Development of Agribusiness Enterprises - Asian Productivity ...

* First eight months only.
AGRIBUSINESS COMPONENTS
Agribusiness in Nepal consists of the production and distribution of certain agricultural
inputs, the distribution of imported inputs, and marketing and processing of outputs. The
linkages between those components varies according to the different commodity subsectors.
In general, the linkages are very weak or limited, particularly between the input and output
handling agribusinesses. There are few input producing or distributing agribusinesses such
as the poultry, apiculture and floriculture subsectors, which link activities to output marketing
or processing. In those commodity subsectors, agribusinesses produce and supply inputs
such as chicks, feed, some medicines and extension services for the producers, as well as
giving buy-back guarantees and even processing of the output.
Input Production and Distribution
Very few inputs are produced within the country and in such small quantities that they
do not meet domestic requirements. Most inputs are imported and sold to the farmers through
their distribution channels.
1. Seeds
Nepalese farmers are increasingly using improved seeds as a part of the strategy for
increasing production. Farmer-to-farmer exchange (production and sale) of seeds is still the
major source of seed supply in the country. The formal sector of grain seed business
comprises a large number of seed producers and the government Agriculture Inputs
Corporation (AIC) that distributes all over the country through its depots, cooperatives and
private dealers. The private sector has recently become a significant player in the supply of
vegetable seeds, saplings (fruit trees and some cash crops), and flower seeds and saplings.
Most of the grain seeds and vegetable seeds are produced under contractual arrangements
while the private nurseries produce saplings often “as and when an order is placed”.
2. Fertilizers
All fertilizers are imported either by AIC or private sector agribusinesses, and then sold
to the farmers through sales depots and dealers around the country. Previously, the fertilizer
business was monopolized by AIC but in recent years the government has increasingly
involved private agribusinesses in the import and sales of fertilizers.
3. Insecticides
The case of insecticides is same as that for fertilizers, but the involvement of private
sector agribusinesses dominates this subsector.
4. Credit
The government-owned Agricultural Development Bank is the major source of
agricultural credit in the country. In addition, the commercial banks and other financial
institutions are providing credit to farmers. In the recent past, “micro financing” became an
important source for agricultural credit managed by NGOs and informal “savings groups”.
The disbursement of agricultural credit in 1999/2000 * amounted to NRs.3,881 million. The
share of agribusiness and agro-industry, including marketing and godowns, constituted 56
percent of the total agricultural credit.
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