value chain/ market analysis of the ginger sub-sector ... - Nepal Trade

3.6 Vertical and Horizontal LinkagesVertical Linkages: Vertical linkages can be attained through cooperation between thedifferent players or firms, and they have the benefits of transferring skills from one player toanother, as well as reducing transactions costs. Considering the ginger value chain, verticallinkages exist between cooperatives and growers in some pockets. In some cases, buyers areproviding credit while purchasing seeds. In the case of ginger candy, Himalayan Naturals hasprovided some technical skills and buyback guarantee of the products from one cooperativeof Ramghat, Surkhet. There is good relationship seen between exporters of dry ginger andsome cooperatives of Palpa also. However, when looked nationally, there is still a very poorvertical linkage between producers and traders.Horizontal linkages: This is the relationship among different players operating at the samelevel of a value chain. It can be seen at the producers level where there are various gingerproduction groups in production pockets. Group members organize meetings periodically andshare information about the status of production, input procurements, and output marketing.Nevertheless, there is little evidence of collective marketing practice in Nepal. As a result,they do not benefit from horizontal linkages that can help them generate economies of scale,which can improve their competitiveness and bargaining power. At the traders level, they aremore united BMOs like JABAN (which fixes the price of products in weekly basis) andNGPTA.3.7 Value Chain GovernanceThe trading of ginger is mainly governed by Indian importers, as about 99 percent of the totalproduct is exported to India (ITC, 2010). There is greater complaint from traders towardsfarmers for supplying unclean and ungraded product.In most cases, the business relations between the various operational actors are of free marketexchange. The uncoordinated transactions (arms-length spot market relationships) areprominent among them. Contract farming is also not seen in ginger. There have been a fewinstances where the Indian buyers have offered the national buyers some advance payment,which is transferred down to local traders. However, there is rare incidence of advancepayment provision to the producers (Ghimire, 2009). The transaction pattern in export marketis mainly on commission basis, where the commission agents charge 6-7 percent ascommission.Due to the lack of a proper market information system and minimal bargaining power,farmers are forced to sell their product at the price offered by traders. Traders usually refer toIndian markets for price fixation. In some cases, there are conflicts among the traders andexporters regarding payment and failure to keep their commitment.Overall, the governance of the ginger value chain is buyer-driven with minimum trustbetween various actors. Traders are always complaining that the farmers are not providingquality product while farmers are blaming the traders for offering low prices.Value Chain/Market Analysis-Ginger 27