key actors and their roles and responsibilities in the PPS SN 1 Agencies involved MOAC 2. Departments Key responsibilities Formulate guidelines, oversee implementation, coordinate with the NPC to allocate budget and resources, monitor and evaluate the PPS Compile and consolidate sectoral programmes , lobby and influence the MOAC, MOF and NPC for necessary allocation of budget and resources, ensure that the programmes and budgets are timely approved by the DDC as per NPCs guidelines, oversee implementation, supervise and monitor programmes and report to the MOAC Propose the production pocket areas under their supervision to the DADO/DLSOs, organize farmers into groups and implement the programme. Consolidate the proposals, analyse it and formulate integrated district pocket programme in their respective areas based on the total budget ceiling available for the district. MOF does not provide budget ceiling specifically for the pocket area development. DADOs/DLSOs, if they wish, may take suggestions from the concerned technical directorates or the technical directorates may advise on their own. Discuss and recommend the District Development Committees for approval Comment or react on the proposals submitted by the DADO/ DLSO and be a part of decision by virtue of being a DADC member. Approve annual programme, oversee and monitor the implementation Implement the programme

Agriculture/Livestock Services Centre DADO/DLSOs

2.

3 4

DADC District Line Agencies

4 5

DDC Farmers groups (target group)

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Annex 4.3.7: Area covered under PPP as a percent of total areas under each crop as of 2002/03 Coverage (ha) 199,878 14,237 4,229 1,038 2,048 1,857 200 7,161 166 1,175 152 2,925 243,794 Area under crops (ha) 4,725,661 165,988 23,663 17,123 39,641 126,884 245 140,171 11,095 11,480 764 12,643 5,154,460 % of the Total 4.2 8.6 17.9 6.1 5.2 1.5 81.6 5.1 1.5 10.2 19.9 23.1 4.7

S.N. 1 2 3

Particulars Intensive crop development Commercial vegetable farming Fruit farming Citrus development Deciduous (winter) fruit Tropical (summer) fruit Apiculture - bee hive distribution Sericulture Potato development Cardamom Ginger Coffee Other

4 5 6 7 8 9 10

Total Source: Dhakal, 2004

95

Annex 4.3.8: Basic information related to pocket areas as of FY 2002/03 Pockets per Project (No) 4 4 5 2 2 2 3 1 1 1 3 2 3 3 2 3 2 3 Average size (Ha) Project 199878 14237 4229 1038 2048 82.0 5.8 1.7 0.4 0.8 2040 162 81 55 64 Pocket 456 43 18 26 36

Districts (No.) S.N. Types of the Pockets No. 1 2 3 Intensive crop development programme Commercial vegetable farming Fruit farming Citrus development programme Apple development programme Other fruit development programme Seed Multiplication Resource Centre Development Cereals Vegetables Potato Other Apiculture (bee hive distribution) Sericulture Fish Development Programme Potato Development Programme Cardamom Ginger Coffee Other Total Apiculture Total 71 72 49 17 24 % of total 95 96 65 23 32

Project (No) % of Total 17 16 0 9 3 6 0 5 2 2 1 7 2 5 8 2 11 2 2 93 100

Pockets (No) % of Total 26 20 14 2 3 0 4 2 1 0 3 2 3 8 2 9 2 1 97 100

Area (ha)

% of the Total

No. 98 88 52 19 32

No. 438 334 241 40 57

5 6 7 8 9 10 11 12

15 9 5 2 26 9 15 42 7 17 8 8

20 12 7 3 35 12 20 56 9 23 11 11

26 13 9 3 39 14 28 47 11 62 12 14 528 567

60 34 12 3 58 42 57 132 33 150 37 24 1694 1752

610 521 368 98 1857 200 8988 7161 166 1175 152 2925 243794

0.3 0.2 0.2 0.0 0.1 3.7 2.9 0.1 0.5 0.1 1.2 100.0

23 40 41 33 48 14 321 152 15 19 13 209 462

10 15 31 33 32 5 158 54 5 8 4 122 144

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Annex 4.3.9: Progress on livestock pockets development S.N . 1 2 3 4 5 Regions/ Districts Eastern Central Western Midwestern Farwestern Total As of July 2003 Cattle 28 5 33 2 2 70 8.7 Buffalo 26 43 83 23 20 195 24.2 Goat 80 80 118 56 48 382 47.4 Sheep 1 3 2 4 1 11 1.4 Pig 31 33 40 14 6 124 15.4 Poultry 2 0 19 0 3 24 3.0 Tota l 168 164 295 99 80 806 % of total 20.8 20.3 36.6 12.3 10.0 100.0

Percent Source: DLS, 2003

Table 4.3.10: Progress on livestock pockets development S.N. 1 2 3 4 5 Regions/ Districts District (No) 16 19 16 15 9 75 Livestock Pockets (No) 168 164 295 99 80 806 Pockets/District 11 9 18 7 9 11

Eastern Central Western Mid-western Far-western Total Source: DLS, 2003

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Annex 4.4: Other contextual environment

Annex 4.4.1 Import tariff and bound tariff on major agricultural products (August 2002) (per cent) Products Bound Tariff % India Mostly 100% (300% on edible oils) 36 35 (onion:5) 35.2-45.2 DG/BN: 108-113.2 35.2-40.4 108 Pakistan Bangladesh Sri lanka 100-120 50-200 50% for all (90 products agriculture have 200%; products 10 Percent have 59%) 25 36 30 10-20 26-36 30-60 (Garlic:12) 20-25 26-75.8 30 Betel Dates: 6 nuts:102.3 25 36-86.4 30 20-25 36 30 (QR for Tea) 6-60 Nepal 42-51% Bhutan Not Entered Into WTO

Cereals Vegetables Fruits

10 10 10-15

30 20 20

Prepn. of fruits and Vegetables Coffee/Tea

25-40 10-25

30 20

Spices

Animals Poultry Egg Meats and Skin Fish/crustaceans Dairy Products Rice Wheat and Wheat flour Coarse grain and Flours Processed Cereals Spices Edible Oils Fibers Sugar Rubber Raw Tobacco Wool, and wood products

35.2-76.8 (QR for CC) 35.2 35.2 35.2+QR 0-35 35.2 15-60 87.2 35.2-50 019.6-50 36-56/QR 35.235.2/QR 75-85 9.2-19.6 60+QR 30-76.8 36 5-36

20

26-102.3

5-10

20

10-20.25 20-oct 20 0-25/oct 10 20-25 10 20-25 10-25 20-25 20 S 5-10 25 5 25 10-25

11 26+QR 36+QR 0-36 36-62.5 36-86.5 26 11-18.5 3.5-18.5 36-75.8 36-75.8 18.5-36 3.5-26 86.4 18.5 18.5 3.5-36

30 30 30 12-30 12 10-30 60 0-10 0-30 5-30 30 26-30 0 3.5 12 90 0-30

10 10 10 5-10 10 10-15 10 10 10 10 5-10 5-15 5-10 40 5 10 5-15

20 20 10 10-30 20 30 20 20 20 20 20 30 0 20 20 100 10-30

Source: WTO/Nepal Unit (Unpub). Q R:Quantative restrictions, DG: Dried Grapes. BN: Betelnuts, CC: Cardamon & cumin

98

Annex 4.4.2 Agreements made by Nepal with WTO in relation to agriculture Terms of Accession of Goods Nepal has bound all tariffs lines except on arms, cement and petroleum product The average applied tariffs rate us about 11% The average tariffs bound rate is 39% at the date of accession subject to lowering it down to 24% in the long run The harmonized system of commodity classification (HS system) is in vogue in Nepal Nepal has committed to gradual elimination of ODCs between two and ten years time from the date of accession After ten years ODCs will be bound at zero For ten years Nepal shall apply ODCs subject to gradual reduction 2.5 4.5%on imports of agricultural goods have been levied as ODCs at the date of accession 2.5 11.5% on imports of industrial goods have been levied as ODCs at the date of accession Nepal has also committed not to introduce new ODCs Nepal has confirmed that it would continue export restrictions on exhaustible natural resources such as logs, timber and mamira. The restriction is also imposed to fulfill the obligations arising from different MEAs to which Nepal is a party. Nepal also said that it would not allow export of those flora and fauna that are prohibited for export to respect the obligations arising from the CITES. Export restriction on raw hides, skins and raw wool is temporarily applied and Nepal would lift the ban at an appropriate time. Nepal would review the export ban on imported raw materials, parts and capital goods in the light of Article III and XI of GATT 1994. Nepal did not provide direct payment of incentives to any industry. Nepal provides certain exemptions in terms of income tax, sale tax, excise tax, excise duty and customs duties to the industries qualifying under the conditions stated in Industrial Enterprise Act, 1992. Nepal has committed to identify subsidy measures incompatible with the WTO and eliminate them. Upon the entry into force of the Nepal's Accession Protocol, Nepal has committed to notify the Committee on Subsidies all the necessary information in the regard. Nepal has committed to administer its subsidy programmes in full conformity with WTO Agreement on Subsidies and Countervailing Measures. Nepal is a party to different international instruments and has different laws to harmonise and implement the sanitary and phytosanitary measures. Nepal is also a member of different international organizations and follows international standards including Codex Alimentarius and has different laws to adopt and implement the sanitary measures. Nepal has also informed about lack of technical expertise to implement the SPS Agreement.

Customs tariffs (para.37 and Goods Schedule)

Other Duties and Charges ODCs (para. 41)

Export Restrictions (para 80,81,84)

Subsidies (paras. 87,88,89)

Sanitary and Phytosanitary Measures (para. 103, 106, 107)

99

Terms of Accession of Goods Ministry of Agriculture and Cooperatives (MoAC) would establish an SPS enquiry point by 1 January 2004. Nepal would fully implement the SPS Agreement by 31 December 2006. Nepal has confirmed to review laws and regulations relating to SPS Measures and accordingly amend necessary legislation. Nepal has committed to apply existing measures in a nondiscriminatory manner to all imports. Measures already in conformity with SPS would not be subject transition period. Nepal has made a commitment to ensure that any changes during transitional period would not result in a lesser degree of consistency with the provisions of the SPS Agreement than existed on the date of accession. Technical regulations and other measures adopted during this period would be developed in conformity with the provisions of the SPS Agreement. Nepal has also committed to notify existing SPS measures to the Committee on Sanitary and Phytosanitary Measures. Nepal has expressed its interest for technical assistance. Nepal has established an Inquiry Points in the Department of Food Technology and Quality Control (DFTQC) under ministry of Agriculture and Cooperatives before the deadline of June 2003. Nepal would fully participate in the work of the SPS Committee.

Terms of Accession on Trips

1 Membership (Paras.12) Nepal is a member of WIPO since 4 Feb. 1997. Nepal is a member of Paris Convention since 22 June 2001. Nepal has committed to join Berne Convention by December 2005. Nepal has committed to join Rome Convention and Treaty on Intellectual Property Rights by December 2006. Nepal has also said that it would also look at other WIPO and IP related Conventions e.g. Geneva Phonograms Convention, WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty in terms of national interest and explore the possibility of joining them in the future, as appropriate. Nepal has expressed that it would also look at UPOV 1991 in terms of national interest and explore the possibility of joining in future, as appropriate. Nepal has committed to provide plant variety protection by December 2005. Legislative Plan Make existing laws compatible with SPS by December Agreement 2005 by December Nepal has committed to prepare Industrial 2005 Property Act covering all categories of industrial property rights under Section 2 through 7 of Part II of the TRIPs. Nepal has committed to amend the Copyright Act 2002 as necessary Nepal has committed to prepare Plant Variety by December Protection Act 2005

UPOV (para 122)

Plant Varities (para 130) SPS Measures (para. 105) TRIPS (para 120)

1 2

Plant Variety Protection (para 130)

Source: S. Bhandari, S.M. Shresttha, Y.G, Upreti (January 2005): Nepal Accession to the WTO: Challenges and opportunities for Nepal, Kathmandu, Action Aid Nepal.

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Annex 5: Explanation for Observed Performances Annex 5.2: Problems and challenges
Annex 5.2.1 Problems and constraints APP Priority Areas Inputs Irrigation Findings/conclusions Reasons/causes Problem area

Achieving GW target is remote within the APP period remote

Subsidy issue Inadequate investment Ambitious target

Irrigation facilities increased/rehabilitated in mountains and hills could not be traced

Achievement behind the APP target in mountains and terai

DOI, MOAC, DDCs and other NGOs/CBOs involved in small irrigation, and no consolidated figures available by physiographic regions IP 2003 and ISP 2004 mandates DDCs to undertake the small irrigation projects Implementing agency responsible for NAP not identified Inadequate investment Conflict

Investment Market promotion strategy, extension services support not adequate Design problem APP Design Coordination Policy weaknesses Governance Human resource capacity

Irrigation policy 2003 not fully supportive to the policy and legal framework provided by the LSGA

Roles and responsibilities of the Divisional Office and local bodies not appro. identified Divisional concept of the DOI might undermine the DDCs role and responsibilities DTO overburdened with irrigation and other infrastructural works undertaken by the DDC;

Design Policy weaknesses Human resource capacity Policy weaknesses Governance

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APP Priority Areas Fertiliser

Findings/conclusions Wide gap between the fertiliser use APP target and actual achievement

Reasons/causes Ambitious target Inadequate fertiliser use promotional activities to promote the use of fertilisers Informal flow of fertilisers from India to Nepal too high to discourage importers to import fertilisers and to MOAC to project demands Government shaky policy Farmers lack incentives to increase the use of fertilisers Import does not correspond to the farmers demand Lack of accountability Availability of different grades of mixed fertilisers General perception fertiliser entered into Nepal through informal source low quality or fake fertilisers Rumours made by private importers Import of fertiliser decreased and dominated by private sector Dependent on the MOAC buffer stock Undue support and coverage by the MOAC Lack of accountability Investment problem Poor supervision and guidance Lack incentives/premium for better performance

Problem area Policy weaknesses Design problem Global or intercountry effect

NFP poorly implemented Quality of fertilisers perceived low

Governance issue Inadequate extension services Lack of farmers awareness

AICLs credibility going down

Governance issue

Technology Poor responsiveness to farmers demands/needs

Governance Organizational problem

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APP Priority Areas

Findings/conclusions APPs research and extension priorities are poorly addressed.

Reasons/causes Lack of accountability System deficiencies Weak farmer-research extension linkages

Problem area Governance issue Weak management

Highly diverse NARCs research programme

Despite of 66 commodities, accepted by NARC for proposals submission in 2005/06, , it missed to include those issues in agricultural development which are of at the heart of national policy. Inadequate investment for research and extension Weak capacity of the local bodies No presence of elected local bodies No efforts from the part of the line ministries to enhance the capacities of the local bodies Conceptual clarify and confusions Financial capacity of the government Poor accountability Ownership problem STWs poorly installed as per APP target Irregular supply of electricity Electricity charge high Most pumps are diesel run Financial capacity of the government Poor accountability Ownership problem Poor accountability Ownership problem

Funding priority for research and extension different Top down and centralised extension system despite it is devolved to local bodies

Road

Issue on rural road vs agricultural road Inadequate investment Not geared/directed towards PPS/PPP Poorly used for STW and agro-processing

Design problems Investment Coordination Investment Complimentarity Design problem Implementation Support from the government

Power

Inadequate investment Not geared/directed towards PPS/PPP ADBN, APPs prime institution for agricultural credit, drifting away from agricultural financing Substantial shortfall in agricultural financing

Investment Coordination Investment Governance Investment problem Investment

Credit

Credits hardly packaged with the PPS Outputs

Other financial and micro-credit institutions coming up, but not recognised by the APP Poor accountability Ownership problem

Coordination Investment

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APP Priority Areas Livestock/ HVC

Findings/conclusions In general, targets not achieved Private sector dairy constrained by DDC pricing policy PPS operating on its own- not packaged as per APP spirit Agricultural road not constructed as per APP targets Slow handing over of community forestry

Reasons/causes

Problem area Investment

Capacity (Financial, technical, managerial etc) Privatisation issue of DDC still not resolved MOAC guidelines not clear Unclear roles and responsibilities Capacity (Financial, technical, managerial etc) MFSC concerned with post formation support to CFs, and most of the households in the hills and mountains are already covered by the CFs. Forestry sector moved ahead of APP

Governance

Coordination Investment Accountability Complimentarity Investment Design problem

Forestry

Agribusiness

Shifting from commercial to collaborative forest management Poor performance and growth of agro/private forestry Forestry sector programme not linked with the PPS Confused approaches towards the expansion of priority output of agribusiness Poor private sector friendly environment

Design problem

Inadequate investment in APP priority areas Inadequate investment in APP priority areas

Investment

Investment Coordination Conceptual problem

Investment inadequate Agricultural road not constructed as per APP targets

Specific and clear-cut agribusiness policy missing Commodity specific policies Multiple tax at multiple levels Supportive institutional structure Conflicts escalation Lack of competitiveness High cost of credit to agri-business sector is another important issue Capacity (Financial, technical, managerial etc) Capacity (Financial, technical, managerial etc)

Coordination Coordination

Investment Complimentarity Investment

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Annex 5.2.2: Root causes: Output S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Root Causes Poor implementation/not effective Coordination Investment Conflict Ownership Policy weaknesses Different understanding Human Resource Capacity Management Governance Organizational weaknesses Unclear Roles Unrealistic assumptions Design Problems Incompatibility with peoples' needs Global effect Total OUTPUT HVC Agri.Buss Total 3 3 10 3 3 2 2 3 2 3 2 3 3 2 3 3 2 3 42 3 2 3 3 3 3 3 3 3 3 3 3 3 3 3 47 12 9 10 10 10 9 10 9 11 11 10 10 11 10 11

Livestock Forestry 2 2 3 1 2 2 2 3 1 2 3 3 2 3 3 3 3 38 3 3 3 3 2 1 3 2 2 2 3 1 2 2 2 36

RANK III I IV III III III IV III IV II II III III II III II

V VI III I 1- OK (Least perceived), 2- Average (Partial problem) 3- High (Full problem)

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Annex 5.2.3: Root causes: Inputs INPUT Irrigation Fertilizer Technology Road/power Credit Total SN Root Causes Poor implementation/not 1 effective 2 Coordination 3 Investment 4 Conflict 5 Ownership 6 Policy weaknesses 7 Different understanding 8 Human Resource Capacity 9 Management 10 Governance Organizational 11 weaknesses 12 Unclear Roles 13 Unrealistic assumptions 14 Design Problems Incompatibility with 15 peoples' needs 16 Global effect 17 Total Rank 3 3 2 2 3 3 3 3 2 2 3 3 3 3 3 2 43 1 2 1 1 1 3 1 3 3 3 3 3 3 3 3 3 37 3 3 3 3 3 3 1 3 3 3 3 3 3 3 2 1 43 3 3 3 3 3 3 3 3 2 2 2 2 3 3 1 1 40 3 3 1 3 3 3 3 1 3 3 2 2 2 3 3 2 40 IV 13 III 14 10 12 13 15 11 13 13 13 13 III 13 14 15 12 IV 9 III II I II VI IV III I V III III III

18 Rank II VII II IV 1- OK (Least perceived), 2- Average (Partial problem) 3- High (Full problem)

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