Repcrit No. 519a-NEP FILE COPY Agyricultural Sector Survey of Nepal: The General Report (In l-wo Volumes)

Public Disclosure Authorized Volume II: Annexes 1-8 Deccmber 20, 1974 South Asia Projects Department

Noit for Public Use Public Disclosure Authorized Public Disclosure Authorized

Doclment of the International Bank for Reconstruction and Development

Public Disclosure Authorized lnteinational Development Association

This report was prepared for official use only by the Bank Group. It may not be ptiblished, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS

US$1 = Nepalese Rupees (Rs) 10.56 Rs 1 US$0.094 = Indian Rupees (IR) 0.726 Rs 1,000,000 = US$94.340

WEIGHTS AND MEASURES

Metric System

1 kilogram (kg) = 2.20 pounds 1 quintal = 100 kg = 220 pounds 1 metric ton (m ton) = 1,000 kg = 2,204.62 pounds = 0.98 long ton 1 meter (m) = 39.37 inches = 3.28 feet = 1.09 yards 1 kilometer (km) = 0.62 mile 1 bigha = 0.68 ha 2 = 1.7 acres 1 hectare (ha) 2 = 10,000 m = 2.47 acres 1 square kilometer (km ) = 100 ha = 0.39 square mile

Crop Year: June 1 - May 31 Financial Year: July 16 - July 15 (exact dates vary with lunar calendar)

ABBREVIATIONS AND ACRONYMS

ADBN Agricultural Development Bank of Nepal ANC = Agricultural Marketing Corporation CEDA = Center for Economic 1)evelopment and Administration, Tribhuvan University DA = Department of Agriculture DF = Department of Forestry DIHM = Department of Irrigation, llydrology and Meteorology DT = Department of Transport FAMSD = Food and Marketing Services Department, MFAI FMS = Farm Management Study HMG = Government of Nepal IAAS = Institute of Agriculture and Animal Science, Tribhuvan University JT = Junior Technicians, DA JTA Junior Technical Assistants, DA M = Million MFAI = Ministry of Food, Agriculture and Irrigation MPP = !finimum Package Program NDC = Nepal Dairy Corporation NESP = National Education System Plan NPC = National Planning Commission NRB = Nepal Ra'stra Bank NRC = Nepal Resettlement Company VC = Village Committees VP = Village Panchayats NEPAL

AGRICULTURAL SECTOR SURVEY

Table of Contents

Paragraph Number

VOLUME I (GENERAL REPORT)

SUMMARY ...... i - xxxvi

I. INTRODUCTION ...... 1.01 - 1.08

1I. BACKGROUND ...... 2.01 - 2.26

Natural Resource Base .2.01 - 2.11 Socio-Economic Disparity: The Hills and The Terai .. 2.12 - 2.26

III. PRESENT POSITION .3.01 - 3.70

The Principal Agricultural Products ...... 3.01 - 3.30 The Institutional Setting ...... 3.31 - 3.70

Ill. A PROPOSED DEVELOPMENT STRATEGY ...... 4.01 - 4.106

Government's Emphasis and Plans ...... 4.01 - 4.03 The Basic Strategy ...... 4.04 - 4.06 Agricultural Development in The Hills ...... 4.07 - 4.21 Agricultural Development in The Terai ...... 4.22 - 4.42 Linking The Hills to The Terai ...... 4.43 - 4.49 Improving Support Services ...... 4.50 - 4.86 Reaching The Small Farmer ...... 4.87 - 4.97 Programs [or the Development Regions ...... 4.98 - 4.106

V. PROJECTS, PREINVESTMENT REQUIREMENTS AND PROSPECTS ...... 5.01 - 5.23

Project Selection ...... 5.01 - 5.02 Present Foreign Assistance and Projects ...... 5.03 - 5.07 Proposed Projects for External Financing ...... 5.08 - 5.22 Preinvestment Requirements and Studies ...... 5.23

Table 1: Geographic Regions, Climate and Agricultural Location. Table 2: Components for Secondary Roads and Area Development Projects.

Appendix: Socio-Economic Characteristics of 'i'he Hills and The Terai. -2-

VOLUME II (ANNEXES)

Annex 1 - Natural Resource, Land Use and Land Settlement Annex 2 - Forestry Development Annex 3 - Foodgrain Production Annex 4 - Cash Crop Development Annex 5 - Livestock and Fodder Development Annex 6 - Irrigation and Water Resource Development Annex 7 - Credit and Cooperatives Annex 8 - Statistical Annex

MAPS

10906 - Nepal - Geographic Regions and Districts (General Report) 10907 - Nepal - Administrative Regions, Zones and Districts ( " " ) 10908 - Nepal - Topography, Large Valleys and River Systems ( " " ) 10742 - Nepal - Crop Concentration and Land Use ( " " ) 11172 - Nepal - Remaining Level Forests in Eastern Terai ( " " ) 10912 - Nepal - Remaining Level Forests in Western Terai ( " " ) 10909 - Nepal - Transportation Infrastructure ( " " ) 11050 - Nepal - Concentration of Government Agri- cultural Services ( " ) 10913 - Nepal - Annual Rainfall (Annex 1) 10741 - Nepal - Geology (Annex 1) 10911 - Nepal - River Basins and Watersheds (Annex 6) 10164 - Nepal - Existing and Proposed Main Irrigation Projects (Annex 6) ANNEX 1 Page (i)

NEPAL

AGRICULTURAL SECTOR SURVEY

NATURAL RESOURCES, LAND-USE AND LAND SETTLEMENT

Paragraph Number

A. NATURAL RESOURCES ...... 1 - 16

Area and Physical Features .1 - 6 Climatic Regions and Agricultural Location ..... 7 - 8 The People ..... 9 Water and Hydropower Resources ..... 10 - 11 Forest Resources ..... 12 - 13 Soils ..... 14 - 15 The Report's Regional Coverage ..... 16

B. MIGRATION AND LAND-USE ..... 21 - 24

Population Pressure and Migration ..... 17 - 20 Land-Use ..... 21 - 24

C. LAND SETTLEMENT ..... 25 - 54

Introduction ..... 25 - 27 Nepal Settlement Company ..... 28 - 46 Department of Resettlement ..... 47 - 49 Proposed Settlement Plan ..... 50 - 54

D. RECOMMENDATION AND PROSPECTS ..... 55

Land-Use Planning ..... 56 - 65 Improving Settlement Capacity ..... 66 - 70 Spontaneous Settlement and Resettlement Department's Role ...... 71 - 72

Table 1: Geographic Regions, Climate and Agricultural Location Table 2: Nepal - Terai and Inner Terai Forests, 1972 Table 3: Nepal Resettlement Company - Numbers of Families Resettled and Land Distributed Table 4: Existing Schemes of the Department of Resettlement Table 5: Nepal Resettlement Company - Current Five Year Settlement Program ANNEX 1 Page (ii)

ANNEX 1: Natural Resources, Land-Use and Land Settlement

Appendix 1: Climate Appendix.2: Assessment of Soil Investigations Appendix 3: Assessment of Land-Use Statistics in Nepal

MAPS:

IBRD 10913 - Nepal - Annual Rainfall IBRD 10741 - Nepal - Geology ANNEX 1 Page 1

NATURAL RESOURCES, LAND-USE AND LAND SETTLEMENT

A. Natural Resources

Area and Phyical Features

1. The Kingdom of Nepal is rectangular shaped, with an area of some 141,000 km2 . Completely landlocked, it is wedged between Tibet to the North, and India to the South. The physical and ecological features play an eminent role in determining the way of life in Nepal. The topo- graphy is the most varied of any nation. Nepal is roughly 850 km (530 miles) long from east to west, and 180 km (110 miles) wide. From the plains and lowlands of the south, about 50 km above sea level, the ter- rain rises in 160 km to the dramatic heights of the world's highest moun- tain, Mount Everest, at 8,850 m.

2. Geographically, the country is divided into three roughly parallel strips, each running generally east and west. The southernmost strip (about 25 km wide) is the Terai, covering about 17% of total area. An extension of the Gangetic plain of North India, it consists of generally flat, open coun- try blending into forested hills, and is noted for its heavy jungles and big game including tigers, rhinoceros, elephants, wild boars and crocodiles. The northernmost strip is about 35 km wide consisting of the great Himalayan Range (4,500 m - 8,850 m) with its perpetually snow-covered panorama. The region is about 35 km wide, and accounts for about 15% of the total land area. The central strip or the Hills is about 100 km wide, with elevations from 250 m - 3,000 m, covering 68% of the land area.

3. The Hills _/ essentially consists of two ranges:

(a) The Churia Range; and

(b) The Mahabharat Range.

4. The Churia Range consists of narrow steep ridges (The Churia Ridge or the Siwalik Hills) at its southern edge, and large valleys north of it. The Churia Ridge (Map 10908) extends east to west at an average height of 2,510 (760 m) and merges into the Indian border through its extensions at Dang (the Dundwa Range) and at Chitwan (the Someswar Range), conveniently dividing the Terai into three parts (Map 10906): (a) Eastern Terai (East of Chitwan); (b) Mid-Western Terai (between Chitwan and Dang Deokhuri); (c) Far-Western Terai (West of Dang Deokhuri). The Mahabharat Range merges closely into the Churia Range north of Far-Western Terai, Mid-Western Terai and the far-eastern third of Eastern Terai.

1/ See Maps 10906 and 10908, General Report. ANNEX 1 Page 2

5. The gap between the Churia Ridge and Mahabharat Range is the greatest in the Inner Terai districts where large river valleys (called duns) of the Churia Range are found. 1/ Although the Inner Terai may be considered as part of the hills, its valleys are agriculturally similar to the Terai.

6. The transition from the Mahabharat Range to the great Himalayan Range is not so obvious, but most of the Mahabharat is below 3,300 m (the upper limit for successful grain farming). The Hills can therefore be divided into (a) the Lower Hills (less 3,300 m) and (b) the Upper Hills or Mountains (Upper Mahabharat and Great Himalayas). 2/

Climatic Regions and Agricultural Location

7. Table 1 illustrates the effects of climate 3/ and topography on the distribution of crops in each region. The humid subtropical climatic zone (encomposing mainly the Terai and Inner Terai) reaches approximately 1,700 m, providing the rainforests, foodgrains (mainly rice, and some maize, wheat and millet), oilseeds, pulses, sugarcane, jute, tobacco and tea. Since rainfall decreases from about 2,500 mm in the East to about 1,500 mm in the West, sugarcane, tobacco, jute and tea are more important in Eastern Terai and Inner Terai; pulses, oilseeds and newly introduced cotton are more im- portant in Far-Western Terai.

8. Each hill area is a micro environment with varying conditions for plant growth depending on the elevation, cloud cover the direction of slopes, etc. The microthermal climate of the Lower Hills supports a wide variety of agricultural enterprises (Table 1) - foodgrains, potatoes, fruits and spices, cattle and buffalo. In the Upper Hills, at subalpine elevations (2,700 - 4,000 m) where the winters are more severe and the summers are cool, barley and potato cultivation and the grazing of yak, goats and sheep are the main enterprises. The natural vegetation are mainly temperate conifers. Above the 4,600 m treeline, true alpine tundera conditons of the Himalyan Mountain zone consisting of shrubs and lichens prevail. Lower rainfall in the west gives rise to a higher concentration of subtropical hill pine (Chir) and savanna in the Lower Hills, and the high grasslands of the Upper Hills.

1/ Some of the larger Inner Terai valleys are those associated with the West Rapti and Babai rivers (Dang Deokhuri), Narayani and E. Rapti rivers (Chitwan), Marin Khola (Sindhuli-Makwanpur). Kamla (Sindhuli-Udayapur).

2/ In terms of the availability of statistics, Lower Hills and Mountains are generally presented in an aggregated form in this report. The differences in ecology subsumed in this aggregation should however be borne in mind.

3/ Appendix 1 gives an overview of Nepal's climate. ANNEX 1 Page 3 The People

9. Besides the differences in climate and agricultural production potentials, there are also important ethnic and cultural differences. The people of the Terai are predominantly of Aryan stock. Those of the midlands or lower Hills are a blend of Mongoloid (Tibeto-Burman) and Aryan stocks, speaking different dialects. The Upper Hills are populated by Tibeto-Burman speaking Mongoloid peoples Kiratis-Rais and Limbus in the East; Sunuwars, Girels and Temangs in the Near East; and Gurungs and Magars in the Central and West. Over the last 150 years, the Upper Hills peoples and the Hill Chetris have traditionally provided the main source of recruits for the Gurkha regiments in the British and Indian armies. Undoubtedly, active service pay and army pensions 1/ have helped keep many hill areas, particularly in the Gandaki zone, solvent. Army returnees also constitute an important pool of semi-skilled labor which has not been fully utilized.

Water and Hydropower Resources -

10. The most important untapped potential in Nepal is the river system. With an average annual river runoff estimated at 124 million acre feet (MAF) and a domestic requirement of only 18.6 MAF, the potential for export to India after storage in Nepalese reservoirs is tremendous. The Terai, except for its major rivers 3/, has few reliable surface water sources for year round irrigation. Significant groundwater resources, however could permit such irrigation. Two important artesian groundwater areas have recently been located in the Lumbini and Janakpur zones of the Terai. The Lumbini, with by far the greater potential, is estimated to cover about 200,000 ha between Butwal and Bhairawa, and has artesian pressure of up to 40 ft.

11. Nepal's potential for hydroelectric power is estimated at 83,000 megawatta (MW), equivalent to the combined installed hydroelectric capacity of Canada, the United States and Mexico. A UNDP study 4/ estimated that the Karnali Basin alone could provide a capacity of 6,800 MW. Present installed hydroelectric capacity is only 33 MW and Nepal's per capita consumption of 6 kwh is among the lowest in the World. 51

1/ Estimated remittances were equivalent to US$5.7 million in 1971/72. 2/ A detailed discussions is given in Annex 6, paras 1-22. 3/ For example, Karnali, Sapt Kosi, Narayani, Kankai, Kamla, Bagmati, Rapti, W. Rapti, Babai, Bheri, Mahakali, Seti (See Map 10908). 4/ Nippon Koei, Master Plan For Power Development and Supply, May 1970. 5/ For 1964, world average was 807 kwh and the average for a developing country was 112 kwh. ANNEX 1 Page 4

Forest Resources

12. The Terai and Inner Terai forests have been the only source of industrial timber. They are semi-tropical hardwood, dominated by Sal (50%) and Asna (15%) strongly demanded in both the Nepalese and Indian markets. Other economic (but much less prevalent) species include Khair for manu- facturing of Katha and Kutch (used as "pan" in chewing), and Semal used in manufacturing matches.

13. Hill forests predominate in the Western region where less population pressure exists. In the subtropical Hill areas and some high forest valleys on the southern side of the Himalayas, the forests are potentially commercial, provided they are made more accessible. However, in the larger Hill valleys and less steep areas, much of the forests have already been lost to settler incursions. The remaining steeper Hill forests consist mainly of indigenous subtropical and temperate pines and oak, used mainly for fuelwood or as loppings for animal fodder or green manure.

Soils 2/

14. Soils in Nepal are generally light and permeable because of the steep river gradients and particularly in the wetter Eastern Terai, generally acid. Two distinct zones may be identified running East-West through the Nepalese Terai:

(a) The northwest "Bhabar" Zone - consists of relatively coarse textured soils (usually with less than 20% clay) and often occur as distinctly sandy and gravelly fans at the foothills of the Siwaliks. Very permeable and highly susceptible to erosion, these soils are the least fertile and the most difficult to manage.

(b) The southern zone - which is much wider - has largely medium textured soils. These are also quite permeable since the predominant clay mineral is kaolinite. Their cropping suitability varies according to relief, with the lower lands close to rivers possessing a higher water table (or subject to flooding) especially favored for paddy and jute cultivation. The higher and dryer lands are slightly less fertile and are more suited to maize, broadcast paddy, followed by mustard, pulses and wheat. The occurrence of remnant terraces (relict uplands) consisting of coarse textured and compacted soils, typically eroded by small ravines, diminish the cropping potential of this zone.

1/ Forest Resources are detailed in Annex 2, paras 1-11. 2/ An evaluation of soil investigations and more detailed discussions of Nepalese soils are given in Appendix 2. ANNEX 1 Page 5

15. Most of the soils in the Hill valleys are also relatively coarse textured, particularly those derived from carbonaceous rocks (Map 10741 of this Annex). The hill slopes generally have slightly more clay and silt.

The Report's Regional Coverage

16. This report will attempt to analyze the problems of agriculture in relation to the four agricultural regions (Upper Hills, Lower Hills, Inner Terai and Terai) as much as the limited data allows. Because of this limitation, the regions will generally be simplified into (a) the Hills and (b) the Terai. Unless otherwise specified; the Hills includes the mountain region and the Terai includes the Inner Terai. The administrative districts included in each categroy are listed in Map 10907, General Report.

B. Migration and Land-Use

Population Pressure and Migration

17. Cultivated area in the Hills (comprising 31% of total cultivated area) supports 59% of the population, or an equivalent of nine people per cultivated hectare (compared to the Terai's average of three). This popula- tion pressure has forced people from the Hills to seek alternative and more durable economic opportunities in Kathmandu, the Terai and even outside Nepal (many through enlistments in the Gurkha regiments of the British and Indian armies). Population in the Hills grew by only 1.3% in the decade of the sixties, while that of Kathmandu and the Terai increased annually by 7% and 3.3% respectively. A farm management study (FMS) 1/ of 10,000 farms in 1968/69 showed average farm size to be only 0.5 ha in the Hills, in contrast to 3.0 ha in the Terai, and even these average understate the small farm disparity between the two regions. Eighty-two percent of the farms in Other Hills (hill areas outside Kathmandu Valley) were less than one bigha (0.67 ha), but in the Terai the corresponding figure was 24%.

18. With the eradication of malaria since the mid-fifties, migration into the Terai and particularly the Inner Terai has accelerated and from 1961 to 1971, population pressure in the Hills led an estimated 400,000 mi- grants (about 67,000 families) there. In the last decade, about 180,000 ha of forest land in the Terai was alienated for settlements, of which about 130,000 ha were illegally settled (Appendix 3).

1/ Economic Analysis and Planning Division (EAPD), Ministry of Food and Agriculture, Farm Management Study in Selected Regions in Nepal, 1968-69, Kathmandu, 1971. ANNEX 1 Page 6

19. Continuing population imbalance in the Hills has increased pressure for bringing more lands into cultivation, either by moving onto much steeper land adjoining farms or by deforestation of nearby steep areas. The result of movement onto such marginal lands has been the primary cause of yield declines in the Hills (particularly in the East). Livestock pressure in the Hills has also aggravated the situation, causing deterioration in the quality and sometimes destruction of hill pastures. Forests have also been denuded because of cutting for fuelwood and lopping for animal fodder or green manure. Consequently, animal productivity, already low, is thought to be declining or at least stagnant, as is the cash income many famers derive from livestock.

20. The combination of (i) fuelwood and fodder extraction in hill forests, and (ii) intensive grazing and improper cultivation on steeper slopes, have increased flooding and crop area destruction in the river valleys and their flood plains in the Terai, threatening to reduce even further Nepal's available cultivated lands.

Land-Use

21. The present status of land use is not known with certainty. Information on land use in Nepal is poor, and large discrepanies 1/ occur, depending on the sources of available information used. A reconciliation of available information 2/ gives the following situation (1972);

Land Use Million ha (%)

Forests 5.0 35.5

Commercial (2.2) (15.6) Non-commercial (2.8) (19.9)

Cultivated Area 2.3 16.3

Grasslands 1.7 12.0

Land Under Snow 2.1 14.9

Other 3.0 21.3

Total Area 14.1 100.0

1/ For example, depending on the source, (i) cultivated area ranges from 2 million (Ministry of Agriculture) to 3.2 million hectare (Department of Forests) and (ii) forest areas range from 4.5 to 6.4 million ha.

2/ See Appendix 3 for details. ANNEX 1 Page 7

22. From Earth Resource Technology Satellite (ERTS) imagery, only 774,000 ha of relatively level commercial forests remain in the Terai and Inner Terai in 1972 (Table 2, and General Report - Maps 11172 and 10912). This represents a total loss of about 340,000 ha since 1963 (equivalent to an annual loss of 3 percent). Population pressure in the hills have led to the settlement of about 180,000 ha of these forests, mainly in the Inner Terai (Dang and Chitwan) and Eastern Terai. Most of the remaining loss was due to firewood extraction and livestock grazing of the less agriculturally suitable forests. Intra-migration within the Terai, and illegal migration from India probably accounted for about 50,000 ha.

23. On the basis of very preliminary pedologic analyses of Terai soils and field verification in the IDA settlement Project areas, a maxi- mum of 325,000 ha of the remaining 774,000 that Terai forests is expected to be suitable for agricultural development. This assessment is primarily based on the probable existence of remnant terrace and Bhabar soils (para 14) in these forests (Maps 11172 and 10912, General Report and Appendix 3, paras 12-14). Probably 200,000 ha of the agriculturally suitable level forests are located in Far Western Terai.

24. This figure of available new agricultural land in the Terai is sub- stantially lower than the 1 M ha presently assumed by the Ministry of Agri- culture and the National Planning Commission. In the Hills, although nearly 300,000 ha of flat land 1/ exist in the larger valleys, indications are 2/ that most of them (except possibly in Far Western Hills) have already been settled.

C. Land Settlement

Introduction

25. With the increasing migration, a Land Settlement Unit was estab- lished in the Department of Agriculture (Ministry of Food and Agriculture) to control this spontaneous movement, and to legalize reclaimed land and organize land settlement on some of the more favorable areas.

26. The first large scheme was at Hetaura, on the Inner Terai close to the road between Kathmandu and the Indian border. This was followed in the mid-nineteen fifties by the Rapti Valley resettlement scheme (Nawalpur) mainly for families who had lost their lands as a result of landslides during the particularly heavy 1954 monsoon.

1/ Land less than 10% slope (Annex 6, para 13).

2/ This needs to be confirmed by a similar analysis of ERTS imagery under- taken for the Terai. ANNEX 1 Page 8

27. Tne overwhelming demand for places on these and other, smaller schemes, and the rash of illegal settlement which sprang up in many Terai forest areas in the late nineteen fifties caused HMG to expand its organized settlement activities through the creation of the Nepal Resettlement or Punarvas Company (NRC). This corporation was finally established in 1963 following acceptance of the recommendations contained in an Israeli report, and it was made responsible for larger settlements. The Department of Agriculture, to which the NSC was attached, retained responsibility for all smaller schemes, usually less than 200 families. A Department of Resettlement was established in 1969 (to undertake Jhora Commission disaster relief for landless population in the Hills) to reclaim land for small settlements. Coordination between the two official bodies is largely effected through the Commissioner in charge of the Department who is also the Chairman of NRC board.

Nepal Resettlement Company (NRC)

28. NRC is a private limited company, formed in 1963 under the Nepal Companies Act, with authorized share capital of Rs 2 M (US$0.19 M). It is wholly owned by HMG and is run by a board consisting of the Director-General or Commissioner of the Resettlement Department (Chairman), the NRC General Manager (Secretary). The other board members consist of the Director- General of the Department of Agriculture; the Chief Conservator of Forests; and representatives from the Ministries of Industry and Commerce, Water and Power and the Planning Commission.

29. N4RC aims and objectives are to plan and carry out the systematic distribution of land primarily for landless hill farmers in organized and legal settlements, and to assist settlers to improve their farming through provision of advice and credit.

30. History. The first NRC scheme was inagurated in 1965 in a small way at Nawalpur, in the Western Terai (Table 3). This was followed in 1968 Dy a second scheme, at Banke in the same region. Both these schemes are now almost completed with about 2,300 families settled. Tnree other schemes at Bardia, Kanchanpur (Western Terai) and Jhapa (Eastern Terai) has settled a further 2,000 families.

31. During the peak development period of the Nawalpur and Banke schemes in 1966-69, the annual intake of settler families averaged 550, but dropped to around 150 in the two subsequent years. In 1971/72, the second phase of settlement activity commenced with acceptance of 900 families, followed by 1,300 in 1972/73. The NRC achievement of 4,300 families settled in its first eight years, is equivalent to about 8% of the total number of migrant families believed to have moved into the Terai during that period. The remaining 88X comprise illegal occupiers of forest land scattered over much of the plain, but concentrated especially in the few remaining forest areas of the central and eastern Terai. ANNEX 1 Page 9

32. Settlement Procedures and Assistance. NRC schemes are designed for rural families who are victims of natural calamaties, or those orginating from the overcrowded and land-hungry hill regions, who possess no land or have insufficient land to obtain an adequate living.

33. Prospective settlers must first apply to the chief district officer in their home districts. Details on their completed application forms are checked by the village panchayats (local councils) in their villages of residence and, if found satisfactory, are forwarded to the office of the zonal commissioner. Following approval at this level, the applications are sent on to NRC which makes a final selection and allocates the chosen families to particular schemes.

34. The basic criteria used for selection include farming experience (usually gained as a farm laborer or unregistered tenant farmer). Applicants must be married, and young families are favored. A positive attitude towards farm work is especially sought, and good health is most important. Selection procedures attempt to avoid those with hidden wealth or who are not hard-working.

35. About 90X of the settlers in present NRC schemes are from the Hills and the rest consist of Nepalese refugees from neighbouring countries (especially Burma).

36. Upon selection, the settler must sign a 12-year bond agreeing to abide by the regulations set by the NRC, and he is given a temporary occupa- tion license to his plots. Settlers are expected to purchase their land at the rate of Rs 300 per bigha (Rs 900 per 2 ha farm). This would be paid, interest free, at the rate of Rs 150 per annum between years 6 and 12, following which a permanent freehold title would be given.

37. Land designated for settlement are supposed to be logged by timber contractors of the Department of Forestry who have bidded for the area for commercial extraction. The land is then handed to NRC for distribution to smallholder.

38. Four bigha (2.7 ha) of land used to be provided for each family in the early years, but the allocation was later reduced to three bigha (2.0 ha) when experience showed that the larger area was generally too much for the average family to manage and the smaller area was sufficient to meet the employment needs of the average family while providing an adequate living.

39. Settlers are generally expected to take about five years to fully develop their land. They arrive with their families during October/December, when weather is cool and land is dry, and they start clearing their 0.8 ha (1 bigha) house lots and building their houses. A small semi-permanent dwelling is normally built within the first three months, using residual timber from the cleared plot. A more substantial, permanent two-story house is built within eighteen months of arrival. ANNEX 1 Page 10

40. Except for a few vegetables, no substantial area is planted during the first six to eight months (October/December-May) which coincides with the second, and drier, part of the traditional crop year (June-May 31). The remainder of each house lot is usually cleared in time for staple food cultivation in the following June. The World Food Program usually provides food to the settlers during their first nine months of settlement. During the dry season of the second year, the settler begins to clear his two bigha (1.36 ha) main farming area, which may not be adjoining his house lot.

41. NRC settlements are usually provided with government services for health, education, water supply (drinking wells). Settlers generally have to construct their own schools and community halls. More intensive agricultural extension service is provided with one JTA to about 100 farmers and cooperatives are assisted by the Agricultural Development Bank which also provides credit to farmers.

42. Problems and Constraints. The main problems facing NSC are:

(a) constraints in the choice of scheme sites;

(b) overlap of commercial timber operations with forest clearing and cultivation activities; and

(c) limited implementation capacity.

43. No mechanism exists for a systematic allocation of land for settle- ment. Selection of sites for NRC schemes has been determined largely by the Forest Department and, in the case of the most recent schemes, has been limited to a 3 km zone along the Indian border, declared a high priority area for settlement largely for security reasons. In effect, NRC has had very limited choice in terms of agriculturally suitable sites for settlement.

44. Poor coordination between DF and NRC has resulted in delays of both timber exploitation and settlement. In some instances, settlers moved into their allocated lands almost immediately, afraid of losing their allocation and thus preventing orderly extraction of the forests. The settlers them- selves do not gain much in the process because their crop yields are much reduced through excession of shade, root competition and pest damage from the forests remaining on the land. In other cases successful bidders using only simple hand tools and ox carts take too long to clear the forests. Others changed their minds about the economic feasibility of exploiting their auctioned plots (after discovering lower quality timber stands than expected) and left settlers with the forest clearing task. In such cases, settlers have taken more than five years to complete clearing their plots for cultivation. ANNEX 1 Page 11 45. NRC administrative and junior technical staff are appointed through the Public Service Commission while senior technical staff are obtained through short-term secondment from Government departments. Neither of these methods are entirely satisfactory for they lead to delay and often result in inappropriate appointments. The practice of obtaining senior agricultural staff on short-term secondment is particularly harmful for an organization which depends on a high level of specialized agricultural expertise for its success. At present, staff seconded from the Department of Agriculture spend only two years with NRC. During this period they gain an understanding of the special problems of NRC settlers, who lack experience of the Terai environ- ment; but before they can apply their new knowledge, they revert to their parent service.

46. The lack of staff has also meant less in-depth screening of potential settlers and loose adherence to selection criteria, resulting in the rejec- tion of many needy and qualified settlers in favor settlers who later rented out their land.

Department of Resettlement

47. The Department of Resettlement (DR), was formed primarily to handle disaster relief and land reclamation for small-scale settlement (less than 200 ha) in 1969.

48. Settlement procedures for potential settlers are similar to that for NSC except that:

(a) settler lots are smaller (from 1-2 ha depending on family size); and

(b) supporting government services (drinking water, agricultural extension, schools, etc) are not normally provided. Settlers nave to do their own land clearing.

49. All the four schemes under the supervision of DR were established in 1970/71 in the Terai districts of the Lumbini, Kosi, Narayani and Janakpur Zones (Table 4). Nearly 1,000 families have been resettled in 1,641 na.

The Proposed Settlement Plan

50. Recognizing the size of the settlement problem, the hardships and illegalities involved, and the inevitability of the trend, which is likely to persist until all agriculturally suitable land in the Terai is fully developed, HMG recently proposed a Five Year Settlement Plan 1/ (1973/74- 1977/78) for Nepal. Two programs are discussed in the Plan: (a) Planned Settlement Program, and (b) Program for Control of Spontaneous Settlement in government lands and forests.

1/ NRC, Summary of the Resettlement and Unplanned Occupation Control Programs. ANNEX 1 Page 12

51. The main features of the Planned Settlement Program are:

(a) Settlement target of approximately 3,000 families annually from 1973/74 to 1977/78 (Table 5);

(b) Guidelines on stricter settler selection 1/ and settlement procedures and rules (including revenues, record keeping, size of plots, fragmentation); and

(c) Emphasis on agricultural inputs, improving agricultural methods and feasibility studies on irrigation.

52. No guidelines on the selection of new settlement areas were given.

53. The Spontaneous Settlement Control Program proposes guidelines on:

(a) areas where settlement will be prohibited 2/ (unstable areas with loose soils, river banks, etc);

(b) areas where settlement would be assisted (i.e. those where forests had been settled for 4-5 harvesting seasons and a high school and bazaar has been established); and

(c) procedures for legalizing areas where settlement will be assisted.

No guidelines were provided for forest areas which will be spontaneously settled.

54. Regional teams will be set up at each administrative zone through the auspices of the Resettlement Department and the Forestry Department, for three years, to undertake "forest preservation and forest-line demarca- tion" as the first step in implementing the spontaneous settler control program. Other members would consist of representatives from the Chief District Officer's Office, the Department of Land Administration, Police, the District Panchayat, and Chairman of Class Organizations (farmers, youth).

1/ Families are eligible for consideration, only if certified by Chief District Officers as victims of natural calamaties or landless farmers (with phographic identification). Screening for settler suitability involves two stages: (i) initially at the zonal commissioner level and at the (ii) NRC (Central Office) level. Initial suitability requires that potential settlers be married, has no serious criminal record, is physically and mentally fit, owns less than 0.5 bigha (0.34 ha) of land. Points are assigned, based on interviews with potential settlers (taking into account age, family size, agricultural aptitute and size of land owned), and selection is to be based on the highest points obtained. 2/ Spontaneous Settlers in these areas would be forcibly removed. ANNEX 1 Page 13

D. Recoumendations and Prospects

55. Land Use and Land Settlement are closely related. With the in- creasing scarcity of new lands in Nepal, it is of prime importance to ensure l:hat remaining potential agricultural lands are efficiently settled and used. This involves:

(a) more systematic land use-planning and policy guidance in land use; and

(b) strengthening the institutions to face the problems wrought by land pressure and low incomes.

Land-Use Planning

56. We recommend the creation of a Natural Resource and Land-Use Com- uittee or Council (NRLUC) 1/ under the purview of and coordinated by the National Planning Commission to:

(a) provide guidelines, objectives and priorities for the survey of existing and potential national land-use;

(b) oversee, coordinate and standardize natural resource- use activities, especially the studies and programs of the several agencies reponsible for surveys and censuses of the land and water resource base;

(c) assess the need for initiating new studies (surveys) or modifying existing ones, where necessary; and

(d) recommend policies consistent with the potential use of the land and water resource, which would involve: (i) the delineation of areas which should be retained as permanent forest, grazing pasture, national parks or wildlife reserves, or alienated for agriculture and other uses, and (ii) the recommendation of loca- tion and phasing of settlement areas and communications.

57. A professionally-staffed technical sub-committee (The Land-Use Technical Sub-committee), consisting of senior representatives of technical departments involved in land-use, is required to support the NRLUC in the

1/ Consisting of senior officials from the Ministries of Agriculture, Forestry, Home and Panchayat, Finance, Water and Power, Mines and Transportation, and chaired by the Deputy Chairman, National Planning Commission. ANNEX 1 Page 14 land-use aspects of (b) and (c) in para 54. In addition, it should: (i) evaluate the results of past and ongoing surveys and censuses for the pur- pose of developing future land-use maps and regional (and national) land development plans; and (ii) assess the need for foreign assistance to pro- vide the technical support to undertake new surveys or studies.

58. Two types of land-use surveys are required: (i) a Survey of Present Land-Use; and (ii) a Potential Land-Use Survey.

59. A Present Land-Use Survey provides information on the extent and location of area cropped (annual crops, tree crops, horticulture) forests, grasslands, areas with soil erosion problems, pasture, swamps, settled areas, mining, waste land, areas perpetually under snow, etc. The present discrepancies between cropped and forested areas (Appendix 3) can then be resolved.

60. A Potential Land-Use (Land Capability) Survey provides informa- tion on: (i) areas providing various levels of potential for agriculture in terms of the range of crops which could be grown (tree crops, annual crops); (ii) areas potentially suitable for grazing, (iii) areas suitable for commercial forestry; and (iv) areas to be retained as protected forests and parks.

61. An inventory of the soil resources and soil environmental factors is fundamental to these surveys (particularly the Land Capability Survey).

62. Firstly, a reconnaissance soil survey is needed to provide relia- ble information on the type of soils (their occurrence and extent), draining and flooding characteristics, general land capability, and suitability for alternative crop rotations and for sustained year-round irrigation or rain- fed agriculture. Top priority for focusing survey efforts in Nepal should be (in order of importance): (a) the level forest areas in Western Terai (Map 10912, General Report), which would be potentially suitable for future settlement 1/; (b) forested areas in Hill valleys; and (c) larger hill val- leys (mainly cultivated) and areas of production potential (Annex 6, Table 3) which would be linked to main roads. A longer term perspective should be to undertake the Reconnaissance Soil Survey countrywide.

63. Secondly, selected areas proposed for development or specific problems areas which need attention, should be supplemented by more de- tailed soil surveys. It is however important to initially get the broad perspective from reconnaissance soil surveys, so that detailed soil sur- veys would be more efficiently used.

1/ The 1973 IDA Settlement Project has made provisions to undertake such a study. ANNEX 1 Page 15

64. Two studies to complement soil surveys for land-capability classi- fication are: (i) detailed forest inventory 1/ (to be carried out after soil surveys are completed in order to avoid unnecessary inventory in areas deemed unsuitable for agriculture development); and (ii) water resource inventories (see Annex 6, para 126).

65. Foreign technical assistance is required in the form of a team to assist the Land-Use Technical Sub-committee. Specifically, the require- ment is for a Land-Use planner, a team of surveyors and cartographers and various specialists on short term consultations. The land-use planner should have: (a) extensive experience in conducting and directing integrated resource and land-use surveys involving the coordination of multiple govern- ment organizations; and (b) good basic technical qualification in at least one of the following basic disciplines - soils, land-use, forestry, hydrology. Tne team could undertake analysis of aerial photography, production of suitable base maps for field work, field surveys, technical assistance and in-service strengthening of government department involved in such work.

Improving Settlement Capacity

66. Nepal Resettlement Company. Assistance is being given to NRC by the IDA settlement project to expand its program, and assist in alleviating the constraints it faces.

67. The project will finance a reconnaissance soil survey of Far- Western Terai to locate additional areas suitable for land settlement. Tne establishment of the NRLUC to recommend the location and phasing of settle- ment areas and communication should help ease the problem of settlement site selection.

68. The project would also ensure that large scale settlements would be integrated with forest extraction and processing through close coordina- tion between the Timber Corporation of Nepal and NRC. 2/ For smaller areas, an improved timber disposal auction system (Annex 2, para 62) should enable less overlap between timber extraction and settlement activities.

69. In order to iacrease NRC's role in land settlement an improvement in implementation capacity is urgently required. Recruitment of local staff can be improved if NRC is free to hire and fire employees at its discretion, subject only to the control of by its board of directors. A scheme of

1/ To: (a) estimate the total net hoppus cubic feet of sawlogs and total number of poles of all commercial species available within selected areas, and (b) to indicate, by a forest type map, the locations at the principal concentrations of these commercial stands. (For details see Annex 2 of the IDA, Settlement Project Appraisal Report, IDA, Report No. 377-NEP). The general forest inventories undertaken so far (Appendix 3) are not suitable for this purpose. 2/ A Settlement Coordination Committee will be established for the purpose. ANNEX 1 Page 16

service for agricultural staff comparable with that of the Department of Agriculture needs to be implemented to enable NRC to attract and hold expe- rienced agriculturists. Organizational and training support for NRC's agri- cultural activities will be provided by an agricultural advisor provided by IDA's settlement project.

70. Despite these favorable developments, it is unlikely that NRC can achieve the Settlement Plan's target of settling about 3,000 families annually from 1973/74 to 1977/78. This target will most probably be reached by 1977. Although an improvement over previous performance, such settlement rates in the next five years will represent about 25% of the estimated migration from the Hills to the Terai in the 1960's. A reassessment of the spontaneous set- tlement program and how it can be handled should therefore be made.

Spontaneous Settlement and Resettlement Department's Role

71. Some points should be noted concerning the spontaneity of illegal settlement. Although the "pushing force" of population pressure exists in the Hills, there has to be an equally important "pulling force" in the Terai. Settlement in the hot forested Terai is difficult if no assistance is given to migrants to clear the forests, develop some transport facilities, and start their production activities. Despite some pressure of land, families in the Far-Western Hills may not be sufficiently motiviated to settle in the hot Terai unless there is a reasonable chance of owning land and obtaining assistance to develop it. A major reason for mass in-flows of families to ARC offices and forested areas earmarked for land settlement has been the wide publicity that land can be easily obtained from NRC. The publicity sources have been mainly politicians and some friends and relatives who have recently acquired land. If such undue publicity can be minimized and the screening process of potential settlers can be tightened and enforced, valu- able time can be gained to assist organized settlements in Western Terai. 1/

72. Settlement pressure and timber losses from spontaneous settlement will continue in the Eastern Terai Forests unless action is taken. Past measures for handling spontaneous settlers was either to: (a) repeatedly try to drive them out of the government forests reserves or (b) legalize their settlement where illegal settlement had been established permanently (say over five years) and efforts to move them would be futile. 2/ Both practices are unsatisfactory because the former is just prolonging the ine- vitable at no insignificant costs to the Forestry Department (DF), and the

1/ Accessibility to Western Terai from Central and Eastern Hills will still be relatively difficult as the East-West Highway will not pass through this region until 1978-80.

2/ About 31,000 hectares has so far been legalized in this manner. (Source: Forestry Department.) ANNEX I Page 17

latter cannot resolve the problem of timber resource wastage as poison-girdled trees are left to rot or are burned. In some areas, however, private indiv- iduals have taken the initiative and assisted the settlers in cutting down the trees, hauled the logs to the nearest river and floated them to India where they are collected and sold. Although resource waste is avoided in such cases, potential revenues to HMG are lost. A scheme should be consid- ered whereby such losses can be averted. It appears to be a losing battle for HMG to use its scarce forestry staff to attempt the protection of all the highly pressured cultivable forest areas in Eastern Terai against settler incursions. Its energies should be channelled into assisting the preparation of intensive organized settlements and particularly in regularizing the process of spontaneous settlement.

73. Attempts should be made by the multi-agency teams (para 54) to iden- tify forest areas which have just been, or are on the verge of being, ille- gally settled. These areas should be marked off, and if they are not re- quired to be conserved (para 53a), attempts should be made to regularize their settlement concentrating in specific sub-areas. "Settler direction" teams could, for example, be formed (consisting of representatives from DP. Reset- tlement Department, Department of Land Administration and the District Pan- chayat) with the assistance of a small survey staff to demarcate lots for settlement. Spontaneous settlers already in the area, or new settlers, as they arrive, would be registered. Each registered head of a household would be assigned a temporary claim to a marked lot and all able-bodied potential settlers would be recruited as hired labor to cut the merchantable trees under the guidance of specially trained DF forest guards or specially hired contrac- tors. Whether the temporary claim could be converted to a Temporary Occupa- tion Licence, would depend on the verification of the landless (or very minute holding) status of the registered settlers, and his performance as hired la- borers in logging. In each area, the number of "settlers" to be registered should not be permitted to exceed the number of plots demarcated.

74. A jeepable track and possible water supply facilities could be built as logging operations commence. When the merchantable timber in the area are cut and properly stacked, the registered households (after suitability veri- fication) could then be permitted to commence settlement. The logs would be auctioned and part of the revenues used to pay for the settlement assistance undertaken. Such "minimum assistance" settlement schemes would be under the jurisdiction of the Resettlement Department, and could then be improved as INHG's settlement capacity improves.

75. The "minimum assistance" settlement approach must be regarded only as a stop-gap measure to protect highly pressured forests. Parallel to this, attempts to identify areas for more organized settlement by NRC along IDA Project lines must continue. Table 1 - GEOGRAPHIC REGIONS, CLIMATE AND AGRICULTITRAL LOCATION

Corresponding Geographiic Administ2tivs Approximate Range of % of Cultivated Main Agricultural Regions Regions Elevations . of Area Area Climate Enterprises Natural Vegetation

Himalayas Upper Hills More than 4,600 m Alpine- None Moss, lichens, some (Mountains) ( 15,000 ft) 15 - Tundra duarfed trees.

The Hills About 750 m to about 4,000 m 61 32 Micro- consisting (2-3,000 ft) (12-14,000 ft) thermal of:

Upper Hills Upper Hills About 2700m to about 4,000 m Temperate- Potatoes, Barley; Temperate pines (fir), (Mountains) (Mountains) (8-10,000 ft)(12-14,000 ft) (2h) N/A Subalpine grazing of yak, junipers, high valley sheep, goats; grasslands. chauris, wool; herbs. Lower Hills Lower Hills About 750 m to about 2,700 m Temperate- Maize, paddy, Subtropical hill (2-3,000 ft) (8 - 10,000 ft) (37) N/A Sub- wheat, millet, pines (chir) and tropical potatoes; spices, temperate pines fruits, vegetables, (fir), oak, bamboo tea; cattle, buffa- loes, goats, ghee (butterfat). Inner Terai Inner Terai 240 m to about 750 m Sub- ) Rice, maize, wheat, Deciduous rain forests, (800 ft) (2-3,000 ft) 7 16 tropical ) millet, oilseeds, subtropical hill pines ) pulses; spices, (chir) and savanna. sugar cane, jute, tobacco, tea. Terai Terai Less than 300 m Sub- ) Deciduous rain forests (1,000 ft) 17 52 tropical ) and savanna

/1 See Map_lUY

Source: Adapted from L.B. Rajbhandary, Natural Enviromaent and Crop Distribution in Ne1p, Department of Agricultural Edma.tion and Research, Nlristry of Food and Agricultures, Xathbndu, April 1968 and misaion estimtee. ANINX 1 Page 19

Table 2: NEPAL - TERAI AND INNER TERAI FORESTS L1, 1972

TYPE OF FORESTS Moderately /3 Dissected Badly Flat/3 and Undissected Undisturbed Dissected Flat Forestry Administrarive Partially Heavily Sub- & Partially & Heavily Total "Commercial" Region/Divisions Districts Undisturbed 12 Disturbed Disturbed Total Disturbed Disturbed Forests Forests (1) (2) (3) (4) (5) (6) (7) (8) (8) - (7) ------hectares ------

Far Western Terai

Banke Banke 14,919 31,411 3,226 49,556 - - 49,556 49,556 Bardia Bardia, Surkhet 27,298 37,136 8,387 72,821 1,734 - 74,555 74,555 Kailali Kailali 104,920 730 8,060 113,710 - - 113,710 113,710 Kanchanpur Kanchanpur 83,467 11,048 7.056 101.571 - - 101.571 101,571

Sub-total 230,604 80,325 26,729 337,658 1,734 - 339,392 339,392

Western & Inner Terai

Butwal-Navalpar Kapilvastu, 25,685 68,668 1,734 96,087 3,548 - 99,635 99,635 Rupandehi, Nawalparisi, Chitwan Chitwan Chitwan 927 20,604 15,161 36,692 - - 36,692 36,692 Deokhuri Dang Deokhuri - - - - 1.290 8,871 10,161 1,290

Sub-total 26,612 89,272 16,895 132,779 4,838 8,871 146,488 137,617

Eastern & Inner Terai

Parsa Bara, Parsa 39,190 - 1,690 40,880 - - 40,880 40,880 Rautahat Rautahat 22,016 282 - 22,298 - - 22,298 22,298 Sarlahi Sarlahi 14,596 2,701 - 17,297 - - 17,297 17,297 Mahotari Dhanusha 6,492 - - 6,492 1,169 - 7,661 7,661 Mahotari Saptari Saptari, Siraha, Udayapur - 8,994 - 8,994 86,875 35,572 131,441 95,869 Morang Sunsori, Morang, Jhapa 44.475 14.435 30,282 89,192 23,991 - 113,183 113.183

Sub-total 126,769 26,412 31,972 185,153 112,035 35,572 332,760 297,188

Total 383,985 196,009 75.596 655,590 118,607 44,443 818,640 774.197

1/ Terai portions south of the foothills to the Churia Range (Siwalik Hills) and flat portions of Inner Terai. 2/ Even land of less than 37.slope. 3/ Farests on ravine land and geological remnant terraces.

Sour . Based on FAO/UNDP Forest Development Project's analysis of the 1972 Earth Resource Technology Satellite Images, October 1973. Table 3: N-PAL R SqTrLWM?,WT COMPAVY - IMRRPM nv w4-ATLTP9 PFSE1TTLFD AN'D LAND DTSTRT9IT17D

(ha)

Year Officially Established 6/66 66/67 67/68 68/69 70/71 71/72 72/73 Total

Nawalpur Scheme-/

Families 1963/64 167 599 99 202 60 73 1,200 Land 343 847 713 493 259 193 57 2,905

Banke Scheme-/

Families 1965/66 318 415 67 88 241 1,129 Land 397 645 145 163 340 1,690

Bardia Scheme

Families 1970/71 260 335 595 Land 176 556 732 Kanchanpur Scheme

Families 1970/71 141 859 1,000 Land 95 580 675 Jhapa Scheme

Families 1970/71 272 112 384 Land 184 566 750 Total - Families 167 599 417 617 127 914 1,306 14,308 Land 343 847 1,110 1,138 404 852 1,702 6,752

1/ Origin of families in first six years: Hill Districts 819 Burmah Refugees 281 t 0 Terai District (Approx.) 100 m Total 1 ,200 E

/ Origin of families in first five years: Hill Districts 1,049 F Burmah Refugees 18 India Refugees 22 TotSalNmty1 Source: Nepal Settlement Company, October 1973 ANNEX 1 Page* 21

Table 4 : EXISTING SCHEMES OF THE DEPARTMENT OF RESETTLEMNT

Year of No. of Area Mlain Location Establish- Families Resettled Agriculture Name of Scheme (District) ment Benefited in Ha Activities

RREPI Lumbini Badhera, Paddy, Mustard Zone Dhanewa 1970/71 118 312 Gram, Wheat, (Nlawal- Maize etc. parasi)

RRP Kosi Zone Sountha Paddy, Mustard (Morang) 1970/71 503 705 Maize, Wheat, Jute Gram, Oil- seed etc.

RRP Narayani Zone Sinduli. Garhi Maize, Mustard Nizgadh 1970/71 150 312 Oilseed, Wheat, (Bara, Gram, Millet etc. Rautahat)

RRP Janakpur Murtia Maize, Mustard, Zone (Sarlahi) 1970/71 198 312 Wheat, Oilseed, Gram etc.

Total 969 1,641

1/ Regional Resettlement Project.

Source: Departnent of Resettlement, October 1973. ANNEX 1 Page 22

Table 5: NEPAL RESETTLEMENT COMPANY - CURRENT FIVE YEAR SETTLEMENT PROGRAM

(families)

-Total Scheme 73-74- - - 74-75- Financial75-76 Year 76-77- - - 77-78

Jhapa 800-1/ 400 500 300 - 2,000

Nawalpur-II 300 300 500 600 300 2,000

Bardia 1,300-1 700 700 300 - 3,000

Kailali - 500 600 950 950 3,000

Kanchanpur 1,800 1/ 700 800 950 750 5,000

TOTAL 4,200 2,600 3,100 3,100 2,000 15,000

V These are cwiblative totals which take into account the faMlies settled an these schemes in previous years. A further 2,300 have been settled at the now oompleted Nawalpur I and Banke schemes.

Source: Nepal Settlement Company, October, 1973 ANNEX 1 Appendix 1 Page 1

CLIMATE

1. Two seasons prevail in Nepal, the wet season from May to October and the dry season from November to April. About 90 percent (an average of 20 representative stations) of the annual precipitation is concentrated in the wet season.

2. During the winter, from December to February, night temperatures decline to below 5'C sometimes even in the Terai. In the daytime, the sky is clear and the temperature rises to 20'C. Night frosts occur in the hills but rarely in the Terai. From March to April, temperatures rise to 25°C in the daytime but decline to 10C at night. The driest air of the year has an average daily relative humidity of 35 to 60%, depending on location.

3. The wet season is from May to October with most rainfall occurring from July-August. It is usually cloudy during this period with a high aver- age daily humidity of more than 80%.

4. The favorable climatic factors in the Terai permit good growth of a wide range of sub-tropical annual and tree crops. Some limitations exist, however, such as low sunshine (and therefore low incoming radiation) during the monsoon, uncertain distribution of winter rains and low winter temperatures. These climatic limitations govern the cropping patterns significantly, e.g., paddy growth and to a lesser extent maturation is slowed between December and February, the onset of the monsoon in June hin- ders harvesting of early-matured paddy, maize, soya beans, and groundnuts, and most vegetables have poor yields when cultivated during the monsoon.

5. Temperature. The temperature declines with higher altitudes at a rate of 4C to 5VC per 1,000 m. The average temperature in January and July may be expressed as follows:

January T - 18 - 0.005 H

July T - 29 - 0.004 H

Where T: Temperature in degrees centigrade

H: Elevation in m ANNEX 1 Appendix 1 Page 2

6. Average monthly temperatures at three locations in Nepal are shown below. The relationship between temperature and elevation and between area and elevation are shown in Figure 1.

Average Monthly Temperatures for Three Locations (in C°)/ Region Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Mean Elevation

Dandeldura 8.0 9.6 13.8 17.6 20.3 21.7 20.1 20.1 19.1 16.5 12.4 9.4 15.6 1,837 m

Kathmandu 9.8 12.2 15.6 19.2 22.0 24.3 23.9 23.5 22.8 19.6 14.8 11.0 18.2 1,288 m

Butwal 18.3 20.3 24.9 29.6 31.7 30.7 28.9 28.6 28.4 26.3 22.3 18.0 25.7 263 m

/1 Department of Hydrology and Meteorology, Ministry of Water and Power, Climatological Records of Nepal - 1966, October 1968.

Precipitation

7. The precipitation is somewhat higher in the east where the monsoon effect is stronger than in the west. The slopes of the hills and mountains frontal to the wind direction receive much more precipitation than the rear slopes. The maximum precipitation is about 3,500 mm around Pokhara, North- eastern Bagmali Zone, Sankhusabha, and Ilam, while the minimum is less than 250 mm around Jomosom in the north. The average annual precipitation for the whole country is 1,516 mm. Map 9 gives the annual rainfall for average 1967/68 and 1970.

Humidity

8. The records on the daily mean relative humidity at Kathmandu and other places are as summarized in Table 1.

Duration of Sunshine

9. The duration of sunshine has only been observed in recent years. The record at Kathmandu is shown below:

Duration of Sunshine at Kathmandu-/

Jan Feb Mar Apr Ma June July Aug Sept Oct Nov Dec

Duration of Sunshine (hrs) 8:04 8:58 7:02 8:07 10:05 6:25 5:13 4:44 6:21 9:01 7:24 6:12

Sunshine Ratio () 77 78 59 64 79 46 38 36 52 78 69 60

/1 Source of data- Depirtment of Hydrology and Meteorology, Ministry of Water and Power, H.M.G., Nepal, March 1969. ANNEX 1 Appendix 1 Page 3

Wind

10. The wind in Nepal is generally moderate but strong wind gusts occur occasionally in the months March to May. The wind velocity in Kathmandu ranges from 0.2 to 0.6 m/sec except for occasional wind gusts. The record of the wind velocity at Chisapani is given below.

Mean Wind Velocity at Chisapani (m/sec)/1

Jan Feb Mar Apr Ma June July Aug Sept Oct Nov Dec

3.73 3.47 3.51 3.13 2.60 1.81 1.57 1.23 1.70 2.63 3.32 3.70

/1 Source of data: Department of Hydrology and Meteorology, Ministry of Water and Power, H.M.G., Nepal, March, 1969.

Potential Evapotranspiration

11. The Nepalese climate ranges from sub-tropical to alpine according to location, and the consumptive use of water by crops varies accordingly. The potential evapotranspiration at three typical locations in Nepal is given below.

Potential Evapotranspiration for Three Locations

Location J F M A M J J A S 0 N D Total

Butwal 97 112 144 167 178 133 111 99 98 113 107 92 1,451

Pokhara 69 74 72 119 112 100 96 81 81 89 76 61 1,030

Kathmandu 58 63 64 110 108 98 88 87 79 83 70 53 961

Remarks: Butwal El. 263 m Latitude 28024' Pokhara El. 833 m Latitude 28°11' Kathmandu El. 1,288 m Latitude 27042' Table 1: MONTHLY PVE N FELA-IVE HUMIDITY

STATIOF LOCATION EL (m) *Jan. Feb. MIar. Apr. Mav Jun. Tul. Aua. 'et. Oct. ,vov. Dec. REM

Birata,agar Long 87017? 76 80.7 73.0 53.4 47.9 63.0 80.0 86.9 87.2 85.2 79.2 76.6 79.5 % Men Hrs

Lat 27 042' % Yes:: af 9:30 Kr,thniandu Long 875020, 1,288, 73.8 68.9 60.0 52.6 52.9 69.8 80.6 84.0 77.0 71.0 69.9 72.7 and 16:30 1; s

Bara.kshetra Lat 26 052' Barashatra. Long 87010, 146 72.0 59.5 41.6 38.2 57.5 76.5 84.0 86.0 87.0 84.7 80.7 79.0 % 17a0nea ar-

Parwi,nipur - -- 72.6 70.0 60.6 63.3 63.6 72.0 75.2 78.1 75.2 75.0 69.9 76.' %

Dt~ndrJdhura Lat 29 018: ,na Dondr.Jdhura Long 80035 1,837 56.8 57.6 53.0 47.4 48.8 69.2 93.4 93.2 88.7 73.2 61.0 51.8 % 8Ma aft

Sn1Jy~~a Lat 28023? 8:40 atr: Sr.llys Lon 8200 1,666 60.2 64.8 50.5 43.8 41.6 66.7 84.6 86.7 80.7 67.3 61.7 59.5 O Meon at

Daile-h Lat 28051 1,304 67.6 62.6 61.1 50.7 47.4 68.3 89.2 91.7 87.8 78.0 68.5 68.2 % Mean aT Long 81043? 8:40 1irs

Chisnpani Lat 28039, 225 81.0 72.0 67.5 6..0 54.5 76.5 87.0 89.0 86.5 82.0 80.5 84.5 8 n40Hat

Butwal 27 0421 BiLtwal ~~Latong 8028, 263 61.7 56.5 41.6 35.3 37.8 63.9 81.0 82.9 78.7 72.2 66.7 65.4 % aY:oan 17:30at 94:30;30

i'3rz:a Lat 2800 1061 7102 60.9 45.9 43.4 52.9 73.1 88.5 90.7 87.4 81.4 Long 84037,. 101 7~ 73-4 737 % Meanand 17:,0at 08:30 lis 2

Lat 28011il Meani at 08:3() Pokhara Long 84000, 833 65.8 58.8 49.3 5 .3 6C.3 75.7 82.8 84.4 80.2 75.0 72.9 71.2.% and 1-7:30 13s

Source; Department of Hydrogy and Meteorology Min.stry of Water and Po-wer FIG. 1. RELATtON OF TEMPERATURE - ELEVATION, AREA - ELEVATION IN NEPAL

TEMPERATURE ('C) AREA IN PERCENT (%) -30 -20 -l0 0 +10 +20 +30 0 tO 20 30 40 50 60 70 80 90 100

8.000------

7.000

6,000

F-~~~~~~~~~~-

0 o

5.000

0 3O 20 30 40 50 60 70 80 90 100 110 120 130 141.6

AC.0AG0E 1000 Km' ) World Bonk-8959 ANNEX 1 Appendix 2 Page 1

ASSESSMENT OF SOIL INVESTIGATIONS

Soil Investigations

1. The Department of Agriculture (DA) and the Department of Forestry (DF) are the only government agencies which undertake soil surveys. The total professional staff engaged full time on the work is estimated to be eight soil surveyors and four soil chemists. DA has had little or no supporting staff such as cartographers, tracers and draughtsmen. The Forest Department has had a cartographic section for several years which contracts aerial surveys and prepares and publishes soil maps with the support of USAID.

2. The Department of Agriculture has published a number of reconnaissance soil survey reports covering some 8,000 square km. The Forest Department has published a number of reports covering forest soils in the Janakpur, Narayani and Bheri areas. A very general survey of the Districts of Saptari, Siraha, Danusha, Mahottari, Sarlahi, Pautahat, Bara and Parsa, comprising 600,000 ha, was published by FAO/Nippon Koei in its Sun Kosi Project in 1970. FAO/NK published in 1972 a report on the soil survey in the Birganj-Gandaki Irrigation Project.

3. Methods and procedures followed by the different agencies under- taking soil surveys are often not mentioned (especially chemical analysis). Pedology and soil formation are usually not covered, hence comparison among studies are difficult. The mission encountered difficulties in interpreting Nippon Koei results because of this problem. Reconnaissance Soil Surveys by the Department of Agriculture are of limited use mainly because of inadequate and antiquated methods adopted and the lack of suitable base maps for field work.

4. The UNDP/FAO Project NEP-12 is however improving the situation, providing DA with soil survey, soils laboratory and cartographic equipment and is training four soil analysts and a few assistants. Reconnaissance soil surveys of the Districts of Rautahat, Parsa and Bara, totaling about 3,800 square km are being carried out by the INDP/FAO Project NEP-12 to accepted up-to-date standards which is a re-survey of some of the area covered by Nippon Koei. Reconnaissance and semi-detailed surveys covering about 2,200 sq. km have been carried out recently in Nawalparasi District by staff of the Directorate of Overseas Survey of Great Britain. The Forest Department is presently surveying forest areas in the Mechi Zone.

Generalization of Nepalese Soils -

5. The soils of Nepal have been categorized into four groups, according to their formation and modes of deposition, namely:

1/ Adapted from Nippon Koei/DA, Master Plan of Irrigation Development in Nepal August 1970, with extensive changes and additions from other sources. ANNEX 1 Appendix 2 Page 2

(a) Residual soils and lithosols produced by the weathering of the rocks which were formed in the tertiary and more ancient geological eras. These soils broadly cover the mountainous lands in Nepal.

(b) Diluvial and colluvial soils which cover the hill lands throughout Nepal.

(c) Lacustrine soils, soils settled out of quiet lake waters, distributed on the valleys, e.g., Kathmandu and the Terai;

(d) Fluvial soils developed on the Terai plain and Tars.

6. Terai Soils. The fluvial and Lacustrine soils covering most of the flat low lands in Terai are divided into four soil groups:

(a) Brown forest soils;

(b) Regosols;

(c) Gray hydromorphic and low humic glei associated soils;

(d) Hydromorphic.

7. The Brown forest soils are found as alluvial fans and as gentle undulations on the belts where the Terai plain comes into contact with the Churia Ridge or the Siwalik Hills. These soils have a thick solum depth, coarse sandy loam texture often mixed with gravels, and medium acid soil reaction. These soils have a high permeability, low water holding capacity and rather low fertility. They cover 420,000 ha of land or about 15% of the total Terai.

8. The Regosols are immature soils derived from the recent fluvial deposits distributed in strips along the rivers in Terai. These soils also have a thick solum depth, very coarse, sandy texture and weak acidity. They have a very low fertility, very high permeability, very low water-holding capacity and high erodibility. They cover an area of 140,000 ha or only 5% of the total Terai area.

9. The term "Bhabar" (or Piedmont) soils as used in Nepal covers these two categories of soils. They are the least fertile and agriculturally most difficult to manage.

10. The gray hydromorphic and low humic gley soils are adjacent to the brown forest soils and are generally lower and flatter. They cover about 2.0 M ha (70% of the Terai plains), and are the most important agri- cultural lands of Nepal due to their potential for year-round irrigation. ANNEX 1 Appendix 2 Page 3

The degree of weathering and profile development depends on land elevation, groundwater depth and fluctuation, and cultivation practices. The effect of cultivation practices is not yet pronounced because most Terai lands have only been used intensively for agriculture over the last 20 to 30 years. Areas with relatively shallow water tables have soils with grey, mottled profiles due to hydromorphic weathering processes associated with the seasonal groundwater fluctuations. The soils have a moderately thick solum depth, a loamy texture rich in sand and a slightly acid soil reaction. They are of moderate fertility, moderate permeability and moderate water holding capacity, and are currently used for rainfed paddy culture. While they are highly suitable for year-round irrigation, they degenerate with prolonged over-irrigation. It is necessary to control water applications to sustain and enhance their productivity.

11. A relatively infertile variant of these soils are the relict up- lands, developed over a portion of a former alluvial plain; lying a few meters above the surface of the present plains. These remnant terraces are unvaria- bly rolling and uneven, in contrast to the almost level, recently formed and most fertile plain soils. They are covered by rather coarse textured, pale- colored, heavily compacted and strongly leached soils which would be diffi- cult to manage. These remnant teraces are typically eroded by small ravines, indicating a fast rate of geological erosion, even under natural forest cover. The depth to water table appears considerably in these soils, as evident by the poor quality of natural forest covers and presence of more drought-resist- ing species. Such soils should be used as protective or productive forests, possibly as controlled grazing or firewood reserves. Their extent is proberly about 10% of the Terai area.

12. Hydromorphic soils are found on the nearly flat and low lands that are annually inundated by monsoon floods for periods of four to seven months. The belt along the Indo-Nepal border is generally covered by these soils. They comprise 280,000 ha or about 10% of the total Terai. These are weak alkaline tropical soils formed from fluvial deposits under the influence of the seasonal groundwater fluctuations due to prolonged inundation. They have a thick solum depth, clay loam texture with silt and sand and a mildly to moderately alkaline soil reaction. They have a moderately high fertility, moderate permeability and moderate water holding capacity. They retain a fairly high productivity with flood irrigation or rice.

13. Two characteristics of the Terai soils should be mentioned. Kaolonite is the dominant clay mineral--a non-expanding mineral with a low cation exchange capacity (CEC = 10 to 12 meg. for 100 grams of Kaolonite clay). 1/ The other is the relatively high infiltration rates of the soils (lowest

1/ FAQ/Nippon Koei, Report on the Soil Survey in Binganj-Gandaki Irrigation Project, June 1972, Appendix on Xray and Thermal Analysis of Clay Fraction. ANNEX I Appendix 2 Page 4 observed value is 3 cm. per day), 1/ resulting in high deep percolation losses with ponded rice cultivation unless the soil is saturated (waterlogged). The adverse effect of nutrient leaching under sustained irrigation has been established in the old Chandra canal project command which has been flood- irrigated for about 40 years. 2/ This raises question as to the wisdom of two practices recommended by Nippon Koei, namely (a) rice cultivation with continuous ponds on non-saturated soils and (b) provisions of drainage systems which would decrease subsoil water levels. Both practices increase leaching of nutrients.

8. Hill Soils. Very little infonnation is available on Hill Soils especially for the slopes. Most of the soils in hills and valleys are relatively coarse, especially those derived from carbonaceous rocks (Map 10911). For the slope, textural analyses 3/ point towards medium textured soils with a higher clay and silt content than the valley soil and they should have a good waterholding capacity. The soil reaction is moderately to slightly acid (pH 4.5-6.0). Cation exchange capacities in the A and B horizons vary between 8-12 m.e.q./100 g soil although values of 20 and more are found in topsoils (A horizon) with high organic matter content. Or- ganic matter and nitrogen contents vary from medium to occasionally high, resulting from the lower temperatures at the higher altitudes. Available P 05 in the topsoils vary from medium (2 - - 50 kg P205/ha) to high (go -180 kg P20 ) although in Ilam very low values were found. Available (K 0 value vary Krom medium (100 - 250 kg K 0/ha) to high (250 - 450 kg ha) and occassionally very high as in Iam district.

1/ FAC/Nippon Koei, Report on the General Reconnaissance Soil Survey of the Eastern Terai Plain in Nepal, September 1970, and footnote 1/, pp. 30-33. 2/ Nippon Koei, Final Report on the Development of Irrigation in the Central and Eastern Terai Plain, Nepal, 1972, p. 22. 3/ Final Report of H. C. Dewan, Soil Chemist FAO Nepal-12 Project, Sept. 1973, M.T. Kaddah 1965, Report to the Government of Nepal FAO-EPTA Report No. 2043; II.M.G. DA, Soil Science Section 1965: Soil Survey of Tea Growing Areas of Ilam District Mechi-Zone. ANNEX 1 Appendix 3 Page 1

ASSESSMENT OF LAND-USE STATISTICS IN NEPAL

1. The land use picture in Nepal is characterised by conflicting figures depending on the source of information used. This appendix sum- marises the different sources of information and attempts to assess and reconcile the diverse land use information to obtain a more representa- tive picture for policy analysis.

Sources of Land Use Statistics

They are four basic sources of Land Use information available in Nepal:

(a) Forest Invensoty surveys of the Department of Forestry (DF);

(b) Cadastral Surveys of the Survey Department, Ministry of Land Reform;

(c) Cultivated Area statistics of the Ministry of Food, Agriculture and Irrigation;

(d) Earth Resources Technology Satellite (ERTS) Imagery.

Forestry Surveys

2. A country-wide forest inventory was undertaken by the Forest Resource Survey (FRS) Office of the Department of Forestry in cooperation with USAID/Nepal. The Terai was aerial photographed in 1964 at a scale of 1 : 12,000. The area covered the whole of the level Terai, the Churia Range and part of the southern exposure of the Mahabharat Range. 1/ In terms of administrative districts, this survey does not cover all Inner Terai. 2/ The results are published in "Forest Statistics for the Terai and Adjoining Re- gions", 1967. Land Use information for the Hills were compiled from aerial photographs taken during 1953-58, 1962 and 1967. In 1964-65, a 100% strip sample of the hills were aerial photographed to rectify the earlier compila- tions. The analysis of the information started only in 1968 and the results

1/ Forest Statistics of the Timber Corporation of Nepal (TCN) Area, 1965, covers the area of Chitwan (Inner Terai) omitted in the 1967 report.

2/ Only about 50% of Dang Deokhuri and Udayapur districts are included. The TCN Forest Reserves of Chitwan are excluded. Small portions of Doti, Surkhet, Argha Kanchi, and Palpa districts are also included. ANNEX 1 Appendix 3 Page 2 will be published in a forthcoming report, "Forest Statistics of the Hill Region" (in Press). 1/ A report on the Bheri-Karnali watershed (Far West- ern Hills), based on 1962 aerial photographs has already been published separately in 1969. 2/

Cultivated Area Statistics and Cadastral Surveys

3. Cultivated and cropped area estimates (and estimates for produc- tion and yield) are made by the Ministry of Agriculture through about 660 extension workers in 75 districts. The Junior Technicians (JT's) and Junior Technical Assistants (JTA's) interivew farmers and also make visual checks on areas under major crops three times a year for each panchayat under their control. These data are scrutinized at the district level and finalized at Kathmandu by the Economic Analysis and Planning Department (EAPD). 3/ Cadas- tral surveys in conjunction with the Land Reform Program was initiated for the Terai in 1967. The results for 16 districts 4/ (mainly in the Terai) were incorporated in the 1970/71 cultivated area statistics published in the Agricultural Statistics of Nepal by EAPD.

Earth Resources Technology Satellite Images

4. The 1972 Earth Resources Technology Satellite imagery provide an up-to-date assessment of the extent of forest areas in Nepal. The FAO/UNDP Forestry Department Project in Nepal has analyzed only the forest images in the flat portions of the Terai and Inner Terai. The Department of Forestry (DF) more recently analyzed the ERTS images for total forests in the Terai and some adjoining hill areas, and the Geography Department have just com- pleted a land-use Map of Nepal based largely on DF's analysis. Maps 11172 and 10912 (General Report) are based on the results of the FAO/UNDP and Geography Department analyses.

1/ The analysis of the Hills data was hampered by the slow acquisition of topographic maps, and hand compution and compilation work.

2/ Timber Resources and Development Opportunities in the Lower Bheri and Karnali Watersheds, 1969.

3/ Since 1973, the newly formed Department of Food and Marketing Services has taken over this function as a result of the transfer of the Statis- tics Section from EAPD.

4/ Kathmandu, Bhaktapur, Lalitpur, Jhapa, Sunsari, Morang, Siraha, Saptari, Mahottari, Dhanusha, Bara, Parsa, Rautahat, Kanchanpur, Doti and Achaam. Some of these districts were adjusted on the basis of registrations at the Land Revenue Offices (Mala). ANNEX 1 Appendix 3 Page 3

An Assessment of Land-Use in Nepal

5. Table 1 illustrates the diversity of data on land-use provided by the two basic sources (EAPD and DF) and the missions alternative esti- mates for present land use. Two fundamental differences had to be recon- ciled - (a) forested areas and (b) cultivated areas.

Forested Areas

6. The 1964 total forested area (6.4 M ha) estimated by the Department of Forestry remains the only comprehensive source available (Table 1). EAPD's 30% downward adjustment of this figure 1/ by 1.9 M ha for 1970/71 (equivalent to about 6% annual loss) appears to have over-estimated the loss of forest area. A comparison of 1972 ERTS imagery and the 1964 FRS survey results provides a clue to the extent of commercial forest loss in the Terai and parts of Inner Terai 2/over the past decade (Table 2). About 340,000 ha or 31% of commercial forests were estimated to be lost - an equivalent of about 4% annually. Some 180,000 ha were lost to colonization (Table 3) and the rest were probably due to illegal commercial felling, forest destruction for fire- wood and livestock grazing. EAPD's total forest area of 4.5 M ha, when com- pared with the 6.4 M ha of FRS is equivalent to unrealistic area losses of 33% 3/ for Hill 4/ Commercial Forests and 25% 5/ of all Non-Commercial Forests since 1964. A more realistic judgement of 5.0 M ha 61 is used by the mission.

1/ Although the source for EAPD's forestry figures were not cited, and no other comprehensive survey has been undertaken by them, it may be safely presumed that their initial basis are the FRS figures.

2/ Mainly Dang-Deokhuri and Chitwan.

3/ Although significant migration into Hill valleys have taken place, pop- ulation statistics indicate that migration has principally been into the Terai and Inner Terai. It is therefore highly unlikely that the per- centage area of commercial forest lost in the Hills will be as high as in the Terai, and Inner Terai. Loss for commercial uses would be mini- mal because of accessibility. Non-commercial losses for firewood and grazing would generally result in thinning of forest stands rather than large scale forest destruction.

4/ Including the rest of the Inner Terai not covered by ERTS analysis.

5/ Such a figure is unlikely because most of the non-commercial forests are on slopes greater than 45°.

6/ Based on 15% decline of commercial forest in the rest of the Hills and 130,000 ha remaining in both the TCN forests in Chitwan and the Bheri- Karneli watershed; and 15% loss of total non-commercial forests. ANNEX 1 Appendix 3 Page 4

Cultivated Area

7. The resolution of the 1.2 M ha discrepancy between EAPD figures (2.0 M ha) and DF figures (3.2 M ha) for total cultivated area in Nepal has to be undertaken as a matter of priority since it has too many policy implications to be neglected. As the adjustments from cadastral survey results for 16 districts have shown, EAPD has tended to under-estimate cultivated areas. (The 1970 adjustment for 16 districts added about 100,000 ha.) Although the data is not entirely comparable, the present (1970/71) EAPD's figure of the Terai (excluding Inner Terai) cultivated area (1.2 M ha) is not unduly different from 1.2 M ha (1964) estimated by FRS for the Terai and Adjoining Areas, particularly if allowances are made for the chronological differences, and adjustments for the Adjoining Areas cover- age. 1/

8. The main discrepanies pertair. to the rest of Nepal. We contend that most of the discrepancies would take place for Inner Terai districts and hill districts with relatively large valleys. The 1972/73 cadastral survey figure for Surkhet of 27,000 ha, for example, was nearly double the 1970/71 EAPD cultivated area of 14,800 ha. 2/ Further adjustments on the basis of cadastral surveys should show similar discrepancies for other districts with relatively large hill valleys (e.g., Kaski, Dhading, Kavre, Nuwakot, Baglung, Gorkha, Tanahu, Palpa, Gulmi, Sallyan, Dailekh) and most Inner Terai districts (Chitwan, Sindhuli, Makwanpur and particularly Dang Deokhuri 3/). Pending the outcome of cadastral surveys for these areas (they should be given priority), a crude adjustment by the mission 4/ gives the following results:

1/ The Adjoining areas in the FRS study consisted of about 50% of Dang Deokhuri and Udayapur districts of the Inner Terai; and minor portions of Doti, Surkhet, Argha Kanchi and Palpa districts of the Hills.

2/ Since cadastral surveys cover only registered areas, the 27,000 ha would also be underestimated.

3/ In Dang Deokhuri, for example, EAPD's cultivated area (55,000 ha) is less than the mission's estimate of level land of 60,400 ha (Annex 6, Table 3). Since ERTS images show that only 1,300 ha of level forests are left at least 5,000 ha has to be cultivated. With possibly another 20,000 ha of cultivated land up to 300 slope (not analyzed from ERTS images), a 25,000 ha incremental adjustment would not be unrealistic.

4/ Doubling cultivated area in large hill valley districts and increasing unadjusted Inner Terai cultivated areas by 50%. Udayapur figures are not adjusted because they appear unusually large. ANNEX 1 Appendix 3 Page 5

EAPD Mission (000 ha) (000 ha)

Eastern Terai 832 832

Western Terai 363 363

Inner Terai 230 371

Sub-total 1,425 1,566

Kathmandu Valley 64 81

Eastern Hill 153 153

Western Hill 358 489

Sub-total 555 723

Total 1A980 2,289

9. Even if all Hill and Inner Terai cultivated areas were doubled, total cultivated area would only be 2.8 M ha in 1970/71. It is therefore unlikely that there were 3.2 M ha 1/ of total cropped area in 1964. A more comprehensive aerial survey of the Hills is currently being under- taken (primarily for Forestry purposes) and should be able to throw more light on this discrepancy.

The additional 300,000 ha tentatively estimated as unrecorded by EAPD, implies that:

(a) the present system of reporting cultivated areas does not cover certain areas which (i) have been recently settled, and/or (ii) have been more inaccessible;

(b) some of the present area covered by extension staff is under-estimated.

1/ Problems in interpreting fallow land as cultivated land, for example, probably accounted for the inflated 3.2 M ha cultivated area and the low 0.3 M ha of barren and badly eroded land. ANNEX 1 Appendix 3 Page 6

10. This however does not detract from the use of area, yield and pro- duction data currently compiled by the Ministry of Agriculture for analyzing year to year changes in crop performance and the factors affecting it. In absolute terms however, some implications will have to be noted. For the Hill districts, on a normal year, the food deficit situation (especially for Western Hills) would appear to be less pronounced with an equivalent of about 240,000 m tons 1/ of maize not previously recorded). Similarly for the Inner Terai, and equivalent of about 300,000 m tons of paddy would be available for nearby deficit areas. 2/

11. These figures illustrate the sensitivity of surplus deficit pro- jections to area assumptions. Hence, absolute level comparisons in the context of Nepal Agricultural statistics should be regarded only as indica- tive.

Potential Areas for Land Settlement in the Terai

12. An approximate estimate of the potential areas for land settlement in the Terai may be obtained from an assessment of level forests in the Terai and generalizations from existing lands-use/soil studies and field observations.

13. Total undissected forests in the Terai and Inner Terai (from ERTS imagery analysis) are estimated at 620,000 - 650,000 ha (Table 2 and Appendix 3, Table 4 of this annex) 3/. From this, the following should be deducted as the minimum area that would be unsuitable for agriculture (see Annex 1, para 14):

(a) heavily disturbed areas (Annex 1, Table 2);

(b) forests with piedmont (Bhabar) soils (Annex 1, para 14); and

(c) forests with relict upland (remnant terrace) soils (Annex 1, para 14).

1/ 141,000 ha times 1.7 m tons (av. yield of maize/ha from 1970/71 - 1972/73).

2/ Because of the problem of accessibility, relatively small amounts probably from Chitwan and Dang would have been exported.

3/ For districts in the Terai, the following estimates of level forests were interpreted from ERTS images:

(a) FAO/UNDP (Appendix 3, Table 4) = 580,000 ha (b) Geog. Dept., Tribhuvan University (October, 1974) - 420,000 ha (c) NPC Task Force for Land Use and Erosion Control (August, 1974) 480,000 ha. ANNEX 1 Appendix 3 Page 7

14. Level undissected forests which are heavily disturbed total about 76,000 ha in the Terai and Inner Terai (Annex 1, Table 2), leaving about 560,000 ha as agriculturally suitable. Relict uplands could not be deline- ated from ERTS images and, from Table 4 and Maps 10912 and 11172 (General Report), only 35,000 ha of undissected level forests are estimated to be Bhabar. A UNDP/FAO analysis 1/ of Bardia and Banke (with extensive field observations) found respectively 4,000 ha and 22,000 ha of limited use forests (those with bhabar and relict upland soils) in each of these dis- tricts. 2/ The 1973 IDA settlement mission found that, of the level forest. areas originally allocated for consideration as settlement areas, about 50% were unsuitable for agriculture. It is therefore not unrealistic to expect that at least (a) 150,000 ha of remaining undissected level forests, and (b) 95,000 ha or half of the undissected level forest which are undisturbed (Annex 1, Table 2), would be unsuitable for agriculture. This leaves a maximum of 325,000 ha for land settlement. Most of this area (Maps 10912 and 11172) would be in Far-Western Terai (about 200,000 ha) and Mid-Western and Inner Terai (about 90,000 ha). In the Eastern Terai, Morang and Bara districts (Map 11172) 3/ probably have the highest potential for new settlements.

1/ UNDP/FAO, Forest Development Project - Land Use for Bardia and Banke Districts, FO:SF/NEP 13, Technical Report 1, 1973. (Restricted Draft), Table 1, p 22.

2/ Compared with only 1,000 and 9,000 ha clearly identified as Bhabar forests in the ERTS imagery analysis of Bardia and Banke respectively (Table 4), either bhabar soils were underestimated or relict upland areas on these level forest were about 3,000 ha and 13,000 ha respectively (i.e. nearly two to three times larger in extent than Bhabar soils).

3/ Although Jhapa has about 32,000 ha of level undissected forests (Table 4), most of it is heavily disturbed. ANNTX 1 Appendix 3 Dgae 8

Table 1: LAND USE IN NEPAL

(in million ha)

/a ~/b EAPDa DF- Mission (1970/71) (19610 (1972)

Forests 4 5 6.4 5-°

= Commercial (3.0) (2.2)

= Non-commercial (3.4) (2.8)

Land Under Snow 2.1 2.9- 2.1

= Built Up and Non-Reclaimable 2.6 .4/2

= Reclaimable for Cultivation 1.8/3

Grasslands 0.9 1.7

Cultivated Area 2.0 3.2 2.3

Others 1.1 0.3A 3.0 -

Total 14.1 14.1 14.1

1/ Includes alpine non-snow areas in Far Western Hills. 2/ Urban and village areas; barren and badly eroded lands. 3/ Includes grasslands. / Water. §/ Comprised mainly of wasteland (barren and rock land below the snow line and eroded land), built-up areas, non-reclaimable and shrubs.

Source: /a Economic Analysis and Planning Division, MFA Agricultural Statistics of Nepal (for 1970/71). /b Forest Resource Survey, Department of Forestry (for 1964). ANNEX 1 Aopendix 3 Page 9

Table 2: ESTIMATED LOSS OF COMMERCIAL FORESTS IN TERAI AND INNER TERAI (1000 ha)

1964 L 1972 1972 Commercial Flat "Commercial" as % of Forest Forest 1964

Eastern Terai 452.1 297.2 66

Mid-Western Ind Inner Terai /2 239.5 137.6 57

Far Western Terai 427o4 339.4 79 Consisting of:

Banke (1004.) ( 49.5) 49 Bardia ( 91.5) ( 74.6) 82 Kailali (121.3) (113.8) 94 Kanchanpur (11h.2) (101.6) /3 89

Total Terai and Inner Terai 1,119.0 774.2 69

/1 Adjusted for comparable coverage with ERTS Images analysis for Terai and Inner Terai level forests. /2 Available data does not permit the separation of Mid-Western Terai and Inner Terai. Inner Terai consists mainly of Dang Deokhuri and Chitwan. Not all Inner Terai districts are included. /3 Planimetric Analysis of level forests by Cartogranhic Section, IDA (Table 4) showed 73,000 ha or 64% of the 1964 level.

Source: Adapted from:

(a) FRS, Forest Statistics for The Terai and Adjoining Regions, 1967, Dept. of Forestry, Kathmandu. (b) FAO/UNDP Forestry Development Projects analysis of ERTS Images. ANNEX 1 Appendix 3 Page 10

Table 3: ESTIMATED ALIENATION OF PRODUCTIVE FORESTS IN THE TERAI, 1963-1972

Area ('000 ha)

Handed over to Settlement Organizations 34.0

Given to Organizations and Individuals 7.0

Given to Jhora Commission (Disaster Relief) 7.0

Given to Squatters in 1969 19.0

Other Legalization of Squatters 12.0

Estimated Unlegalized Incursions by Squatters 100.0

Total Areas Alienated 179.0

Sources Department of Forestry. Annex 1 Appendix 3 Page 11

Table 4: AREA OF LEVEL FORESTS BY TYPES AND BY ADMINISTRATIVE DISTRICTS ('000 ha)

Geographic Regions Distr t Category of Level Forests /2 Heavily or Admin. Districts Area Moderately Badly Piedmont Eroded llndissected Dissected Dissected Soils /3 Land (a) (b) (c) (d) (e) (f)

Far-Western Terai Banke 198 49 9 Bardia 167 77 1 Kailali 265 114 6 Kanchanpur 168 69 4 Sub-total 798 309 20

Mid-Western Terai Kapilvastu 179 58 4 Rupandehi 132 25 2 Nawalparasi 222 26 2 n.s. /4 Sub-total 533 109 2 6

Eastern Terai Parsa 140 1 49 Bara 125 20 33 2 Rautahat 110 19 1 Sarlahi 138 8 10 Mahottari 125 11 Dhanusha 119 2 2 Siraha 114 4 2 Saptari 125 2 1 16 Sunsari 136 17 2 4 1 Morang 184 48 6 Jhapa 148 32 Sub-total 1,464 158 93 24 28

Total Terai 2.795 576 /5 95 24 34

Inner Terai Chitwan 249 41 Dang-deokhuri 223 5 1 9 Udayapur 246 2 14 83 3 15

Total Inner Terai 718 48 /5 15 83 3 24

1/ As given in EAPD, Agricultural Statistics of Nepal, 1972, Table 6. 2/ Explanation of categories is given in Annex 1, Table 2. 3/ Piedmont (Bhabar) soils are part of (b) except for Udayapur with about 50% in (d). Relict terraces are not demarcated. 4/ n.s. = less than 500 ha. 5/ Total undissected category do not add up to the 656,000 ha in Table 2 because of differences in planimetric error and the exclusion of Surkhet'in this table.

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ANNEX 2 Page (i)

NEPAL

AGRICULTURAL SECTOR SURVEY

FORESTRY DEVELOPMENT

Paragraph Number SUMMARY AND CONCLUSIONS ...... i - ix

A. FORESTRY RESOURCES ...... 1 - 11

B. FORESTRY INDUSTRIES ...... 12 - 21

1. Logging and Transportation ...... 12 - 13 2. Sawnilling ...... 14 - 16 3. Other Forest Industries ...... 17 - 21

C. MARKET PROSPECTS ...... 22 - 30

1. The Indian Market ...... 23 - 25 2. Domestic Market ...... 26 3. Prices and Quality ...... 27 - 28 4. Marketing Constraints in Perspective ...... 29 - 30

D. FOREST ADMINISTRATION ...... 31 - 52

1. Structure and Number ...... 31 - 38 2. Forest Education ...... 39 - 41 3. Timber Corporation of Nepal ...... 42 - 51 4. Forest Ownership ...... 52

E. ISSUES AND RECOMMENDATIONS ...... 53 - 75

1. Future Emphasis of Forest Industries ...... 54 - 57 2. Systems of Log Disposal from Government Forests ...... 58 - Timber Disposal for Commercial Use ...... 59 - 64 - The Control of Fuelwood ...... 65 - 70 3. Management of Forest Estates ...... 71 - 72 4. Competing Uses of Forest Lands ...... 73

F. PROJECT POSSIBILITIES ...... 74 - 75 ANNEX 2 (Page ii)

Table 1 - Timber Volumes in the Terai (Excluding Ton Reserve) 1964 Table 2 - Estimated Changes in Growing Stock in the Terai, 1964-1973 Table 3 - Industrial and Non-Industrial Round Log Requirements for India, 1970, 1980 and 1990 Table 4 - Recorded Production of Wood in India 1955-56 to 1969-70 Table 5 - Indian Market - Prices for Logs, 1972/73 Table 6 - Indian Market - Prices for Sal Phanta, 1972/73 Table 7 - Indian Market - Prices for Sal Gatu, 1972/73 Table 8 - Indian Market - Prices for Sal Sleepers, 1972/73 Table 9 - Indian Market - Prices for Scantlings and Boards, 1972/73.

Appendix

Past Systems of Log Disposal from Government Forests ANNEX 2 Page i

NEPAL

AGRICULTURAL SECTOR SURVEY

FORESTRY DEVELOPMENT

Summary and Conclusions

L. Present forest area in Nepal is estimated at 5.2 M ha. Except Eor the Terai, reasonably accurate estimates of productive forests are not available. The forests of the Terai and Inner Terai have been the only isource of industrial timber. They are semi-tropical hardwood, dominated by ,al (Shorea robusta) and to a lesser degree by Asna (Terminalia tormentosa), strongly demanded in both the Nepalese and Indian markets. Other economic (but much less prevalent) species include their (Acacia catechu), used in the manufacture of Katha (an ingredient of "pan" for chewing), and semal (Salmalia malabancum) for the manufacture of matches.

Li. Hill forests predominate in the Western region where less population pressure exists. In the subtropical Hill areas and some high forest valleys on the southern side of the Himalayas, the forests are potentially commercial, provided they are made more accessible. However, much of the forests in the :larger hill valleys and less steep areas, have already been lost to settler :lncursions. The remaining steeper Hill forests consist mainly of indigenous eubtropical and temperate pines and oak, used mainly for fuelwood or as :Loppings for animal fodder or green manure. In many areas, denudation from fuelwood and fodder extraction and intensive grazing on the steep slopes have :led to accelerated erosion. Additionally, improper cultivation on steep :Lands has resulted in the increasing threat of flooding and crop area destruc- tion in the river valleys and their flood plains in the Terai. iii. The commercially productive forest resources in the Terai have also been denuded. Area losses from the 1.2 M ha of relatively level commercial f-orests existing in 1964 have averaged 3% annually. An analysis of the 1972 ELarth Resource Technology Satellite imagery show that only 774,000 ha of :Level commercial forests remain in the Terai. Timber losses have been pro- portionately larger since (i) much of the excised forests have been "creamed" t/ (ii) natural regeneration has been slow; and (iii) primarily the loss of com- mercial growing stock from remaining forests, ostensibly for village "house- hold use," pole thefts and grazing, have been increasing. Growing stock losses of 40% in the past ten years are therefore not unrealistic.

1/ High grade timber has been removed. ANNEX 2 Page ii iv. An important element in Nepal's strategy for forestry development is the delineation of areas which should be retained as protected forests, and those which should be retained for commercial forest production on a sustained basis. The Land-use Committee (see Annex 1) will be an important vehicle for this purpose. In the meantime, a more deliberate policy is required to steer forest management from the selection system 1/, based on the natural regeneration of long maturing (80 years) species, to one which better fits the country's needs. Fast growing species need to be planted for three important purposes: fuelwood, fodder and construction timber. Fuelwood shortages in many areas, particularly in the Hills, have resulted in the need to travel for nearly a day to collect them, and in extreme cases, in the abandonment of farms. Suitable sites should be selected in and around villages and settlements for the establishing local fuelwood plantations. Larger fuelwood plantations can be established by the Fuelwood Corporation for the supply of larger consumption centers either as fuelwood or charcoal. In addition, waste areas on farms can be planted with suitable species both for fuelwood and fodder. The capacity of the Department of Forestry (DF) to supply growing stock for these purposes should be increased, and the program for research and introduction of fast growing species (particularly dual purpose - firewood/fodder trees) should be accelerated. v. The development of forest industries in Nepal is still rudimentary. Except for the activities of the Timber Corporation of Nepal (TCN), the logging "industry" uses simple handtools, axes and bullock carts for their operations. Although 50-60 sawmills exist, only about half are operating. Other wood-based industries (all minor) include the following factories: two katha and kutch, 2/ six match, numerous furniture, and two small plywood ones opened in early 1973. vi. Despite its many problems, Nepal should concentrate on developing its sawmilling industry. Not only will it be possible to realize value- added, hitherto accruing mainly to India, it is one of the few primary indus- tries in Nepal where the necessary combination of adequate supplies, markets, technological skills and tood possibilities of a reasonable return on invest- ment exist. However, several actions will be needed to eliminate the basis constraint facing this industry - the uncertainty of raw material supply. This constraint has resulted primarily from the unsatisfactory and frequently changing system of log sales from government forests (see Appendix 1) and the poor coordination between the DF and the Nepal Settlement Company (NSC). We recommend that the Government reassess Nepal's private sawmilling capacity and formulate guidelines for selecting the efficient mills (or potentially efficient over upon rehabilitation) which have a reasonable chance of compet- ing in the Indian market. Concessions should then be granted to these mills.

1/ This essentially involves the removal of mature and overmature trees. 2/ Katha and kutch, extracted from Acacia catechu, is used as a chewing "cake" and an ingredient of pan in Southeast Asia. ANNEX 2 Page iii

The remaining forests earmarked for timber disposal should be sold under a modified auction system. 1/ In addition, all other timber marketing processes should be reviewed to minimize land settlement delays.

vii. In forest areas earmarked for large scale settlement (like those under the IDA Settlement Project), it is particularly crucial to closely inte- grate forest extraction (and processing) with settlement activities. In the IDA settlement project, a more commercially orientated TCN would undertake forest extraction and processing, and integration would be expedited through a Settlement Co-ordinating Committee. 2/ Assistance would also be given to TCN in expanding its lumber marketing and exports to India. As TCN's capabi- lity in this field increases, it might act as a marketing agent for private domestic sawmillers' exports to India. viii. Although foreign markets are available, expanding other wood- based industries should be approached cautiously. Expanding the fledgling plywood industry for export is fraught with many difficulties. The only species sufficiently concentrated to be economical are Sal and Asna. Sal is not very suitable for plywood because it is hard, heavy, irregular in grain, subject to considerable shrinkage and difficult to peel. Although Asna has decorative merits when sliced, its dark color limits its use. Corestock species like Semal are of limited availability and required for match manu- facturing. Furthermore bonding resins, purchased through India, are two to three times world prices and often in short supply.

ix. The pulp and paper industry has few immediate prospects. A viable pulp and paper mill cannot be justified with a domestic paper consumption of about 3,000 m tons per year. Government plans for a pulp and paper mill based on rice, waste straw and bamboo, presupposes a lower opportunity cost in using rice waste and straw for human and livestock consumption, which is highly doubtful. As a longer term strategy, however, increasing adaptive research on quick growing species including the local Daphne cannabia and a comprehensive assessment of long term prospects in the India market is required.

1/ Which should include among other provisions, a valuation system which specifically takes into account sale lot accessibility and fluctuations in market prices.

2/ 4Comprising representatives from the Ministries of Finance, Industries and the Planning Commission (who will also sit on the boards of NSC and TCN) and the respective general managers. ANNEX 2 Page 1

NEPAL

AGRICULTURAL SECTOR SURVEY

FORESTRY DEVELOPMENT

A. Forestry Resources l. Nepal's forests are estimated to cover about 50,000 km (20,000 square miles) or nearly one-third of the country, and may be divided into four zones:

(a) the Terai and Bhabar forests of the plains;

(b) the forests of the Siwalik hills and the lower valleys of the Mahabharat range;

(c) the forests of the middle zone or the upper heights of the Mahabharat range; and

(d) the Himalayan forests.

2. The Terai and Bhabar forests are found at altitudes below 300 (1,000 ft) on a strip of level alluvial terrain between the Indo-Nepal border and the main hill region. They occupy about one million hectares. The important timber species in the Terai are Sal (Shorea robusta about 57% of total volume, and Asna (Terminalia tomentosa), about 16%. Hardwoods suitable for furniture manufacture amount to 5%, and include Sissoo (Dalbergia sissoo), Toon (Cedrela toona), Karma (Adina cordifolia) and Chamb (Michelia champaca). Other species of economic significance are Khair (Acacia catechu) which is used in the manufacture of katha (an ingredient of "pan" for chewing), and Seman (Salmalia malabaricum) used in the manufacture of matches. Coni- ferous woods are represented by Chir pine (Pinus roxburghii), but this is estimated to be only about 0.5% of the Terai's timber volume (Table 1).

3. The forests of the Siwalik hills and the lower valleys of the Mahabharat range run east to west across Nepal, between the Terai and the main central mountain mass. They cover about 500,000 ha. The upper altitu- dinal limit of this forest zone is 1,220 m (4,000 ft). The forest cover is characterized by Sal and Chir Pine. Valleys, locally known as "duns" occur between the Siwalik hills and the Mahabharat range and contain sal forests of great importance and value. Sal also occurs in the lower reaches of the main river valleys which traverse the Mahabharat range.

4. The larger duns in the Inner Terai would be suitable for commercial extraction but, as much of these forests are extremely steep and rugged, conventional timber extraction methods would be inefficient for this zone. ,ANNEX 2 Page 2

5. The forest cover of the middle zone or upper Mahabharat to an ele- vation of 1,830 m (6,000 ft) is generally patchy, particularly in the east and center of Nepal. However, on the southern and higher slopes of the Mahabharat range, and in western Nepal, where population density is low,, the stocking volume of trees is relatively high. In the east and center, much of the forest has been cleared, and the steep slopes have been inten- sively terraced for the cultivation of rice, wheat and millet. In addition, cattle, buffalo, sheep and goats graze the remaining scrub and forest areas. The area of forest in this zone has been estimated at about 2.5 M ha.

6. The characteristic forest species are oak (Querous semicarnifolia, Q. incana, Q. flauca), Schima wallichii, Alnus nepalensis, and chir pine. Blue pine (Pinus wallichiana) and hemlock (Tsuga dumosa) , in association with the scarlet rhododendron (Rhododendron aroboreum) , occur at higher altitudes. Much of the oak forest is heavily lopped each year to provide green manure for the fields and fodder for the animals. Moreover, because of intensive grazing on the steep slopes, the area is in a state of accele- rated erosion. As this zone's forests are accessible to the main towns,. they have considerable local commercial importance as a source of timber for fuelwood. This importance could be increased through scientific forest management and utilization practices, and reforesting denuded areas.

7. The valley forests on the southern side of the Himalayas at an eleva-- tion of over 2,440 m (8,000 ft) (covering approximately one million ha) are composed of the following species: fir (Abies pindrow) hemlock (Tsuga dumosa), spruce (Picea smithiana), cypress (Cupressus torulosa), blue pine (Pinus walli- chiana), juniper (Juniperus recurva) and deodar (Cedrus deodara). On limited evidence, commercial forests are potentially available provided they are made accessible by developing roads in the higher mountain valleys. They are now an important timber and firewood source for the inhabitants of the mountain villages.

8. The Terai was surveyed by air in 1964, and a forest inventory compiled. 1/ Management plans have also been drawn up for the Terai forest divisions but neither the traditional "selection system", nor the provisions of the new management plans are presently operational. In the last three years, commercial exploitation has been mainly confined to salvaging timber Dn land being converted to agriculture 2/ (mainly for resettlement programs). However, unrecorded losses continued on a massive scale, primarily through illegal squatter settlement (see Annex 1) and the abuse of privileges for removing timber and fuelwood granted to local villagers.

9. In the absence of a land use policy, with no permanent allocation of land to commercial forestry and no effective management plans, it is impossible to provide any long term estimates of future forest production. *Nevertbeless,

l/ HMG/USAID, Forest Statistics of the Terai and Adjoining Regions, Kathmandu, 1967. / An important exception is the TCN sawmill which draws logs from a reserve set aside for this purpose. ANNEX 2 Page 3

it is both possible and necessary to arrive at an estimate, however approxi- mate, of the present commercial forest resources and their potential output.

10. Estimates of commercial forests in the Terai (see Annex 1, Appendix 1) show that only 774,000 ha of relatively level forests are left. This repre- sents an average area loss of about 3% annually in the past decade. The timber loss has been proportionately greater than that of forest area because:

(a) Alienated forest land for agriculture also represents the better forests;

(b) Loss in the growing stock on remaining forests are increasing due to pole thefts and grazing damage;

(c) Many forest estates are not growing because losses, as outlined in (b), restrain natural regeneration and inhibit conversion of areas under permanent forest estates to higher yielding species.

11. Assuming that losses of growing stock were 40% (about 10% more than the loss of commercial forest area since 1964), the remaining growing stocks are estimated to be 1,208 million h ft (Table 2) or 55 m3 .1/ If the same composition of species remain, Sal and Asna respectively comprises 57% and 16% of total timber volumes.

B. Forest Industries

Logging and transportation

12. Except for the activities of TCN (Timber Corporation of Nepal), a Government corporation, logging and transportation operations in Nepal are primitive. Simple handtools such as the axe are used for felling and cross- cutting and ox carts are employed in log hauling. By contrast, TCN's opera- tions are heavily mechanized. Trees are felled by chain saws and then hauled by bulldozers up to a distance of 2,000 ft. They are then cross-cut, again by chain saws, and loaded into heavy duty diesel trucks by reel cranes. The logs are then transported by trucks for an average distance of 45 miles to the sawmill Hetaura.

13. No logging and transportation operations take place during the monsoon period between June and September. In the Western Terai, at least for the month of May and parts of April, the climate is too hot for much work to take place and the effective working period for logging is only seven months. Such breaks in operations disrupt the flow of logs to the sawmills

1/ The IDA Settlement Mission estimates, on the basis of Earth Resource Technology Satellite (ERTS) images,that 40 million m3 of merchantable timber existed in the Terai (excluding the reserves of TCN) in 1972. This implies a loss of 57% of merchantable stock since 1964. ANNEX 2 Page 4

and this is among the reasons for mill owners' failure to utilize the full capacity of their conversion plant. During the working seasons, there are also problems of accessibility to timber areas in order to take advantage of modernized log transportation. The building of timber roads in far Western Terai should be considered in relation to the phasing of land settlements, and their contribution to the establishment of feeder roads linking the East- West Highway to be completed in 1976.

Sawmilling

14. Of the 50-60 sawmills in Nepal only about 25 to 30 are in operation, and all but one (the government mill at Hetaura) are run by the private sector using semi-portable horizontal band-saw mills manufactured in India. These mills are relatively inexpensive, costing less than Rs 100,000 with a rated capacity of 100,000 hoppus (h) ft per year. In practice the capacity is normally between 30,000 and 50,000 h ft annually. The average recovery rates of these mills are extremely high - about 807. The productivity per unit of labor is low but, in a country with severe unemployment, underemploy- inent and low labor costs, this is not a significant factor. The most impor- tant advantages of these types of mills are:

(a) Nepalese sawmill operators are accustomed to them;

(b) machines and spare parts are generally available in India and may be purchased in soft currency;

(c) they are easily operated and maintained;

(d) they are semi-portable;

(e) they can be used in small forest areas;

(f) they are cheap and simple and can survive periods of enforced idleness better than larger, more sophisticated mills.

15. The basic reason for the idleness of about half the existing sawmills is the uncertainty both quality and quantity of raw material supply, arising from the system of log disposal and the poor coordination between the DF and the NSC. This uncertainty has prevented owners from moving their mills to where timber sales are taking place and has stimulated the export of timber as log exports then as lumber.

16. The advantage which the government mills in Hetaura has over private mills is their assured source of concession timber within the Hetaura command area. Government sawmilling activities at Hetaura basically depend on an American circular sawmill built in 1956, with the assistance of USAID, and eKtended to its present capacity in 1960. Operated by TCN, the installed capacity (single shift) is about one million h ft of logs per year. The high- est annual conversion rate of logs from round to sawn (in hoppus) is about ANNEX 2 Page 5

70% (55% on the basis of true cu ft). This circular mill is more specialized and difficult to use. More skill is required to operate it, and it is more suitable for the larger logs (which are getting scarcer). Not only is it expensive (capital investment is modestly estimated at Rs 6.6 million), it also has a lower lumber output per cu ft of round log. TCN has realized this and recently added three Indian-type mills to their operation (one in Hetaura and two in the concession areas). The management at the Hetaura and two in the concession areas). The management at the Hetaura mills has improved in the past few years; they are now successfully running their large workshop and have improved coordination between logging and milling operations.

Other Forest Industries

17. Apart from sawmilling, the main forestry industry, Nepal has facto- ries manufacturing katha and kutch (para 18), six match factories, and 14 furniture factories, including one which manufactures parquet in Hetaura. A resin and turpentine factory was set up in 1,970/71 but has since been closed due to the company's reluctance to employ local labor and the mistreatment of trees. Two small plywood factories were opened in early 1973 (see para 54).

18. The katha and kutch mills are relatively well organized and managed, even though the process of extracting the ingredients from the Acacia catechu wood and preparing the product seems to be more complicated than sawmilling. Katha and kutch are used as a chewing "cake", and ingredient of pan, in South- east Asia. Most of Nepal's production is consumed locally and in India, but small amounts are exported to other parts of Asia. The owners of the two mills complain that despite an annual quota of 6,000 trees, amounting to between 100,000 and 200,000 h cu ft per year, they could use a higher alloca- tion. The DF, however, maintains that about 9.4 million cu ft of allocation for these mills are still unused. The DF prefers to sell the acacia trees by auction to buyers from India rather than to increase the allocation to local mills, since the prices obtained across the border (Rs 25.80 per cu ft) are higher than the royalty rate obtained for these trees (Rs 4.5 per log).

19. Only three of the six match factories are operational mainly be- cause the species used (mainly Semal, and some Gutel and Bhurkul) cannot be obtained regularly. Although the operational capacity of the match factories are small (between 30,000 to 50,000 ha ft of wood per year), they are not being used to capacity.

20. The main species used by the furniture manufacturers are Adina cortifolia, Cederela toona, Dalbergia sisso, Gmelina arboria, Michela champaca and Mitragyna parvifolia. Most furniture shops are small and rely mainly on manual labor. Much of the furniture is made to order and all of it is produced for local customers. The prospects of expanding production for local and export markets are not very bright, as local furniture demand is not high, and India has a well-established industry of its own. ANNEX 2 Page 6

21. The only parquet flooring factory, established in 1q70 at Hetaura, has an output capacity of 3,000 sq ft per day. Although various wood species are used, the main one is Asna (Terminalia tomentosa) because of its combina- tion of reasonable suitability and availability. This factorv has never been in full production, and has relied heavily upon furniture manufacturing as a profit-making sideline. After overcoming initial difficulties in pro- curing raw materials, successful sales of flooring in Kathmandu have virtually saturated the market. Export sales have not been actively solicited.

C. Market Prospects

22. Analysis of market prospects for Nepal's timber and timber products is hampered by scarcity of data (particularly on production and trade) and a significant amount of unrecorded timber traffic between Nepal and India (essentially the only foreign market for Nepal. 1/

The Indian Market

23. Historically, the value of official net exports to India (based on cumulative 1961/62 - 1966/67 figures) have been approximately equal (NRs 2.1 M each) for round logs and fuelwood. Nepal is a net importer of plywood. Its timber and timber products marketing channel to India has traditionally been dominated by Indian traders from the procurement level right to the final wholesale level in the larger cities of India. Provisions of the 1971 Trade and Transit Treaty (to be renegotiated every five years) permit duty and quota exemptions for Nepal's forest products into India which make assess- ment of product flows even more difficult.

24. An indication of prospects in India may be gleaned from the projected requirements of raw materials in the Report of the Working Group on Forests, Government of India, October, 1972 (Table 3). The most important industrial consumer of round logs is She Indian sawn wool industry. In 1970, estimated requirements were 9.57 M m , but only 6.3 M m were accounted for by recorded roundwood production. A third of these requirements were therefore non- recorded, obtained from village groves, orchards, and other sources 2/ for which future production remains uncertain. Even less information is available concerning the sources of round logs for other industrial wood use like panel products and pulp and paper. The Indian border states of Bihar and Uttar Pradesh are expected to require 4 M and 1.6 M transmission poles (respectively)

1/ Bangladesh is deficit in timber and timber products (particularly rail- road sleepers). The present lack of direct rail or road links (which necessitates joint trade and transit agreements with India) and Bangla- desh's present shortage of funds for import, suggest that it will remain an insignificant market for Nepal. 2/ Illegal imports of Nepal's timber probably also fall into this category. ANNEX 2 Page 7 from 1974-79. - Although the Indian Government has formulated new forestry sector development in the Fifth Five-Year Development Plan, it is almost certain that the projected financial requirements of IRs 2,230 million will not be available. The inability of past plans to improve recorded production (see Table 4) is testimony to the demand gap available for Nepal's exports to fill.

25. Although a large non-industrial wood demand is projected for India (especially for fuelwood) Nepal's exports would be mainly to the Bihar and Uttar Pradesh markets for which separate figures are unavailable. There is also uncertainty as to whether India would be able to expand its fuelwood production capacity, particularly in the fast growing species.

Domestic Market

26. Domestic requirements of timber and timber products will also increase from present levels. The Kathmandu valley and the Terai, the main areas of domestic consumption from the commercial forests, are also the main areas of population growth. The table below indicates their supply-demand balances for round timber and fuelw7ood:

1973 1983

m3 h.ft m3 h.ft ------million------Timber Total Supply 2.92 81 1.66 46 /a Total Demand 1.37 38 1.84 51 Surplus +1.55 +43 0.18 -5

Fuelwood Total Supply 6.55 182 3.74 104 Total Demand 4.18 116 5.62 156 Surplus 2.37 66 1.88 -52

/a Based on present natural forest resources. Source: A. J. Browning, Forest Development in Nepal - Marketing, FO: SP/NEP-13, Technical Report 2, FAO/UNDP, Kathmandu, 1973, P33.

On the basis of this table, Browning emphasized that increments from the existing forests are not, by themselves, sufficient to support the present scale of domestic consumption. Short-term exports can therefore only be maintained by destroying growing stock.

1/ Although the demand is favorable, it is uncertain whether Nepal's Terai forests possess enough sufficiently straight and round poles for this purpose. ANNEX 2 Page 8

Prices and Quality

27. Price trends for timber and timber products will determine the future of Nepal's forest industries and its export product mix. Indian timber are expected to follow world trends. For example, by 1980, world log prices are expected to increase by about 45% from present levels. 1/ Present prices are given in Table 5.

28. In terms of relative prices of sawn timber, the three most demanded forms of lumber in the Indian market (in order of importance) are (a) phanta, (b) gatu and (c) sleepers. Phanta (specified as 4 in thick, 6-12 in wide and up to 24 ft long) is usually resawn by purchasers into smaller sizes. It is about the same quality standard as sleepers (i.e. no boxed heart, sapwood, cracks or worms) except that phanta dimensions are more flexible. Any log which could produce sleepers could also produce phanta. Present prices (table 6) show that length commands a premium (16 ft earn 20% more per ft than 8 ft). Gatu lumber (squared beam up to 24 ft long with the center heart measuring 6 in square or larger) is less valuable than phanta (Table 7). Sleepers are specified in more restrictive dimensions (Table 8) and unit prices are less than for gatu and phanta. With these price relation- ships, sleeper quality logs would therefore normally be sawn into phanta or gatu. However, sleeper production has the advantage of potentially obtain- ing long term contracts if these can be negotiated with the Indian Railway Board by a government marketing organization like the TCN. Since only portions of existing forest stands 2/ can be processed 3/ into phanta, gatu or sleepers, prices for scantlings and boards should also be taken into account (table 9).

Marketing Constraints in Perspective

29. The main constraint in marketing Nepal's forest products will be the ability of exports from its wood based industries (essentially sawmilling) to compete with Indian counterparts in the Indian market.

30. Under existing conditions, this will be difficult. First, log disposal problems provide viable private sector sawmilling operations with insufficient incentives (see para 15). While price-cost relationships appear to favor log exports, this is because exported logs have resulted primarily from "creaming" forests. It is illogical for log sale and transportation to be more favorable than that of lumber, from which waste timber will have been

1/ IBRD, Economic Analysis and Projection Department, January 1974. 2/ For example, in the proposed IBRD Settlement Project in Nepal, from a project area of 18,600 ha of typical Western Terai forests, it is anti- cipated that the quality of timber stands will permit the following mixture: gatu - 60%, phanta - 15%; scantlings and boards - 25%; trans- mission poles - 33,100 units. 3/ Because of small logs and remnant portions of larger logs which cannot be sawn Into phanta, gatu and sleepers. ANNEX 2 Page 9 removed. However, reliable lumber prices are particularly difficult to obtain because of the small amount of Nepalese product traded and the bias of Indian middlemen towards logs for the Indian sawmilling industry they serve. Second, the Indian middlemen's firm grip on marketing is too strong for any individuAl to overcome and concerted effort by a commercially oriented organization (which can handle the marketing) is the most viable solution. TCN, which is already making limited sales to the Indian timber market, is potentially such an organization. However, to expand this marketing function, in coope- ration with, or by-passing the Indian middlemen, it must be aware of the logistics and specification of the different markets (in different consump- tion centers) for different types and grades of timber products. 1/ As TCN's marketing ability increases, it could act as a marketing agent for domestic sawmills exports to the Indian market. Technical assistance of the type proposed for the IDA Nepal Settlement Project is desirable in view of Nepal's limited experience of marketing lumber outside its borders.

D. Forest Administration

Structure and Number

31. While forestry matters in Nepal are dealt with by the Department of Forestry (DF), in the Ministry of Forestry, all matters relating to forest industries are the responsibility of the Ministry of Industries.

32. The broad organizational structure of the Department of Forestry is:

Minister of Forests

Forest Secretary

Chief Conservator of Forests

Deputy Chief Conservator of Forests

I I I Field Divisions Headquarters Divisions Specialist Division

33. The Field Divisions are divided into 24 forestry divisions (each with a Forest Ranger/Divisional Conservator), forest guard units and a

1/ For example, some urban centers like Calcutta would pay more for dried timber products; sleeper demand is concentrated in certain railroad centers. ANNEX 2 Page 10 wildlife unit. The Headquarters Divisions are ((a) Forest Development, (b) Administration, (c) Forest Utilization, (d) Research, (e) Wildlife and (f) Elephant Management. There are three Special Divisions - (a) the Forest Resources Survey Division (located in Kathmandu) which is responsible for aerial photographic interpretation, ground survey, mapping, forest growth studies, working plan preparation, etc., (b) the Afforestation Division which conducts research on the establishment of forest plantations and is responsible for implementing research findings in the field, and (c) the Wildlife Management Division, concerned with wildlife conservation and manage- ment (particularly in Chitwan). The Forest Training Institute at Hetaura which trains sub-professional staff, (staff below the rank of Divisional Forest Officers) has just been made a part of Tribhuvan University.

34. The current staffing position is:

Position in the Post Forest Service Number

Chief Conservator Professional Class I 1 Deputy Chief Conservator Professional Class I 1 Regional Conservators and equivalent (survey specialist chief, etc.) Professional Class I 18 Divisional Conservators/Forest Officers and equivalent Professional Class II 37 Attached Forest Officers and Equivalent Professional Class III 54 Rangers Sub-professional Class I 175 Foresters Sub-professional Class III 421 Forest Guards and Officers: Terai (Reserves/Parks) - Armed Guards 228 - Commanding Officers 58 Terai (Forest Protection) - Armed Guards 434 - Commanding Officers 83 Hills - Unarmed Guards 453

Total 1,909

35. There are too many professional and sub-professional forest officers for the type and volume of work they perform, the number of forest industries and the supervision of Nepalese sawmillers. Confining their activities largely to the Terai forests, they do little in the more difficult terrain of the hills and the mountains. Furthermore, only in the past few years has some element of forest management been introduced.

36. Staff development needs improvement. Many of the professional staff spend too much time at their desks. The emphasis on classical approa- ches to forest management and the predilection of the Nepalese Forest Service for natural regeneration have led to a situation where, in practice, only one professional officer is assigned to forest utilization and only two to ANNEX 2 Page 11

afforestation. Yet Nepal needs to concentrate on these areas if the present forest resource is to contribute fully to the national economy and be able to supply Nepal's future demands.

37. Development of the forestry and forest industries sectors is somewhat restricted by their being under separate ministries. All applica- tions for the establishment of forest industries must be sent to the Ministry of Industries, which can grant or refuse applications; in theory, it acts on the advice of the Ministry of Forests. However, forestry and forest indus- tries are but two facets of one process, and this separation of responsibilities has contributed to the imbalanced distribution of sawmills in Nepal. In addition, the separation of powers often leads to unnecessary delays in processing applications.

38. HMG of Nepal urgently needs a specialist to advise on deploying forestry staff, and who could also advise on integrating those aspects of forest industries dealt with by the Ministry of Industries with the activi- ties of the Ministry of Forests.

Forest Education

39. Ninety four of the professional staff are graduates, mainly with natural science degrees. Their formal professional forestry education was usually obtained at the Dehra Dun Forestry Institute in India, although several received their first degrees in other countries, such as Burma and Germany. Many received post-graduate education in North America, India and Europe.

40. Most rangers and foresters are trained at the Nepal Forest Institute at Hetaura, which also offers refresher courses to sub-professional forest officers. Forest guards are given on-the-job training.

41. By any standard, the training given Nepalese forest officers is good. However, because most professional forest officers are trained at Dehra Dun, a most conservative and conservationist institution, they tend not to be very development-oriented. In particular, an absence of training in forest economics becomes evident when examining forest management plans and provisions for forestry in the fourth Five-Year Plan. It would therefore seem appropriate for selected Nepalese forest officers to receive post- graduate training in forest economics in suitable universities.

Timber Corporation of Nepal (TCN)

42. TCN is a public limited company, formed in 1960 under the Nepal Companies Act, with authorized share capital of NR 10 M (US$0.9 M) in 100,000 shares of NR 100 each. Wholly owned by His Majesty's Government of Nepal (HMG), its shares are held nominally by various HMG Departments and Officials, principally the Ministry of Industry and Commerce and the Ministry of Forests, with a small holding (9%) by HMG Nepal Industrial Development Corporation (NIDC). The Directors, a minimum of five, are appointed by the shareholders in general meeting. The Chairman of the Board (elected by the Directors) is ANNEX 2 Page 12

the Secretary, Ministry of Forests. The other four members are now: a Ministry of Finance representative; Director, Department of Industry; Chief Conservator of Forests; General Manager, NIDC. A non-Government director is to be added, but no appointment has yet been made.

43. TCN has a lumber extraction concession for about 100,000 ha of the Hetaura and Chitwan Forest Reserves (see map) of which about 58,000 ha are commercially exploitable, and owns a sawmill complex at Hetaura. It does not operate in other parts of the country, but has been asked to help NSC with timber removal from settlement sites.

44. TCN operations originated from a sawmill established under a USAID program to provide lumber for rebuilding houses destroyed by the catastrophic 1954 flood. TCN mills were managed by a U.S. sponsored sawmilling management team from 1960 to 1968 when it transferred full management to the Nepalese. After initial teething problems (TCN incurred losses for the first time during the takeover year), the situation has improved considerably since 1970/71 when a new general manager was appointed, and in 1972/73 recorded profits reached Rs 1.1 M.

45. TCN faces four major problems: (a) the limited size of the concession; (b) the effect of four to five months monsoon on forestry operations; (c) the capacity of the Nepalese haulage industry to carry lumber; and (d) Public Service Commission intervention in appointments.

46. While no estimate of the amount of timber remaining in the TCN concession is available, a large part (285 km2) of the most easily accessible southern area was recently declared the Chitwan Wildlife National Park. TCN's management is concerned that working in the northern area will be- come more costly and that future production expansion to meet growing de- mand and exports will be inhibited.

47. Rains quickly impede log haulage and TCN has not yet been able to stockpile sufficient logs to keep the main sawmill going throughout the June to October rainy season.

48. HMG's requirement that the local market (mainly Kathmandu) be given priority, has meant hauling lumber some 100 miles from Hetaura to Kathmandu over a difficult road, instead of the shorter stretch across the Indian border. TCN has been unable to find enough private haulage capacity, but now has some relief through operation of its own trucks.

49. TCN's obligation to ask the Public Service Commission to fill vacancies at all levels has caused it great inconvenience through delay, and sometimes inappropriateness, of appointments. TCN has had to hire many employees on temporary contract, sometimes for a year or more, with no assurance that their appointments would be confirmed. TCN should be free to hire and fire employees at its discretion, subject only to control by its Board of Directors. ANNEX 2 Page 13

50. Despite many difficulties, TCN is operating successfully without outside help, and to the considerable benefit of HMG. Its staff has long experience in logging and sawmilling and has been designated to take on the forestry operations of the IDA Nepal Settlement Project. TCN could, however, benefit from some temporary guidance on operating winch lorries for timber extraction, which are new to Nepal, and on installing Indian-type sawmills, which it has not previously undertaken without help. One of the important contribution of the IDA Settlement Project will be to undertake these operations through TCN. In addition, large export sales would be developed in the Indian market, with which TCN is not very familiar, and TCN would also be assisted by the project in developing that market.

51. It is also important that TCN be free to make direct contact with its customers, as an independent commercial enterprise, without reference to HMG (subject only to normal policy direction by its board), and that it be free to sell logs or lumber, at its discretion, in Nepal or elsewhere as market conditions dictate.

Forest Ownership

52. HMG owns all forest land in Nepal. However, certain individuals or groups may obtain fuelwood and timber for home use from the forest estate, either free or at nominal cost. Under this 'concessionary sales' system, the appropriate forest authority provides a villager with a permit to fell and remove a certain quota of firewood and timber for specific purposes. 1/ However, as no record of actual removals is kept, there is no means of check- ing whether the villager removes more than his entitlement. Moreover, there is no system of checks to ensure that the forest produce removed is utilized personally, as is intended, and not sold to third parties. Because felled trees are not checked, the high quality and large timbers which command high prices in the commercial market are felled for "personal" uses which do not warrant the large size felled.

E. ISSUES AND RECOMMENDATIONS

53. Issues in Forestry subsector revolve around (a) future emphasis for forest industries; (b) appropriate systems for disposal of government forests (including the control of fuelwood); (c) management of forest estates; and (d) competing use of forest lands.

1/ Local communities have the privilege of removing wood for the following purposes: (a) timber and poles for building and repairing houses (125 h ft every three years and not more than 50 h ft of Sal); (b) fuelwood consumption (250-500 h ft/family year); (c) ox-cart ploughs and other farm implements (minute quantities). ANNEX 2 Page 14

Future Emphasis of Forest Industries

54. Forest industries development in Nepal is still rudimentary, with sawmilling constituting the only activity of any real significance. The Fourth Five-Year Plan has targeted the creation of a 15,000 tons capacity pulp and paper mill and a plywood mill with a capacity of 19.2 million sq ft. None of these have materialized except for two small plywood factories 1/ not originally included in the Plan. Establishing a plywood industrv in Nepal, particularly for the export market, is fraught with many difficulties. Only Sal and Asna are concentrated in any significant amounts and being hard, heavy, irregular in grain, subject to considerable shrinkage and hard to peel, they are not particularly suitable for plywood. Although Asna has some decorative merits when sliced, its dark color limits its application. The availability of species suitable for corestock production, like Semal, is limited. Comprising the main species for match manufacturing, it is already in short supply for that industry. The cost of bonding resins purchased through India are two to three times world prices and often in short supply. The only future for the plywood industry in Nepal appears to be for the domestic market, which is limited 2/ and this industry would be economically viable only if sufficient wood can be obtained in concentrated locations.

55. The pulp and paper industry has few prospects in the immediate future. The proposed mill under the Fourth Plan (based on rice, waste straw and bamboo) presupposes a lower opportunity cost in using rice and waste straw for human and livestock consumption. There is presently no pulp and paper mill but one cannot be justified on the basis of a domestic paper consump- tion of only about 3,000 m tons annually, of which about 400 tons is hand- made from the bark of Daphne cannabia with small admixtures of straw, grass and waste paper. Although an NIDC feasibility study for a pulp and paper factory indicates that India's present demand for paper exceeds its supply, longer term prospects in the Indian market (including their plans for capacity expansion) should be assessed before developing a pulp and paper industry in Nepal.

56. In the immediate future, Nepal should concentrate on developing its sawmilling industry, for this is one of the few primary industries for

1/ The Nepal Plywood and Bobbin Company's factory in Biratnagar (12,500 sq ft of 3/16 inch plywood per day) opened only in February, 1973, al- though the machinery was imported in 1967. The delay was primarily due to arrangements for wood supply with HMG. The United Mission's 4.4 M sq ft annual capacity plywood mill in Butwal started limited production only in early 1973 despite virtual completion at the end of 1971. The delay in this case was due to the formalities and arrangements required to finalize HMG participation. 2/ Only 70,000 sq ft of plywood was imported in 1967/68 for example. As for the Indian market, the country has a well-established plywood industry which presently operates below capacity. This is primarily due to the shortage of raw materials which may be partially overcome by increased imports from the Andaman Islands. ANNEX 2 Page 15

which the necessary combination of adequate supplies of suitable raw material, adequate markets (both in India and in Nepal), technological skills, and good possibilities of a reasonable return on investment, is locally present. Moreover, this industry can serve as the basis for a wide range of secondary industries while providing the nucleus for the expansion of other primary forest industries. Much of the value added to Nepal's forest resources now accrues to India. Nepal could remedy this state of affairs if it produces sawn timber of good quality at reasonable prices. This is contingent on the provision of an assumed supply of raw materials for these industries (see para 15).

57. The Indian band-saw mills have proved more useful than the American circular saw mill for many reasons (para 14). The question of whether to construct permanent Indian band-sawmills (i.e., based on perma- nent installations and powered by electricity) or semi-portable Indian band-sawmills on forest sites (based on temporary shelters and powered by diesel) depends on a case-by-case assessment of the relative assessment of these primary factors (i) the haulage distance of logs to the permanent site; 1/ (ii) the relative capacity utilizations of each mill; 2/ and (iii) the relative cost of hydro-electric power and diesel.

Systems of Log Disposal from Government Forests

58. Tlwo issues are relevant: (a) the appropriate system of timber disposal for commercial use; and (b) the loss of commercial yields due to local villagers' privilege of removing timber and fuelwood.

1/ For example, the cost of producing one cu ft of sawn timber ex-Hetaura through TCN's two portable mills are Rs 3.91 and Rs 5.27 respectively, compared with Rs 4.20 at the permanent installation at Hetaura. De- tailed breakdown are given below:

Semi-portable Permanent

Costs at forest loading/point semi- portable mill site Rs 0.37 Rs 0.37 Processing costs at semi-portable mill site Rs 3.65-Rs 2.29 - Transportation costs (20-50 miles) to Hetaura/permanent mill site 1.25 2.28 Processing costs at Hetaura - 1.55 Cost ex-Hetaura Rs 5.27-Rs 3.91 Ra 4.20

2/ This is basically dependent on: location, the number of months semi- portable mills are operable and accessible, and the extent stockpiling is possible at the permanent site before the onset of the monsoon. ANNEX 2 Page 16

59. Timber Disposal for Commercial Use. The Nepalese Forest Service seems, over less than twenty years, to have tried most of the known systems of forest allocation and disposal of timber (see Appendix). Instead of attempting to remedy the defects of a particular system, an entirely new method of sale was embarked upon and in turn abandoned when difficulties arose or pressure groups exerted their influence. Very frequently the trial periods were too short to allow an adequate assessment of the practice being tested (see Appendix).

60. The present system is by auction, reintroduced in 1972/73. In the last five years, DF auctions only forest areas released for settlement; the rest has remained commercially unproductive. The auction procedures consist, initially, of DF valuation of potential sale lots based on species and royalty rates. A minimum of 21 days notice of the auction date is given in the news media; sales are held in Kathmandu. Although thes notices specify the number of trees (by species), the volumes or values are kept secret. Potential buyers have to travel to the lot locations to evaluate the lots for themselves and return to Kathmandu for the auction. A disquieting feature is that no officially specified criteria are used for deciding on the successful bid. For example, many of the highest bidders have been unsuccessful. Numerous lots remain unsold (despite re-auctioning later in the season). Many factors have contributed to this situation. Overevaluation by DF and secrecy of bids, for example, has resulted in bids falling short of the government's secret figure. The present system of timber valuation makes no allowance for accessibility (transport costs).

61. Valuations become unrealistic as poor planning and the consequent lengthy time-lags (between the marking of sale lots and the buyers' actual assessment) result in timber losses through theft and destruction. Revalua- tions and re-auctioning often result in the timber being available too late for exploitation in the season. Bidders are also wary of the poor coordina- tion between DF and NSC which has resulted in settlers moving into sold timber lots to stake their claims before timber felling had even commenced. Well intentioned stipulations (like stiffer payment terms for timber sales to non-Nepalese) to protect domestic sawmillers and contractors have not succeeded to any noticeable degree in encouraging Nepalis to deal in timber 1/, but only resulted in discouraging reputable Indian contractors from partici- pating in timber sales.

62. The mission recommends that HMG reassess Nepal's private sawmilling capacity and formulate some guidelines for selecting efficient mills (or potentially efficient mills upon rehabilitation) which have a reasonable chance of competing in the Indian market. Concessions should then be

1/ There are problems in assessing who are Nepalese contractors since many Nepalese citizens are of Indian origin and some foreign contractors employ Nepali "front men" to buy timber for them. ANNEX 2 Page 17

allocated to these mills. 1/ If necessary, the possibility of abolishing export duties on sawn timber and other wood manufacture should be considered. The rest of the timber available should be sold under a modified auction system which has the following provisions:

(a) A valuation system which (i) simplifies marking and volume estimation, 2/ (ii) takes into account accessibility of sales lots (considering for example nearest railroad heads across the Indian border) and fluctiations in market prices;

(b) Public knowledge of government's estimates of volume and value of sales lots;

(c) Decentralized public auction sales under the charge of territorial conservators; and

(d) Abolition of sales rules imposing unfavorable contract terms to foreigners.

63. In addition, all other processes involved in timber marketing should be reviewed with the aim of selling timber the first time and mini- mizing delays for the land settlement program.

64. With regard to the 'specialist' industries (those relying on parti- cular species), a careful assessment should be made of the existing raw material resource, and of the growth rates of the required species. These data should then be compared with the capacity of the existing mills. If it is possible to increase the allowable cut to meet the capacity of the mills, this should be done. If this is not possible there should be a deliberate

1/ As has been shown (see appendix) this system was introduced at a time when the Forest Service was small and its experience minimal. At that time it might have been more appropriate to sell trees through a system of short-term felling and extraction permits. Now, however, not only is there need for the forest industrialist to be assured of an adequate and continuous supply of timber for at least the amortization period of his conversion plant, but the Nepalese Forest Service is in a position to control the operation of such an agreement. A system of forest leases should therefore be evolved which would ensure that conversion plants are 'tied' to forests of adequate size and volume. Technical assistance may be required in the drafting of these agreements, for complex considerations such as royalty rates, duration of leases, area of forest to be leased, capacity of plant, penalties for breach, etc., have to be taken into account. It must be emphasized, however, that unless Nepal's timber disposal policies and practices are drastically altered, there will be little hope for forest industries development in the country.

2/ As recommended by A. J. Browning, op. cit., p. 60. ANNEX 2 Page 18 policy of restricting the number of match factories and katha mills in the country. However, data now available suggest that this latter step should not be necesssary. There appears to be a sufficient volume of Acacia catechu and Semal, for example, to warrant an increase in cut. It is the long rotations and the uncritical acceptance of the principle of sustained yield which impede the development of these forest industries.

65. The control of fuelwood. Fuelwood consumption is very high in Nepal because other types of fuel are either too costly for the average Nepalese, or unavailable in certain localities. The result is considerable pressure on forests throughout the country.

66. Unfortunately the DF seems to have exerted little control over the trees and species to be felled (and of the location of their felling). Usually, the consequence has been thinned forest lands in many parts of the country but the Hills have been laid bare by fuelwood cutters, and many trees and species suitable for more remunerative uses have been utilized for fuel. HMG's estimate of a three million ft (worth Rs 10 M) annual removal from the Terai is modest compared with the FAO/UNDP Forestry Deve- lopment Project's figure of 37 M h ft. In the Kailali Division, for example, FAO/UNDP found that villagers had been issued "legitimate" permits to remove 855,000 h ft, representing 1/3 of the Division's total yields and 71% of Sal yields, leaving only 342,000 h ft for commercial sale.

67. In an attempt to reduce illegal tree felling for fuelwood supply in the Terai and the Kathmandu valley, HMG established a Fuelwood Corpora- tion. The Corporation is to collect, distribute and sell dead trees, the branches and tops of trees felled for other purposes, sawmill waste, etc., to consumers and no live trees may be felled solely for the production of fuelwood in these areas. With the limited capacity of the Fuelwood Corpora- tion, these rules, of course, have not been enforced throughout the affected areas. The costs of this rather dispersed operation are also somewhat high, since fuelwood prices are rising, and consequently the incentives for illegal felling have increased. The problem of fuelwood felling in the Hills with its contribution to increasing erosion has been conveniently ignored.

68. These defects could be improved by instituting a system of checks to prevent extensive abuse of the villagers' entitlement. This may be done by a) including in the felling and removal document a column (or columns) in which the Forest Guard could record any removals made by the villager and making it an offence for a villager to fell and remove timber without a Forest Guard's permission; and b) by ensuring that those trees which the villager is permitted to fell would not command a ready sale to third parties (in other words, there should be size and quality control). Admitted- ly, control will be difficult and ultimately the success of any such arrange- ments would depend upon the integrity and authority of DF staff. As there is no dearth of Forest Guards, from the point of view of numbers, control ANNEX 2 Pagoe 19

could be reasonably effective 1/. Unfortunately, it is not. A ccuibieicn of incentives to Forest Guards, more regular field checks by senior off4cers, and the imposition of penalties on venal Forest Guards may well result it removing most of the abuses to which the system of concessiojiv, s:Les L- subject.

69. The above proposal, even if implemented, only corrects the sywptons but not the basic cause of the problem, i.e. shortages of fuelwood in local areas. Suitable sites should be selected in and around villages and ments for establishing local fuelwood plantatiors. 2/ DF should, and distribute the seedlings for these plantations at nominal charge. Thsa villagers would tend the plantations themselves on advice sup

70. Larger plantations should be established by the Fuelwood Cerporation to supply fuelwood in those areas in which wood is in short supply or whera it would be inadvisable, for protective purposes, to fell trees. The fuelwood plantations can be used to make charcoal to supply the larger consunptizi areas. Problems may arise with storage and transport, and because a larre segment of the population are used to wood as fuel, but these p-roblems are not insurmountable and the Fuelwood Corporation should be given the lndatc to look tnto the feasiblity of manufacturing charcoal, S±mple char^zoJl kilns

are already avaiiable to villages use and an extension of their a is also required.

Management of Forest Estates

71. As proposed in the Working Plans for Forestry under tihe Pourth Development Plan, Forest estates are to be managed on the slect-'c system, which essentially entails the removal of mature, over-mature and defective trees. However, in practice, trees still of vigorous growth have been taken away, and in many areas the over-mature and defective trees have been left. As a result there is a virtual absence of certain size clasees in the forests. Yet existing management plans call for their rzturel .:- They propose that the rotation period for all forest species in th7 TerLi (with the exception of Semal which is to be regenerated in 40 yucrs) >3hould be 80 years. Such a long gestation period will obviously yield a erv lcw internal rate of return to the economy. It is also doubtful whet'her ttie

1/ Terai forest guards for example should also be trained !n th.- 4 differentiation of permitted sizes.

2/ There is no intrinsic reason why live trees from the natural f3rcests should not be felled for fuel, provided that the trees so fellaid 'tWith respect to species, quality and size) would not have giveni higher re- turns if otherwise utilized. These areas could then be replaatz- ;4ith quick growing species for the same use. ANNEX 2 Page 20

main species to be naturally regenerated, Sal would be in great demand bv the middle of the next century 1/. Such proposals would have been difficult and costly to implement even if the stocking and composition of the forests with respect to vigorous trees were more favorable. In the present circum- stances, they appear to be little more than unrealistic hopes.

72. The important point, however, is the assumption in the working plans that the species now found in the forest should be regenerated. No alternative method to natural regeneration has been considered nor has any real attempt been made, if only in view of the inevitable contraction of the forest estate, to see if by introducing faster growing and higher yielding species, produc- tion could be maintained and improved on a reduced area. The present area of forest plantations (about 4,000 ha) have increased by little, even though a target of 1,600 ha has been set annually for the Fourth Plan. Some of the plots are for experimental purposes, and others are for the provision of fuelwood. The plantations are mainly located in the central zone (in both the Hills and the Terai). They are young, generally under six years old. The main exotic species are Eucalyptus spp., Pinus patula, P. tadea, and Tectona grandis. The main indigenous species are Alnus nepalensis, Michelie champeca, Pinus longifolia and Schima wallichii. The program for introducing fast growing species in both the Hills and the Terai for three purposes (fuel- wood, fodder and construction wood) should be accelerated. New fodder tree species like "kairals" (Bauhinia variegata) and mulberry, presently tried in Lumle should also be considered. The staff for forest utilization and reforestation should be increased and technical assistance for planning and implementing of forest estates based on fast growing species should be souglht.

Competing Uses of Forest Lands

73. Discussions on the relative returns and employment effects in evaluating the extent forests should be retained for forestry or alienated for agriculture appear somewhat obtuse in the Nepalese context with its high rate of forest encroachment. The magnitude of the problem is not as large as may be commonly believed since competition exists essentially in forest areas on relatively good agricultural lands. Such lands (determined by slope, types of soil, climate) are however quite limited (Annex 1). Where good agricultural land is available, crop production outcompetes present forestry uses based on long term natural regeneration. Priority should however be given to assessing the competitive use between forest management of fast growing species and agriculture. This has not been done because experience in the former has been limited in Nepal.

1/ Sal owes its present popularity mainly to the fact it is naturally resistant to insect and fungal attack. It has, however, already been demonstrated in many parts of the world that it is more economic to apply preservative treatment to fast-growing species rather than to utilize slow-growing but naturally resistant species. It is conceivable that wood preservation plant could be available in Nepal by the year 2050, and that species other than sal could therefore be utilized. ANNEX 2 Page 21

F. Project Possibilities

74. A project is proposed for foreign financing with the following components:

(a) expansion of the Department of Forestry's program in the research, production and distribution (para 69) of quick-growing timber species for (i) fuelwood (including those which can be used for browsing) primarily in the Hills; and (ii) for construction timber, primarily in the Terai.

(b) improvement of the Fuelwood Corporation's capacity to establish plantations for fuelwood and charcoal production; and

tc) reforestation and/or pasture improvement 1/ of denuded government forests.

75. Technical assistance is required to prepare a feasibility study which should include an assessment of:

(a) the location of forests which can be exploited and reforested into quick-growing species for commercial use (e.g. construction timber);

(b) the location of denuded government forests suitable for fuelwood reforestation and pasture improvement (including alternative arrangements for combining the two activities;

(c) the demand pattern for fuelwood and charcoal (for house- hold, industrial and tobacco curing);

(d) the optimal location of fuelwood plantations;

(e) the feasibility of adapting and/or extending simple charcoal kilns to farmers or farmers groups.

The estimated financing cost for the project is US$5.0 million.

1/ Pasture improvement is included as a joint activity because the problems of reforestation cannot be separated from livestock grazing and fodder use of these government forests. ANNEX 2 Page 22

Table 1 - TIMBER VOLUMES IN THE TERAI (EXCLUDING TON RESERVE) 1964

(In Millions of Cubic Feet)

Species/ Volume Per- Volume Volume Per- Group Gross Cent Net Net Cent 4" top 8" top 8" top diameter diameter diameter True, cu.ft. True, cu. ft. Hoppus ft.

Sal 1,775 49.4 1,325 1,043 56.7

Asna 479 13.3 372 292 15.9

Khair 45 1.3 7 6 0.3

Chir pine 15 0.4 12 9 0.5

Furniture Species 189 5.2 145 114 6.2

Other hardwoods 361 10.1 202 159 8.6

Other softwoods 64 1.8 51 40 2.2

Other species 666 18.5 221 174 9.6

Total 3,594 100.0 2,335 1,837 100.0

Note

1. Volumes are under bark measure, diameters over bark. Z. Gross volume to 4 inch top obtained from Table 14 of Forest Statistics of the Terai and Adjoining Regions. 3. Net Volume to 8 inch top obtained from Table 13 of Forest Statistics of the Terai and Adjoining Regions. 4. Net volume in hoppus feet obtained by multiplying net volume in true cubic feet by 0.7875.

Source: A.J. Browning, Nepal Forest Development - Marketing, FAO/UNDP Technical Report 2, Kathmandu, 1973. ANNEX 2 Page 23

Table 2 - ESTIMATED CHANGES IN GROWING STOCK IN THE TERAI, 1964 - 1973

(In millions of hoppus feet, net volume)

Species/Group 1964 Losses of Remaining Growing Growing Growing Stock Stock Stock 1964-73 1973 (40%)

Sal 1,178 471 707

Asna 309 124 185

Khair 7 3 4

Chir pine 9 4 5

Furniture species 118 47 71

Other hardwoods 165 66 99

Other softwoods 45 18 27

Other species 184 74 110

TOTAL 2,015 807 1,208

Source: Adapted from Browning, op. cit., 1973. ANNEX 2 Page 24

Table 3 - INDUSTRIAL AND NON-INDUSTRIAL ROUND LOG REQUIREMENTS FOR INDIA, 1970, 1980 AND 1990

Production Equiv. Round Log Requirenents Units 10 18 10 1970 1980 1990

A. Industrial Wood

Sawn Wood Conifer M3) 0.58 0.78 1.16 1.27 1.72 2.33 Hardwood F ) 59 4.88 7.27 7.90 10.74 14.53 Sleeper O o.17 0.08 0.o8 0.40 0.20 _04i5 Sub total (Mm3) 3.34 5.74 8.51 9.57 12.66 17.01

Panel Products

Plywood (Mm3 0.13 0.32 0.59 0.31 0.75 1.17 Fiberboard (Mm3) 0.02 0.08 0.11 0.06 0.19 0.23 Sub total (Mm3) 0.15 0.4o 0.70 0.37 0.94 1.40

Pulp and Paper

Pulpwood (Mm3) 0.75 5.03 12.73 Bamboo (Mm tons) 1.20 2.20 1.95 Others (Mm tons) 0.10. 0.56 1.16

El. Non-Industrial Wood Fuelwood (Mm3) 203 256 300 Other Round wood (Mm3) 5.23 6.93 9.56 Bamboo (Mm tons) 1.64 2.17 2.96

'ource: Adapted from the Ministry of Agriculture, Government of India, Fifth Five Year Plan - Forestry Sector (1974-79), Report of the Working Group on Forests, New Delhi, October 1972, Ch. IV, and Interim Report of the National Commission on Agriculture, Production Forestry---Man-made Forests, New Delhi, August 1972, pp 89-92. ANNEX 2 Page 25

Table 4 - RECORDED PRODUCTION OF WOOD IN INDIA 1955-56 to 1969-70

(Million m3 round)

Industrial Wood Fuelwood Total Year Coni- Non-Coni (including Production of ferous Ferous Total wood for wood (Col. 4 + 5) charcoal)

1. 2. 3. 4. 5. 6.

1955/56 0.98 3.18 4.16 10.81 114.97 1956/57 0.97 3.49 4.46 10.18 14.64 1957/58 1.12 3.75 4.87 10.98 15.85 1958/59 1.14 3.56 4.70 11.96 16.66 1959/60 1.22 4.35 5.57 11.68 17.25

1960/61 1.19 4.24 5.43 11.64 17.07

1961/62 1.33 4.10 5.43 10.75 16.18

1962/63 1.14 4.45 5.59 13.20 18.79

1963/64 1.00 6.15 7.15 12.49 19.64

1964/65 1.15 5.30 6.45 12.76 19.21 1965/66 1.04 7.57 8.61 13.09 21.70 1966/67 0.98 8.30 9.28 12.24 21.52

1967/68 1.24 8.33 9.57 13.11 22.68 1/ 1968/69 1.40 7.97 9.37 11.59 20.96

1969/70- 1.30 7.63 8.93 12.86 21.79

1/ Provisional

Source: Report of Working Group on Forestry, Ministry of Agriculture, Government of India, Oct. 1972, p.23 ANNEX 2 Page 26

Table 5 - INDIAN MmT - PRnCES FOR LOGS, 1972/73

Dimensions FOR/1 Pries

Length Girth12 per cu ft

ft m in cm IR UR IR UR

A. Sal

12+ 3.7+ 48+ 120+ 11.00 15.29 388.41 539.89

of 36-4B 91-120 10.21 14.19 360.52 501.12

if 24-36 61-91 9.43 13.11 332.97 462.83

10-12 3.1-3.7 48+ 120+ 10.60 14.73 374.29 520.26

II it 36-48 91-120 9.82 13.65 346.74 481.97

if ItU 2b-36 61-91 9.03 12.55 318.85 4h3.20

7-10 2.1-3.1 48+ 120+ 9.43 13.11 332.97 462.83

IF "f 36-48 91-120 7.86 10.93 277.54 385.78 if ?r 24-36 61-91 5.50 7.65 194.21 269.95

6-7 1.8-2.1 48+ 120+ 7.46 10.37 263.41 366.14

I U1 36-48 91-120 7.07 9.83 2L9.64 3h7.00

i " 2 L-36 61-91 - - - - 5-6 1.5-1.8 - - _ _ _ _

4-5 1.2-1.5 48+ 120 - - "1 "36-48 91-120 5.50 7.65 194.21 269.95 t1 2L-36 61-91 - - - -

3-4 .91-1.2 arny any 2.75 3.82 97.10 134.97

B. Asna B-10 2.4-3.1 48+ 120 6.28 8.73 221.75 308.23 36-48 91-120 4.71 6.55 166.31 231.17

I' 24-36 61-91 - - - - 6-7 1.8-2.1 48+ 120 5.11 7.10 180.43 250.80 36-4B 91-120 3.93 5.46 138.77 192.89 't " 24-36 61 -9i - - - -

Al Free on rail. These are fair average prices for good quality logs rail heads in Uttar Pradesh side of the India - Nepal (Far Western Terai) border. /2 Inside bark.

Source: A.J. Browning, Neal Forest ,avelop4ent - Mrket4ng, FAO/UNDF Technical Report 2, Kathmandu, 1973. ANNEX 2 Page 21

Table 6 - INDIAN MARKET - PRICES FOR SAL PHANTA. 1972/73

Length FOR/ Price -

ft m per cu ft Ear__ IR NR IR KR

17+ 5.2 28.00 38.92 988.81 1,374.45 15-16 4.6-4.9 24.00 33.36 847.55 1,178.09

11-14 3.4-4.3 22.00 30.58 776.92 1,079.92

8-10 2.4-3.1 20.00 27.80 706.29 981.74

71 2.1 18.00 25.02 635.66 883.57

6 1.8 16.00 22.24 565.03 785.39 4 1.2 13.50 18.76 476.75 662.68

/1 Free on rail. 72 The prices given are for Class I (heart excluded). Prices for Class II (heart included) are about the same as for g:tu (see Table 3).

Source: A. J. Browning, Nepal Forest Development - Marketing, FAQ/UNDP Technical Report No. 2, Kathmandu, 1973. ANNEX 2 Page 25

Table 7 - INiDIAN1 MARET - PRICES FOR SAL GATU, 1972/73

Length FO0 Price

ft m per cu ft per m3 IR NR IR NR

18+ 5.5 21.00 29.20 741.60 1,030.82

15-18 4.6-5.5 18.00 25.02 635.66 883.57

11-114 3.4-4.3 17.00 23.65 600.35 834.49 9-10 2.7-3.1 15.50 21.54 547.37 760.84 8 2.4 15.00 20.85 529.72 736.31 7 2.1 114.00 19.46 494.40 687.22 4-6 1.2-1.8 10.00 13.90 353.15 1490.88

3 .9 6.30 8.76 222.48 309.25

/1 Free on rail.

Source: A.J. Browning, Nepal Forest Development - Marketing, FAQ/UNDP Technical Report No. 2, Kathmandu, 1973. Table 8 - INDIAN MARKET - PRICES FOR SAL SLEEPERS, 1972/73

/1 FO1- Price

Dimensions Volume per cu ft per m3 Type and Class ft/in mrcm cu ft m IR NR IR NR_

Broad Guage 9' x 10" x 5" 2.7m x 25cm x 13cm 3.125 .09

Class I 14.83 20.61 523.71 727.96

Class II 12.60 17.51 444.96 618.49

MIeter Guage 6' x 8" x 4.5" 1.8m x 20cm x 12cm 1.5 .04

Class I 12.30 17.09 434.37 603.77

Class II 10.46 1L4.54 369.39 513.45

Narrow Guage 5' x 7" x 4.5" 1.5m x 18cm x 12cm 1.094 .03

Class I 11.24 15.62 396.93 551.73

Class II 9.55 13.27 337.25 468.78

/1 Free on rail. o

Source: A.J. Browning, Nepal Forest Development - Marketing, \o N FAO/UNDP Technical Report No. 2, Kathmandu, 1973. ANNEL 2 Page 30

Table 9 - DIMN MAET - PRICES FRM SCANTLINGS AN1) BOARDS, 1972/73

FM la Price

necf U p arn3

Scantlings 6.oo 8.34 211.89 294.53

Boards 11.38 15.80 401.83 558 54

a Pree rail.;o

Soswct A.J. Brmoing, N oe_ eting FADWP Tecbical Report No. 2, L97 - ANrNEX 2 Appendix Page I

PAST OSYt2D_FLOG DISP)SAL FROM GOVER FORSTS

leases 1. The granting of forest concessions, in which long-term disposal were given to concessionaires, was the first method of timber forest marketing attempted in Nepal. It was unfortunate that this type of system whieh .dema.+id5 relatlvely hlgh expertise in the drafting of clauses, the fixing of royalty rates, etc., and wihich requires a competent field been attempted inspection staff to enforce some of the clauses, should have Not in Nepal at a time when their Forest Service was somewhat embryonic. concession- surprisingly, there were frequent disputes between HMG and the aires over th' interpretation and implementation of clauses.

2. It was therefore, decided to replace this system with two others which were to operate concurrently: an auction and a quota system. Blocks Generally these of forests -ere auctioned and sold to the highest bidders. were not sawmillers but speculators who exported logs to India, In order to cater for the small sawmill industry then in the country$ a certain 3 quota of trees (2,200 m N was supplied to each sawmiller on payment of a that its fee equivalent to the prevailing royalty rates. HMG soon realized revenues from auctions were higher than those it obtained from the quota timber system. It therefore abandoned the quota system and all cotmercial abandoned in in Nepal was sold by auction. The auction system was in turn compete 1969, presumab.y because sawmillers complained of their inability to with log exporters in the open market.

3. Timber disposal ill 1969/70 was changed to the "valuation" system. the Estimates were made of the volume of the standing commercial trees in forests to be nut up for sale. A monetary value based on existing royalty was rates, were then placed on these forests. This was the sale price which advertised locally. There was no bidding and the prices were fixed. Nepal- ese sawmillers were given first priority, then Nepali log merchants and finally Indian log merchants. Applicants may apply for one or more of the areas to be sold. There was, of course, no guarantee that a sawmlller will obtain the area for which he has applied. In fact, many sawmillers applied to for certain areas which were either well stocked or in close proximity no their mills while in a considerable number of areas, there have been applicants for other forests. In any case, the selection of successful applicants was arbitrary. The net result has been that only a small propor- tion of the forests put up for sale were sold, while most sawmills continue to operate below capacity for want of wood. Despite the lack of success, the valuation system continued for another year through 1970/71. Difficul- tle8 arising from delays in renewing the Trade and Transit Agreement with India, resulted in a further drop in timber revenues (see Table .. ).

4. In the 1971/72 season DF decided to switch to the "tender" system with restrictive couditions (an amount of deposits and stringest time of payment) placed on foreign contractors. Unfortunately, the first sale was ANNEX 2 Appendix Page 2 not instituted until 1972. Local sales by auction were later permitted. although a proper evaluation of the tender method is not possible due to the delay in implementation, forest revenues did increase to Rs 20.2 M.

5. For the 1972/73 season DF decided to revert back to the auction system. Nearly 62% of the 338 lots offered were sold. Forest revenue was at an all time high of Rs 35.2 M. ANNEX 3 Page (1)

NEPAL

AGRICULTURAL SECTOR SURVEY

FOODGRAIN PRODUCTION

Paragraph Number

A. INTRODUCTION Background ...... 1 - 3 Past Performance .4 - 6

B. PRESENT POSITION Productive Inputs. 7 Improved Seeds . 8- 9 Fertilizer Use .10 -12 Mechanization .13 Irrigation .14 Credit .15

Research Background .16 -19 Research Results and Improved Technology Rice .20 -24 Maize .25 -31 Wheat .32 -33 Extension ...... 34 -38

C. RECOMMENDATIONS Improving Agricultural Practices .39 -44 Research Emphasis Varieties .45 -50 Integration with Livestock Research .51 -52 Fertilizer Research .53 -57 Pest and Diseases .58 Improving Production Support Services ...... 59 Adaptive Research .60 -61 Seed Supply .62 -64 Fertilizer Use .65 -66 Extension .67 -71

D. PROJECT POSSIBILITIES ...... 72 -74 ANNEX 3 Page (ii)

Paragraph Number

Table 1: Area Under Major Foodgrains, 1972 Table 2: Area, Production, Yields of Major Foodgrains, by Regions Table 3: Area Under Improved Foodgrain Varieties Table 4: Rice High Yielding Varieties

Appendix 1: Foodgrain Cropping Practices 1 - 9 Appendix 2: Research Results for Foodgrains 1 -23

Figure 1: Organization of the Ministry of Food, Agriculture and Irrigation Figure 2: Nitrogen Fertilizer Response for Improved Paddy (IR20), 1971-72 Figure 3: Nitrogen Fertilizer Response for Improved Local Maize, 1971-72 Figure 4: Nitrogen Fertilizer Response for Improved Wheat (S331), 1971-72 ANNEX 3 Page 1

NEPAL

AGRICULTURAL SECTOR SURVEY

FOODGRAIN PRODUCTION

A. INTRODUCTION

Background

1. Foodgrains constitute about 60% of agricultural GDP and 80% of total cropped area in Nepal. Developments affecting foodgrains will there- fore affect Nepalese agriculture. Paddy, maize and wheat account for 96% of all cereals produced in Nepal. The minor foodgrains are millet and barley.

2. Paddy, the most important foodgrain is cropped in 1.2 M ha. Near- ly 80% is found in the Terai, concentrated in the Eastern part (Table 1) where annual rainfall is highest. In the Hills, paddy is mainly found in the valleys. Although maize is the most important Hill crop and is princi- pally grown on the slopes of the Lower Hills (750 m - 2,700 m elevation), its distribution is less concentrated than paddy (Table 1). Except for the monoculture of paddy (mainly in Eastern and Mid-Western Terai), these two foodgrains are usually grown in rotation with other crops, particularly wheat and potatoes. In Western Terai, oilseeds (particularly mustard) and wheat are also commonly grown as a second crop after rice or maize. In the Upper Hills, maize or upland paddy followed by potatoes, millet, wheat or barley are the common rotations.

3. Cropping practices for the major foodgrains are given in Appendix 1 for the main agricultural regions.

Past Performance

4. The production of major foodgrains (paddy, maize and wheat) grew at an annual rate of 0.7% from average 1967 to average 1972 (Table 2) com- pared with the population growth of 2%. This growth was achieved despite an annual yield decline of 1%.

5. The overall decline in foodgrain yields was basically the result of declines in the Hills (particularly for paddy and maize in the Eastern Hills). Kathmandu Valley was the only region where overall foodgrain yields increased by as much as 1% annually and Terai yields were stagnant. ANNEX 3 Page 2

6. Yield declines in the Hills were primarily the result of (a) con- tinued cultivation on existing scarce arable land without sufficient nutrient compensation; (b) degeneration of seed used; and (c) increasing expansion into areas of marginal productivity (waste land and steep slopes). In the case of wheat, an additional reason for overall yield decline was overly fast expansion of total area cropped (nearly 11% annually) which resulted in the inability for farmers to procure reliable quality seeds. For maize, partic- ularly in the Eastern Hills, increasing incidence of insect infestation was an additional reason.

B. PRESENT POSITION

Productive Inputs

7. With the exception of Kathmandu Valley, foodgrain production in Nepal is characterized by low input use (fertilizers, improved seed, agri- cultural chemicals, irrigation and mechanical power).

Improved Seeds

8. Improved paddy and maize seeds cover only 4% of their total cropped area and only 1% of the hill areas outside Kathmandu (Table 3). The Agricul- tural Marketing Corporation or AMC (and its predecessor the Agricultural Supply Corporation) which is responsible for commercial multiplication and import of seeds for distribution to farmers, supplied only a small fraction of the area under improved foodgrain seeds. The relevant figures for improved paddy is presented below:

AMC Improved Area Covered Actual Area Under Year Seed Sales Seed rate by AMC Seeds Improved Paddy (kg) (kg/ha) (ha) (ha)

1967/68 232,000 55 4,218 26,111 1970/71 102,000 55 1,854 68,285 1971/72 555,000 55 10,090 81,627

On the average, only about 9% of total improved seeds were from AMC. Private sources (especially farmer-to-farmer sales) constituted the main source of seeds. The source of government's improved seed procurement (cumulative 1968/69 - 1972/73) is given below: 1/

1/ Source: Annex 8, Table 24. ANNEX 3 Page 3

Wheat Paddy Maize Total (m tons) (Z) (m tons) (%) (m tons) (%) (m tons) (%)

Local collection 1,091 26 829 70 189 69 2,109 38 Imported 3,050 74 347 30 83 31 3,480 62 Total Procurement 4,141 100 1,176 100 272 100 5,589 100

9. Imports (consisting of mainly wheat and paddy from Uttar Pradesh 1/) comprised 62% of governments total major foodgrain seed procurement. Prior to 1972/73, DA was responsible for local collection. Since then, AMC has been contracting the multiplication of "certified" seeds with selected farm- ers. DA is still responsible for field inspection and seed testing. Lack of staff, insufficient field inspection, disease control, and drying and storage facilities, account for the generally poor results in local multi- plication of improved seeds. Insufficient planning to order seeds from re- liable seed sources in India (e.g., the Tarai Development Corporation) also explains the poor quality of seeds obtained.

Fertilizer Use

10. The concentration of fertilizer distribution by AMC (who monopolizes the sale of fertilizer and agricultural chemicals in Nepal) and its dealers for the major foodgrains (1970/71) is given below: 2/

Distribution Per Fertilizer Distribution Cropped Foodgrain Area (1,000 m ton) (%) (kg/ha)

The Hills 14.6 58.6 26 Kathmandu Valley (13.3) (53.4) 149 Other Hills (1.3) (5.2) 3 Terai and Inner Terai 10.3 41.4 8 Nepal 24.9 100.0 14

11. Fifty percent of total distribution was to Kathmandu Valley (equiv- alent to 149 kg/ha of major foodgrain cropped), which explains in part why Kathmandu Valley was the only region with significant yield increases. The average per ha distribution for Nepal (14 kg/ha) was equivalent to about 3 nutrient kg/ha -- a level much below current recommendations ranging from 90 - 240 nutrient kg/ha (Appendix 2, para 23).

1/ Most imported foodgrain seeds have been obtained from private seed traders and not the Tarai Development Corporation (the most reliable source) in Uttar Pradesh.

2/ Source: Annex 8, Table 29. ANNEX 3 Page 4

12. This low level of input use is not just a problem of insufficient economic incentives since chemical fertilizer use for rice and wheat (and in combination with manure for wheat and maize) in selected districts has been shown to be profitable (see paras 21, 29, 32). Fertilizer use could be higher but for local shortage and untimely delivery by AMC in many local- ities, particularly the Hills. These constraints are related to the problems faced by AMC 1/ as well as the present cumbersome methods of assessing fer- tilizer requirements 2/.

Mechanization

13. The mechanization of foodgrain production operations is very limited, with tractor use primarily confined to government research farms and larger farms in the Terai. Bullocks and buffaloes are the main sources of draft power and in many instances, bullocks are often too weak to pro- duce the required draft for improved implements (Annex 5, para 8).

Irrigation

14. Irrigation facilities, primarily for paddy production cover only 250,000 ha or an equivalent of 20% of the area under paddy. Of these, about 150,000 ha are farmers' irrigation systems (most of which are functioning) and the rest are built by the Department of Irrigation, Hydrology and Mete- orology. Government systems have been primarily geared to the building of large canals rather than distribution works and on-farm development. Bene- fits to the farmers have consequently not been as large as anticipated.

Credit

15. Institutional credit for production (seasonal) purposes amounted to only Rs 14.4 million in 1970/71 or an equivalent of Rs 7.6 per foodgrain ha cropped. Most of the farmers' cash needs came from private moneylenders or relatives at high interest rates ranging from 25-50%.

1/ Primarily (a) late import arrivals due to slow handling in Calcutta; (b) difficulties of internal transport; (c) limited branches and staff; and (d) the absence of an integrated production program. 2/ Detailed in Annex 7, para 59. ANNEX 3 Page 5

C. RESEARCH

Background

16. Foodgrain research in Nepal initially started at the Department of Agriculture (DA) Research Station in Kumaltar (Kathmandu) and with USAID assistance (in the past six years) has expanded to research stations and research farms in Rampur (Chitwan) and Parwanipur (Central Terai); Janakpur and Biratnagar (Eastern Terai); and Bhairawa and Nepalganj (Western Terai). Although the major part of agricultural research is still concentrated at Kumaltar, DA decided to decentralize some of its research work with the result that Parwanipur (located near Birganj) in Parsa District became the rice research center, Rampur became the maize research center, and wheat research remained in Kumaltar. In 1972/73, crop development coordinators were appointed for each major foodgrain. Their duties are to: (a) coor- dinate the trials undertaken at the various research stations and farms 1/ with those initiated by the subject matter-oriented research sections (agro- nomy, soil science, etc. -- see Figure 1) of DA; (b) supervise the multipli- cation of breeder and foundation seeds; and (c) disseminate research informa- tion to the extension service.

17. Nepal is fortunate in that much of the research developments in Uttar Pradesh, India are generally applicable to the Terai and Inner Terai (especially Western Terai where conditions are very similar). The largest search gap is Hill agricultural research. Local variations, particularly in the Hills, necessitate increased research adapted to local conditions.

18. Most of the field research undertaken by DA are conducted in re- search stations and experimental farms. Except for the trials undertaken with FAO assistance, few systematic experiments are conducted in farmer's fields. Research experiments have emphasized complicated statistical de- signs rather than simple experiments which can be easily replicated under farmer conditions. Researchers are generally very conservative and reluctant to release prospective varieties for extension until after protracted testing and research.

19. Except for maize, past foodgrain research has emphasized mainly breeding lines from exotic varieties. Little emphasis has been given to incorporating fodder crops as part of an integrated livestock-foodcrop

1/ Other agencies also involved in adaptive field research on foodgrain are: (a) the FAO Project for the Increased Use of High Yielding Crop Varieties and Fertilizers, Central Nepal; (b) the Nepalese-German Gandaki Agricultural Development Project; (c) Hardinath Pilot Demon- stration Farm, Janakpur (run by Nippon Koei consultants); and (d) British-Gurkha Ex-Servicemen Re-integration Training Scheme at Lumle. ANNEX 3 Page 6

farming system. Fertilizer trials have been virtually restricted to chem- ical fertilizers, and improved rice varieties have been limited to those which require irrigation or at least areas with high water table and good possibilities for water retention.

Research Results and Improved Technology

Rice

20. High yielding varieties (HYV) have been released for irrigated areas and areas with high water table during monsoon and less permeable soils. In the Hill valleys, recommended improved "japonica" varieties (Chainan 242, Taichung 176 and Chainan 2) can outyield local varieties by 80-100%. In addition to Taichung 1, Jaya and CH 45, the IRRI varie- ties (IR 8, IR 20, IR 22 and very recently Parwanipur 1 (selected within IR 400) with yield potentials double that of local varieties) have been released for the Terai and Inner Terai.

21. Improved rainfed varieties have yet to be developed for release to farmers. However, fertilizer experiments on farmers' fields, conducted in 6 districts by DA/FAO 1/ showed that IR 20 performed reasonably well even under rainfed conditions (Figure 2). Fertilizer application (140 kg of N2 - 50 kg of P205 - 20 kg of K20) gave yields from 4-6 m tons, and at 1971/72 prices gave added revenue/fertilizer cost ratios of about 2:1 2/ or better as shown below:

1/ P. J. C. Damen, DA/FA0, Preliminary Statistical and Economical Analysis of Fertilizer experiments on Paddy, Maize, and Wheat, 1971/72 (revised), May 1973.

2/ The standard commonly used to measure the profitability of applying fertilizer in order to justify the added risks involved. ANNEX 3 Page 7

/1 Paddy Revenue/Cost Ratios/ Farm Price/3 /2 /2 70 kg N-/ 140 kg NF- (Rs/kg)

Kavre (Hills) 2.11:1 2.36:1 1.16 Nuwakot (Hills) 2.92:1 2.41:1 0.94 Makwanpur (Inner Terai) 5.29:1 5.59:1 1.26 Chitwan (Inner Terai) 1.89:1 2.00:1 0.72 Bara (Terai) 2.08:1 2.98:1 0.88 Parsa (Terai) 1.58:1 1.94:1 0.70

/1 Value of increased yields divided by incremental cost of fer- tilizer application.

/2 With 50 kg P205 and 20 kg K2 0 per ha.

/3 At harvest.

Source: Damen (DA/FAO), op. cit.

22. At lower N levels (70 kg), fertilizer application is much less attractive for Bara and Parsa. Locally selected HYV's like Parwanipur 1, Mansuli and Marinda should replace IR 8 and IR 5 in rainfed areas of East- ern Terai, because if planted late, IR 8 and IR 5 have limited yields and often do not enable the planting of a second crop of wheat or mustard (Appendix 2, para 4).

23. Improved husbandry practices for paddy cultivation can also improve yields significantly. Irrigated yields of improved varieties in the Terai increased 88 percent when paddy was sown in March instead of May (Appendix 2, para 4). Present irrigation facilities (even those constructed for supple- mentary monsoon irrigation) will however not permit the benefits from such early sowings to be realized. More year round irrigation is therefore im- portant, not only in increasing rice cultivation intensity, but in permitting earlier planting.

24. From above, improvements in the technology of rice mono-culture are available in the form of improved varieties, improved husbandry prac- tices and fertilizer use. Complementary improvements from crop rotation and integration with livestock and fodder are discussed in Annex 5.

Maize

25. Selection among local varieties has produced the following varie- ties (with about 50% higher yield potentials) for three altitude zones: (a) High altitude (over 6,000 ft) - Kakani Yellow; (b) Middle and low altitude Hills and Terai - Hetaura Composite and Kumaltar Yellow; and (c) Low altitude Terai and Inner Terai - Rampur Yellow. The extension of these varieties has however been very slow primarily because of some undesirable agronomic quali- ties and limited economic gains from chemical fertilizer use. ANNEX 3 Page 8

26. The agronomic disadvantages are: (a) 20-25 days longer duration than the local varieties making them unsuitable for intensive cropping pat- terns; (b) cobs located high on stalks making them susceptible to lodging; and (c) open husks during maturing and storage which lead to infiltration by rain making them more prone to attacks by birds and insects.

27. Fertilizer trials with these varieties (mainly Kumaltar Yellow and Rampur Yellow) were conducted in six districts by DA/FAO 1/ (1970/71). The results showed that average yields increased by about 40%, and average ni- trogen efficiencies (Figure 3) ranged from 9-15 kg of maize per kg of N ex- cept in the case of Chitwan (5.9 kg) and Rautahat (2.3 kg).

28. The added revenue/cost ratios from applying fertilizer were how- ever not much more than 2:1 except for Kavre and Nuwakot in the Hills (and possibly Bara in the Terai) as shown below: Maize /2 Revenue/Cost Ratios Farm Price- 70~kg1 140 kg N-1 Rs/kg

Kavre (Hills) 2.37:1 2.62:1 1.16 Nuwakot (Hills) 4.63:1 3.25:1 2.00 Makwanpur (Inner Terai) 1.96:1 2.01:1 0.73 Chitwan (Inner Terai) 1.48:1 1.31:1 1.00 Bara (Terai) 2.12:1 2.13:1 0.82 Rautahat (Terai) 0.24:1 2.02:1 0.70

/1 With 45 kg P205 and 30 kg K20 per ha.

/2 At harvest.

Source: Damen, op. cit.

Since fertilizer costs are standardized in Nepal the main determinant of relative profitability was the farmgate price for maize.

29. When manure was combined with chemical fertilizer in two districts of the Gandaki Zone (Hills), yields increased an average of 85% (Appendix 2, para 15). Such a level of response improves the profitability of fertil- izer use. With CIMMYT assistance, seven improved synthetic varieties with high lysine content have been developed. Consisting of the Indian varie- ties Ganesh 1 and 2, Thai Composite 1, Philippine DMR 2 and 3, Hard Endo- sperm Opaque 2 and Cuperico x Flint Compuesto, they come closer to meeting farmers' requirements for short duration and lodging resistance than the previously recommended improved varieties and have comparable yields under

1/ Damen, op. cit., 1971-72. ANNEX 3 Page 9 average farm conditions (2.5 m ton/ha). Although their relative profitabil- ities and fertilizer responses have yet to be tested under farmer's field conditions and their multiplication has been limited (and both these activ- ities should be expanded as top priority), researchers are confident that their economic performance will be better than the local improved varieties.

30. Insect pests (primarily cutworms and stemborers) have caused losses of up to 50% 1/ of the standing maize crop in numerous hill localities. Pre- liminary indications (Appendix 2, para 17) show that if yield improvements of more than 20% can be obtained, it would be profitable to apply three rounds of 5% BHC dust at 40 kg/ha.

31. Improved technology for maize consisting of (a) improved high lysine maize, (b) fertilizer - manure application and (c) pesticides appli- cation therefore exists.

Wheat

32. Improved varieties for wheat exist in the form of RR 21 (Sonalika), S308, S331 and Pitic 62 2/ obtained from Uttar Pradesh, India. Their yield potentials are more than double those of local varieties. Research results 3/ for these varieties (mainly S331) show that under farmers' conditions (rain- fed), fertilizer application at 120 kg N, 60 kg P205, 40 kg K20 per ha is profitable at 1971/72 fertilizer prices (with the exception of Chitwan and possibly Parsa districts). Wheat /2 Revenue/Cost Ratios Farm Price- 60 kg 1 120 kg /1

Kavre (Hills) 1.65 2.27 1.15 Nuwakot (Hills) 4.92 4.35 1.50 Makwanpur (Inner Terai) 2.63 3.61 1.40 Chitwan (Inner Terai) 1.68 1.79 1.03 Bara (Terai) 2.62 3.60 1.20 Parsa (Terai) 1.58 2.05 0.77

/1 With 50 kg P205 and 20 kg K20/ha.

/2 At harvest.

1/ Source: Maize Coordinator, DA and information supplied by various DADO's visited by the mission.

2/ These have replaced the Mexican dwarf varieties (Lerma Rojo, Kolyan Sona and Sonora 64).

3/ Damen, op. cit. ANNEX 3 Page 10

At 60 kg N, except for Bara and areas with rather high prices for wheat (Nuwakot and Makwanpur), fertilizer application is marginal in terms of increased net returns.

33. Under rainfed conditions, Hardinath (Terai) experiments indicate that adequate P2 05 is essential for obtaining the expected N response with the semi-dwarf varieties (Appendix 2 para 20).

Extension

34. The gap between the existence of the improved technologies out- lined earlier and their low level use by farmers, illustrates the lack of effectiveness in government's support services in improving foodgrain pro- duction. 1/

35. The extension service (provided by the Agricultural Extension and Training Division, DA) is among the weakest links in Nepal's agricultural development effort. 2/ The District Agricultural Development Officer (DADO), who usually holds a B. Sc. (Agriculture) degree, is in charge of extension at the district level. The extension staff, which does most of the actual work with farmers, are the 330 Junior Technicians (JT's) and the 692 Junior Tech- nical Assistants (JTA's) with, respectively, two years and one year of agri- cultural training after obtaining their high school leaving certificate (SLC). This amounts to about one extension worker for 7,000 farmers. The distribu- tion of these middle-level extension workers (1970/71) is given below:

Distribution of JT's and JTA's Numbers %

The Hills 421 54.8 Kathmandu Valley (46) (5.9) Other Hills (375) (48.8) Terai and Inner Terai 347 45.2 Nepal 768 100.0

Source: Annex 8, Table 1.

1/ For cash crops like jute, tobacco and sugarcane, separate organiza- tions and concentrated activities for each crop in specific areas have resulted in relatively better supporting services (Annex 4).

2/ Another weak link - input supply has been discussed in paras 8-12. ANNEX 3 Page 11

36. Contrary to common belief, more extension workers are located in the Hills than in the Terai. However, these extension workers are concen- trated in Kathmandu, the German Gandaki agricultural development project, and government research stations and research farms. The number of exten- sion workers serving the Hill farmers is effectively negligible.

37. The lack of effectiveness in agricultural extension is due not only to the small number of available middle-level extension staff, but also to: (a) the high turnover rate and low prestige position; (b) insuf- ficient support both in terms of (i) the absence of a readily extendable improved production package, and (ii) negligible transportation facilities and allowances; (c) lack of training and capacity to handle practical agri- cultural problems (especially in the Hills); (d) the unwillingness of exten- sion workers (primarily from the Terai) to work in the Hills; and (e) the responsibilities to other government organizations 1/ which may detract the extension worker from his field extension and demonstration duties.

38. The poor link between research and extension is primarily due to the lack of adaptive research and a systematic arrangement to disseminate the knowledge of existing improved technology to the extension worker.

C. RECOMMENDATIONS

Improving Agricultural Practices

39. Feasible improvements in foodgrain production practices involve improving (a) soil preparation, (b) cropping patterns (including fodder crop production), (c) production and use of animal manure, and (d) on-farm storage.

40. Seedbed preparation, especially for wheat can be greatly improved by the use of steel soil-inverting plows. These plows may require more draft than many farm animals in their present condition can supply. Con- current improvements in livestock, feeding and breeding are, therefore, necessary (see Annex 5 for details).

41. Integrating fodder legumes with traditional cereal cropping can be further expanded. With prior phosphate fertilization, intersowing with pulses (sunhemp, cowpeas, mung beans, rice beans, soybeans) between paddy and maize towards the end of the monsoon (late August/early September) and harvesting at late October/early November could produce sufficient green

1/ For example, in preparation of farm plans one JTA or JT is assigned to each of the 147 guided cooperatives and 434 guided village committees to assess input requirements. ANNEX 3 Page 12 fodder to feed 1.5 - 2 milk buffaloes or a pair of bullocks adequately (Annex 5, para 58). This practice of intercropping with fodder pulses (particularly for maize) would be mnore suited for the Hills because the main crop is usually planted earlier. The additional advantage against erosion by keeping the slopes under more intensive cover is also important.

42. As a result of fodder crop production and better feeding, high quality manure could be produced if care is taken to collect not only the manure but also the urine (Annex 5, para 55). Farmyard manure has an im- portant role as a source of nitrogen 1/ and potassium, particularly in the Hills, where accessibility and soil permeability problems predominate. Its important role has not been sufficiently emphasized but the soaring costs of inorganic fertilizers and the need for a readily available substitute, now make it imperative to do so. If proper care is taken to conserve manure, improved leguminous fodder availability could meet 25-50% of N and P and 100% of K fertilizer recommended rates for foodgrains 2/.

43. The interrelatedness of fodder, foodgrain and livestock activities should be noted. For instance, the importance of shorter duration grain varieties and improved ploughing (especially for seedbed preparation) would permit better accommodation of fodder crops. In addition, stall feeding would be more feasible as more fodder is available on the farm, making it easier to conserve manure.

44. In the Terai, the threshed paddy and wheat is usually stored on the farm in grain bins constructed of mud and bamboo and covered with thatch. The grain losses during farm storage in the Terai due to insects and moulds are estimated to be about 5%. Similar losses in the Hills are much higher and vary from 15-25% 3/. The storage methods there consist of placing the panicles or ears tied in bundles on raised platforms and covering them with straw or placing them in mud and bamboo bins. An on-farm storage program was started in 1972/73 by USAID in Chitwan consisting of the construction of concrete bins with concrete roofs (capacity 2-4 m tons), financed through the Agricultural Development Bank (ADBN). The construction costs were Rs 1,500

1/ As a source of nitrogen, farmyard manure is more bulky, slower in its action and less effective than nitrogen available in inorganic fertil- izers. Its soil improving properties are however particularly impor- tant in lighter soils and in cooler Hill conditions where less leach- ing results. When used as basal dressing it enhances the response to inorganic fertilizer.

2/ Ranging from nutrient levels of 40-120 kg N, 30-80 kg P2 05 and 20-40 kg K20 (with rice and wheat at the lower levels and maize at the higher levels).

31 Estimates from mission's field trips. ANNEX 3 Page 13

- 2,000 cash, repayable in 4 years. Complaints have been made concerning con- siderable temperature build-up in these bins resulting in a rapid increase of grain moisture content. These problems and the construction costs could be reduced with a modified and simpler design. For example, with the use of locally made bricks, costs may be reduced to about Rs 800 each. 1/ Medium term ADBN credit should be supplied to promote this type of storage. Alter- natively, improvement of present methods can be made by constructing simple grain bins made of hollow bricks covered with lids and thatch roofs to pro- vide shading of the walls. The hollow bricks and the thatch shade provide sufficient insulation and shade to prevent high temperature build-up in the bins.

Research Emphasis

Varieties

45. The development of short duration rainfed rice varieties for the Eastern Terai and Hill Valleys should have the highest priority in DA's crop improvement programs since the limited irrigation facilities and climatolog- ical factors do not permit optimal performance of the introduced IRRI varie- ties. Although the expansion of irrigation and rehabilitation of existing schemes will be increasing, the majority of rice areas will have to rely on rainfed husbandry. For the rainfed conditions in Eastern Terai, varieties such as Ch 45, Padma, Ratna, Jabarmati, Pussa 22-1 in addition to short dura- tion local varieties such as Mansuli and Marinda offer a source of genetic material for further varietal selection. The emphasis in varietal develop- ment should be on selection rather than on cross-breeding as the first would result in quicker results.

46. Varietal development for the hill valleys should concentrate on the selection and evaluation of local genetic materials. Field testing of 10-15 selected varieties should be initiated under actual farming condi- tions country-wide using simple non-replicated farmers plots but with a sufficiently large number within each locality (or ecological unit) to per- mit statistical analysis of the results. After the first year of field testing, the number of varieties could be reduced to 6-10 varieties to be evaluated in the second year. The same procedure bUL possibly with a lower number of selected varieties should be repeated in the third year. Seed multiplication of outstanding varieties in specific ecological zones should start after the second year of field testing. The exrtension service and progressive farmers should be made responsiole for the implementation of this testing program since they are in a position tc evaluate farmers' acceptance.

1/ Estimates by R. B. Shresta, Farm Manager at Kumaltar. ANNEX 3 Page 14

47. For the irrigated areas, the present rice HYV's offer sufficient varietal choice both from local stock and from new varieties developed by UPAU at Patnagar, India (See Table 4).

48. Field testing of promising varieties for local adaptability should take place initially at the regional crop development centers (para 60) fol- lowed by testing of the most promising varieties on farmers fields in adja- cent areas. This procedure in combination with local seed multiplication of those varieties (by contracts with farmers) would lead to much faster introduction than the present system, with new varieties tested only on DA experimental stations and farms.

49. The variable performance of the "japonica" rice varieties in the Hills (Appendix 2, para 6) also warrants more extensive testing in farmer fields for key rice growing areas. Nepal should not develop its own breed- ing program for new wheat varieties, but rely on the introduction and eval- uation of genetic material from CIMMYT, UPAU and Pakistan. Maize research has reached the stage where extensive field testing of the improved high- lysine varieties are required.

50. Attempts should be made to assess the performance of improved varieties under actual farm conditions. Where the distribution of fertil- izers and improved seeds cover the same area, an analysis of the yields through crop cuttings at harvest may be undertaken by DA in conjunction with the preparation of farm plans by the extension staff for ADBN. This evaluation of actual performance would be particularly useful for guiding research and seed multiplication policy.

Integration with Livestock Research

51. The use of improved varieties may not result in significant food- grain yield increases if not accompanied by fertilizer use and proper crop husbandry. The prospect of high imported fertilizer prices and the reflec- tion of Nepal's ruggedness and landlocked position in high transportation costs necessitates: (a) priority attention to integrating nitrogen-fixing fodder with foodgrains and to improving production, collection and use of high quality manure (see Annex 4, Appendix 3 for details); and (b) focus on the economics of chemical fertilizer use (particularly in combination with manure) under various ecological and local conditions.

52. Research for integrating foodgrain with livestock/fodder produc- tion should be undertaken at the proposed livestock development centers (Annex 5, para 67) established in conjunction with the crop development centers, and in farmers' fields.

Fertilizer Research

53. Research results show that although wide ranges of fertilizer re- quirements occur in different ecological zones, the DA's recommendations of fertilizer requirements for the major foodgrains are generally appropriate ANNEX 3 Page 15

except for possible underestimation of N requirements in some areas (Appen- dix 2, para 23).

54. With the internal transportation and distribution problems, DA and AMC should seriously consider concentrating on two types of fertilizer for research and distribution--namely a 20-20-10 complex and urea. When applied at the rate of 200 kg/ha, this complex fertilizer should meet the basal requirements for nitrogen and all the phosphorus and potassium re- quirements. Emphasis on top dressings with nitrogen, which are essential on Nepalese soils, should be on urea. DA should also evaluate the agronomic and economic advantages of sulphur coated urea over ordinary area both for irrigated and rainfed rice. Sulphur coated urea has a real potential for increasing the effectiveness of applied nitrogen where flooding is delayed or intermittent and the use of other nitrogen carriers results in high losses due to volatilization and leaching. 1/

55. In order to demonstrate the effects of fertilizers and to assess nitrogen response for rice similar to that shown in Figure 2 (with calcula- tions of benefit/cost ratios), attention should be focused on non-replicated trials on farmers' fields within each identifiable ecological unit, testing 2 or 3 rates of complex 20-20-10 in combination with topdressing of 1 or 2 levels of urea. The number of plots in each of these trials should not be more than 5 or 6 so that they can be easily handled by the extension serv- ice, who should have the responsibility for implementing this program. Pro- gressive farmers can play a key role in undertaking these trials on their fields. Because of its simplicity, the advantages of basic NPK applications and incremental N applications are easily demonstrated. Feedback of yield data and other relevant information by extension workers and progressive farmers participating in this program will enable the research workers to establish the optimal N response curve for each ecological zone. The present regional research farms and the proposed regional crop development centers should have staff directly responsible for the planning and implementation of these farmers' trials.

56. DA should pay greater research attention to the possible N supply from green manures grown during the dry season to provide cattle with fod- der such as berseem clovers, sunhemp, mung and rice beans. Maize research should emphasize: (a) legume intercropping (such as soybeans, mungbeans and cowpeas) and rotation with legume crops (such as sunhemp and field peas) should be studied from the standpoint of cattle fodder and soil N supply; (b) the production and preparation of animal manure and compost, and their ability to supply various nutrients; and (c) basal applications of 20-20-10

1/ Source: International Rice Commission, Thirteenth Session of the Working Party on Rice Soils, Water and Fertilizer Practices, Bangkok, October 30 - November 3, 1972. ANNEX 3 Page 16 complex fertilizers at rates of 100 and 200 kg/ha in non-replicated trials on farmers' fields (in order to test the N response curve and N efficien- cies) for the various ecological zones.

57. Fertilizer research for wheat should be based on the use of farm- yard manure and fertilizers following the farmers' plot technique outlined for rice and maize.

Pest and Diseases

58. An indicative survey to determine the extent and magnitude of infestations by stemborers and soil insects in maize is urgently needed. This survey should make an inventory of the entomological work undertaken so far in maize. As part of this survey, extension personnel should be instructed in the identification and epidemiology of these major pests. Simple trials testing a limited number (3 to 4) of chemicals should be set up on the regional crop development centers and farmers' fields. Em- phasis should be given to granular or dust formulated insecticides that are relatively easy to apply. Although chemical control may be feasible for some pest infestations, major emphasis in developing resistant varie- ties is still required for most maize diseases.

Improving Production Support Services

59. Improving research and the development of improved varieties can only benefit the small farmer if the research is adapted to farmers' con- ditions, and the recommended improved technology can be packaged and dis- seminated to the farmer through improved supporting activities.

Adaptive Research

60. Adaptive research for local conditions is more important in the Hills than in the Terai because of the higher variability in the former. Research in the Hills will be further supported by a UNDP Hill Agriculture Development Project (pending government 's approval) through the establish- ment of a Hill Agricultural Development Center to coordinate and dissemi- nate information relevant to Hill agriculture. Decentralizing adaptive research to the four development regions for each of the three ecological zones (Upper Hills or Mountains, Lower Hills and the Terai) can be done by selectively expanding and strengthening (both with staff and facilities) existing research stations or farms in most of the sub-regions into the planned regional crop development centers. Testing of adapted varieties and fertilizer rates could then be conducted simultaneously by these re- gional centers and by progressive farmers on demonstration plots (paras 46 and 55). ANNEX 3 Page 17

61. At the district level, consideration should be given to selective- ly activating district coordination committees 1/ as a forum to discuss the appropriateness of distributing or testing improved production technology. Periodic crop conferences at the regional directorate level attended by district level research and extension officers, farm leaders and village committee mpmbers, would also be useful in assessing the effectiveness of research recommendations.

Seed Supply

62. A National Seed Committee was formed in 1973 (with AMC and DA com- prising the key members) to: (a) decide on variety recommendations; (b) pre- pare the program for seed multiplication and (c) guarantee purity and quality of multiplied and imported seeds (primarily foodgrain). AMC will be responsi- ble for the certified seed multiplication program, while seed inspection will be handled by the Botany Section, DA at Kumaltar. With the UNDP/FAO-assisted seed processing plant being constructed in Hetaura and an FAQ seed specialist to be assigned there, seed testing should be transferred to Hetaura.

63. In view of AMC's limited capacity, timely negotiations should be started with TDC 2/ to supply the Nepalese Terai requirement of rice varie- ties like IR 8, Jaya, IR 24, IR 20, Patna and Ratna, wheat varieties like PR 21 (Sonalika), S 308, S 331 and Pitic 62, and selected oilseeds and pulses. Nepal will still have to provide its maize seeds countrywide; wheat and rice (particularly the "Japonica" varieties) seeds for the Hills; and rainfed rice varieties for the Terai. Expansion of local seed multiplica- tion capacity is therefore necessary. Where possible, breeder and founda- tion seed requirements should be obtained from UPAU. Despite the construc- tion of a seed processing plant in Hetaura, the needs of the Hill areas less accessible to Hetaura, requires an assessment of the feasibility of setting up regional multiplication centers attached to the regional crop development centers proposed for extension and adaptive research (para 60).

64. An improvement of AMC's capacity to handle certified seed multi- plication is urgently needed. Selection and field supervision of contract growers remain the most important activity in seed multiplication. We re- commend the establishment of a Seeds Division in AMC to primarily undertake

1/ Comprising tne Secretary of tile Ministry of Food, Agriculture and Irri- gation (Chairman), the general manager of ADBN (coordinator), tile direc- tor generals of DA, DIiIM, and FAMSD, the general manager of AMC, tae Registrar of Cooperatives, representatives of Ministry of Finance and a few advisors.

2/ If sufficient notice (at least one year) is given, TDC can provide the rice varieties. It is questionable whether TDC has the export capacity for certified wheat seeds. ANNEX 3 Page 18 the important task of ensuring good standards of varietal purity, disease control and good cultural methods by the contracted seedgrowers.

Fertilizer Use

65. Improvements in fertilizer delivery may also be achieved by stream- lining the cumbersome procedures of assessing fertilizer requirements 1/. Efforts to diversify sources of fertilizer imports should be undertaken, par- ticularly through bilateral-aid arrangements. Consideration should also be given for permitting private sector to import fertilizers as agents of HMG. The extent of future chemical fertilizer use will, however, primarily be de- termined by future output - fertilizer price relationships. Present (1972) and projected (1980) urea prices per m ton (in current terms) are given below:

International/ Nepal (f.o.b. Europe & Middle East) (Retail)

1972 US$59 US$145 or NR 1,535/

1980 US$145 US$231 or NR 2,437

% Increase 145% 59%

/1 IBRD, Commodities and Export Projections Division, Price Forecasts for Major Primary Commodities, Report No. 467, June 19, 1974.

/2 AMC.

66. If Nepalese farmers face a 60% increase in urea prices by 1980, the guideline for a "profitable" incremental revenue/cost ratio (sufficient to justify the added risks of application) would increase from 2:1 to 3.2:1. At 1972 product prices, applying urea in 1980 becomes a marginal activity in three additional areas (Kavre, Nuwakot and Bara) for paddy, one additional area (Kavre) for maize, and one additional area (Kavre) for wheat. As an illustrative example, the required price increases for paddy, maize and wheat to achieve such a "profitable" ratio (based on DA/FAO research on farmers fields) are summarized below:

1/ Detailed in Annex 7, para 62, essentially involve the joint revision and simplification of the farm plan (currently prepared by JTA's and ADBN staff) with the additional participation of AMC or its dealers in the process of assessing fertilizer requirements. ANNEX 3 Page 19

1972 Revenue/Cost Ratios/ 1980 Required Product Price Increase () Paddy Maize Wheat Paddy Maize Wheat

Kavre (Hills) 2.4:1 2.6:1 2.3:1 33 23 39 Nuwakot (Hills) 2.4:1 3.3:1 4.4:1 33 - - Makwanpur (Inner Terai) 5.6:1 2.0:1 3.6:1 - 60 - Chitwan (Inner Terai) 2.0:1 1.3:1 1.8:1 60 146 78 Bara (Terai) 3.0:1 2.1:1 3.6:1 - 52 _ Passa (Terai) 1.9:1 n.a. 2.1:1 7 n.a. 52 Rautahat (Terai) n.a. 2.0:1 n.a. n.a. 60 n.a.

/1 At a N level of 140 kg for Paddy and Maize and 120 kg for Wheat.

Required commodity price increases at the farm level would range from 0 - 150% in order to make foodgrain cropping for cash profitable. Although these range of increases would probably take place, the impetus to improve the integrated livestock -crop - fodder systems to generate more and better manure remains very important.

Extension

67. Improvement of the extension service is required in terms of strengthening the extension base by (a) increasing the number and quality of qualified JTA's and JT's, and (b) utilizing progressive farmers and re- tired Gurkhas in the extension process.

68. The Institute of Agriculture and Animal Science (IAAS) is making a good start at its new campus in Rampur (Chitwan District) which provides better training facilities (especially field training) than its former lo- cation in Kathmandu as the College of Agriculture. IAAS intends to make greater use of research stations and research farms for field training. In addition, arrangements are being made to train students and JTAs for irri- gation extension at IAAS, the Nepalese Engineering Council and the Technical Training Institute in Kathmandu.

69. A new evaluation system for IAAS candidates now favors applicants with agricultural background (and knowledge) and candidates from the more remote Hill areas. This should alleviate the high dropout rate (65% in 1968) in the JT/JTA training program, as well as produce graduates more willing to be posted to the Hill areas.

70. More effective use should be made of progressive farmers and retired gurkhas in agricultural development. Some progress has been made in training progressive Hill farmers in the Lumle agricultural farm (under British assistance) but this approach has not been systematized. Progres- sive farmers should be selected for short training in improved farming ANNEX 3 Page 20 methods so that they can be engaged as village level extension workers ("leader farmers") and be paid for their assistance in extension. Many gurkha army returnees trained in mechanical and agricultural skills are ineligible to join government services because they are over the thirty- five year age limit set by the Public Service Commission. These rules should be changed but, in the meantime, alternative ways of using this untapped resource should be assessed. They could, for example, be used as paid "leader farmers" and quasi-government corporations should be en- couraged to give priority to their recruitment.

71. In addition to greater use of research stations for training, a more viable link between agricultural research and extension requires an improvement of Nepal's agricultural information service.

D. PROJECT POSSIBILITIES

72. A comprehensive Seeds Development 1/ Project is proposed for for- eign financing. In addition to the breeding, multiplication and storage of seeds, this project would support adaptive research to select improved seed varieties suitable for various ecological zones and selected localities in the Hills. The project would involve:

(a) infrastructure support for (i) the proposed crop development centers of DA and (ii) seed testing, storage and distribution facilities for improved seeds to be distributed by AMC:

(b) technical assistance to improve the breeding and multiplication program of DA and AMC respectively.

73. A study is required to: (i) review research and other available data on the most promising varieties of seeds in major production areas and Hill valleys (including their deterioration under storage); (ii) review the present seed production, storage and distribution systems and their defects; and (iii) assess the regional seed requirements, and the need, feasibility and possible location of seed multiplication and storage centers in addition to that in Hetaura.

74. A separate agricultural research framework study is also required to determine the framework for national crop/livestock and farming systems research which would include the analysis of Nepal's agricultural research

1/ Although foodgrain seed development is the major activity, potatoes, oilseeds and fodder seeds should be included. ANNEX 3 Page 21 structure and research programs relevant to accelerating agricultural pro- duction. This study should lead to: (i) the preparation of a long-term master plan for foodgrain and other agricultural research, and (ii) recom- mendations on short and medium term emphases which can lend itself to in- corporation into proposed projects with large agricultural production com- ponents. ANNEX 3 Page 22

Table 1: AREA UNDER MAJOR FOODGRAINS, AV 1972 ('000 ha)

Major Paddy Maize Wheat Fbodgrains (1000 ha)(%) ('000 ha)(%) ('000 ha)(%) ('OO ha)(%)

Eastern Terai 640 54 . 42 10 66 27 748 ho Western Terai 284 24 5p 13 56 23 398 21 Sub-total _92 78 100 23 122 3 0 ,1h6 SE

Inner Terai 74 6 56 13 16 6 146 8

Eastern Hills 43 4 97 22 10 4 150 8 Western Hills 103 9 159 36 71 29 333 18 Sub-total T1 13 256 3B S T33 M3 7

Kathmandu Valley 32 3 28 6 27 11 87 _

Total 1,176 100 440 100 245 100 1861 100

Source: Annex 8, Table 13. ANNII 3 Page 23

Table 22 AL.1., C. I(0. :.LD.., (i'CP I.:O 1.(Oo.: c:l ., IrY M:fiONS

Crop Year I -7 L.[Anytual Ral.e Of Grc,wth .3 .-1 *''-'2'/2"77_3/ Crop ~Ycax ~ ~ ~ ______71 r-AIv"1r Ju?', 3 L,O * ;r a : Q:. i' (0(Xt) ha) (0Do m 2on)(a lorvha) (>)J ha) (0t, . .on)(m Ton/h.) (oOD ha) (QuO ra Ton)Qar4 o'7J)

PA.Xl

Eastcrnl Terai 619.9 1,162.L 1.07 640.14 1, 1. 1 1.71) .0 -.7 _1. LVcTc-

l,,.- T,rai 72.2 ih1.i l.9i9 77 15'3 2.03 .1. 1.3 .0

.A- rn 8i1ls 39.1, 1i13.3 2.7: )Lz.9 5D. 2.21. 2.6 -1.7 -_ .. rrl Hi lls D j .9 2 1371.? 3* I 22.0 ."1. 8 _. 2 . - ,ct-alI 1,.>. .2 :i23. o 773 l.Thi.A v . 3.2 -2.21.0

.'/ 75-Ar,,u Oll vy /14 7".( 97~.2 2.05 . _ 9 173. 3.23 *&ll 2 i

a I I 1,1. 7 2,11L.5 1.60 1,176.0 2,1i '1- 1.8j )? Dl

l50.1 7b.6 1.;' 11.9 ^l. 1.52 -3.7 °- -0 tie5 rn te!ai [7/ t).7 .? .1 7 3.5 1.:.2 - a '.7 !-:.ctal YY I -)D 77 61 W 2.1 -2. 1 0

Ii.: Terai 50.n 97.6 12. 55.d 11lj9 2.05 2.2 3.1, 1.>'

is s1.: 'kils 98.7 201Di 5 27.7 171. 5 1.77 0.3 -7.1 -'r'n 1r '. ' _ 3Hi. 7 ..7 1.7 -*.. 3 _ -D.C v d 1 2, .1.7 i; 1 ,97. Xu> 3 -- T- 4 2. 0 - .

XA Idle; L1 26.212 65le9 .9, 8.-7 . 1. Q2 1.6 2.? 0.5

i,37.7 bo.d 1 1.W! L39.6 772. 1.75 0.1 -0.9 -.

F.,stern Terai 2B.0 25. 8 9 65.6 62.6 .95 18.6 19.. .6 .i,strn Terai 23.7 22.' '1L ,.6 S1. .92 18.6 18.2 -.L "It-total L Q.1 72T:t 7 Y 7 TM I IXI 18. 5 1 89 .2

Irtnmi Tsrai 6.6 6. .97 15.6 13.2 .85 18.8 15.6 2.7

;as.e-nHtlls 7.0 7.9 1.1, 10.2 12.8 1.25 7.9 10.1 2 J_2tCP4I Hills 60.1 83.1 1.3 71.1 7 .99 3.5 3 - 6.S .u4. t tl.' 67.1 91.0 1. 8.3 3 1.03 3.9 -1.8 - 5.6

6 atlu;sr.Au Valley L 22.1 2!,8 1.12 27.0 3?.9 1.22 4.1 5-. I5 11G.4 Total 1L7.5 170.3 1.1S 245.1 21.3.5 .99 10.6 7.- - -3.

TOTAL. MIAJORFOODCRAI1S 1,706.9 3,093.3 1.81 1,860.7 3,200.7 1.72

/I Average 1965/66, 66/67 ard 67/68. / Average 1970/71, 71/72 and 72/73. 75 Growth rates may not add due to rounding of yielaos. .-A9 ici-to ar. -,i cl, a,1

Ftreood ar.d .. lc't-l"rlct-roriccs Dent., 'lI,! S,rm':-r 1973. ANNEX 3 Page 24

Table 3: AREA UNDER IMPROVED FOODGRAIN VARIETIES, AV 1969/70-1971/72

Improved Paddy Improved Maize Improved Aeat % of Total % of Total % of Total Area Paddy Area Area Maize Area Area Maize Area ('o0o ha) ('000 ha) ('000 ha)

Eastern Terai 33.6 5 3.4 8 45.7 78 Western Terai 14.3 2.7 4 20.8 38 Sub-total 5 7.9 T. 66.5 60

Inner Terai 304 4 2.7 4 4.9 35

Eastern Hills 1.1 1 1.2 1 1.8 17 Western Hills 1.2 1 1.8 1 6.o 8 Sub-total 2.3 1 3.0 1 7-T 10

Kathmandu Valley 13.1 41 2.3 8 16.7 61

Total 66.7 6 14.1 3 95.9 41

Source: Annex 8, Table 20. Table 4: RICE HIGH YIELDING VARIETIES

Variety Duration Grain Quality Yield Potential Diesease Susceptibility Comments (days) (m tona/ha)3

Taichung No. 1 110-115 Small, coarse 2-3 Blight, blast, Helminthosporium Japonica type

IR 8 140-145 Long, bold 3-4.5 Bacterial blight and blast

IR 20 135-145 Long, slender 3-4 Very disease- resistant

IR22 2-3 Limited

IR 24 125 Long, slender 2-5

Jaya 130-135 Long, bold 3.5-5.5 High response to Nitrogen

Padma 110-120 Short, bold better 2.5-4 Early maturing than IR 8 photo insensitive

Ratna 105-110 Long, slender 2.5-4.5 Very early drought tolerant

CR44-35 115 Long, slender 2.5-4.0 Cross IR 8 x TUM 6

Passa 22-1 110 2.5-3.5

CD PO VIx ANNEX 3 Appendix 1 Page 1

FOODGRAIN CROPPING PRACTICES

Terai

1. During the main (monsoon) season paddy is the predominant crop, consisting usually of the long duration varieties (more than 130 days) planted in May-June and harvested in September-October. Grown mainly on inundated areas near rivers, land prepration consists of plowing (3-4 times) and crossplowing by bullocks and planking the land for breaking and level- ing the large clods. Local manures are applied during the plowing opera- tions usually 2-3 cartloads (2-3 tons) per ha. Chemical fertilizer use is still very limited consisting mainly of nitrogenous fertilizer. Seedlings are raised on nursery beds, or more often on levelled and well prepared land. On the onset of the monsoon rain, the field is puddled for trans- planting. The first weeding is carried out 3-4 weeks after transplanting and the 2nd weeding 8 weeks. Estimates for mandays spent of weeding vary from 10-30 mandays per ha.

2. In areas with water control, double cropping of paddy is practiced with a 100-110 day duration rice crop planted in April-May and harvested in early August. Cropping practices are similar except land preparation start in March-April. For the second paddy crop, land preparation takes place in early August, usually consisting of not more than 2 plowings followed by planking. Harvesting takes place at the end of October.

3. Maize planting in the Terai takes place in May-June on the higher free-draining lands. The land is ploughed several times and the seed is either broadcast or dibbled in the furrow. Seedrates are high, usually around 20 kg/ha. When the seed is dibbled in lines, the seed is spaced at 4-5 cm. The initial plant populations are 50-60,000 plants/ha. Usually maize receives most of the farmyard manure produced on the farm. This can vary from 5-10 tons/ha but depends on the number of farm animals per house- hold, and local manure availability.

4. Field preparation for wheat consists mainly of plowing the maize or rice stubble land once or twice and broadcasting the seed on the rough tilth at rates varying between 60-100 kg/ha. Little weeding is done. Farm- yard manure is applied, if it is available, at variable rates.

5. In the Western Terai, where only one rice crop is grown, the field preparation and planting dates are usually one month later than in the Eastern Terai. Difficulty may be experienced in sowing the wheat on time if the monsoon starts late, which delays the planting and harvesting of rice. ANNEX 3 Appendix 1 Page 2

Hill Valleys

6. In Kathmandu Valley little animal plowing is done for rice. Soil tillage is usually by means of a hoe throwing up ridges of 1-2 feet wide on which the seedlings are transplanted.

7. Seedlings are grown on raised nursery beds. In the case of rain- fed paddies on which the water is retained by bunding and terracing, trans- planting is done in July. Very oftern farmers try to grow an early maize crop before rice if the rains come early in April. Much labor is put into land preparation, transplanting and weeding in the Hills (average 190 man- days in the Hills compared with 100 mandays in the Terai). Chemical fertil- izers are still little used outside Kathmandu Valley. Terraced irrigation is commonly practiced in the Hills. Most of this is a "water retention" type irrigation with the water flowing from the higher to the lower fields. Where possible, farmers construct simple local diversion structures to bring supplementary irrigation water to their fields.

8. Wheat is sown mainly in the Terai and Valleys in October - November. It takes about 180-200 days to mature. Soil preparation consists of 1 or 2 plowings at the most and the wheat is broadcast at a seedrate of 80-100 kg/ha. Little or no weeding is carried out. Occasionally barley or peas might be grown instead of wheat.

Hill Slopes

9. On the hill slopes maize is often grown as a mixed crop either with soybean or other pulses sown simultaneously, or with finger-millet seedlings that are transplanted in July-August when the maize crop is still standing in the field. This interplanting is possible because the original plant population will often be naturally thinned out to 20,000-25,000 plants per ha by heavy insect attacks. The ripening period of maize depends on al- titude, rainfall and varieties but is usually in the range of 90-120 days in the hills. Land preparation consists of manure spreading and intensive bul- lock plowing during the month of February. Maize planting starts in mid- February in the Upper Hills and up to the end of March or April in the Lower Hills and Kathmandu Valley, depending upon the weather and elevation. The harvested maize is usually stored on the cob by tying the cobs to a pole. Maize is followed bv either millet planted in July-August or wheat or mus- tard sown in October-November. In the Upper Hills wheat is sown as a second crop as early as September and October and takes longer to mature than in the Lower Hills. Potatoes may be planted instead of wheat particularly in the Eastern Hills. ANNEX 3 Appendix 2 Page 1

RESEARCH RESULTS FOR FOODGRAINS

Rice

1. The present rice research program comprises: (a) introduction, selection and breeding of new varieties; and (b) field testing of selected varieties (primarily in the form of fertilizer trials), disease and pest susceptibility, and planting dates.

2. New Varieties. This activity is closely linked with IRRI. The program receives F4 and F5 lines of promising new IRRI crosses for selec- tion under local conditions and participates in the International Blast Nursery, and Cooperative Variety Trials. In 1972, about 150 local varie- ties were selected for evaluating performances in yield, plant type, duration and grain characteristics. These varieties are being tested and evaluated both at Parwanipur and at IRRI. DA also maintains contact with the All India Coordinated Rice Improvement Program at Hydrabad and with Uttar Pradesh Agri- cultural University (UPAU) at Patnagar, India for the supply of new varie- ties for breeding. These trials have resulted in the release of IR400 as Parwanipur 1 for irrigated areas and areas with high water-table and less permeable soils in the Terai and Inner Terai. Extensive trials for recom- mendation to areas other than those corresponding to Parwanipur conditions has yet to be undertaken.

3. Variety Tests. The IRRI varieties recommended for the Terai and Inner Terai (IR 8, IR 5, IR 20), although with a potential for high yields, have three main limitations compared with local varieties:

(a) longer maturation which limits performance and prevents double cropping with late monsoon;

(b) susceptibility to bacterial blight disease;

(c) lower straw yields.

4. Sowing date experiments 1/ with improved varieties showed high yields with early sowing, but sharply reduced yields with later sowings as shown below:

1/ Based on data in Annual Report No. 2 (1970/71) on Hardinath Pilot Demonstration Farm, Sun Kosi Terai Project, Nippon Koei Co. Ltd. ANNEX 3 Appendix 2 Page 2

_Sowing in March Sowin in Sowing in July Variet Yield Duration Yield Duration Yield Duration (m ton/ha) (days) (m ton/ha) (days) (m ton/ha) (days)

Taichung No. 1 6.8 126 3.5 124 2.4 120

Chainan 242 4.8 135 3.3 127 2.2 123

IR-8 7.0 149 4.2 145 3.9 140

IR-5 - - 5.1 173 3.2 140

The crop was well-fertilized with 80 kg N/ha for the March sowing and 120 kg N/ha for the May and July sowing. P2 05 was applied at the rates of 70 kg/ha for the March sowing and 100 kg for the later sowings. K20 was given at the rates of 15 and 20 kg/ha for respectively the first and other two sowing dates. The higher yields with the early sowing dates result from a very significantly higher tiller production resulting from the lower temperatures during the early sowings. The low yields with the late sowings show that the yield potential of HYV's during the main plant- ing season (may-June) in the Eastern Terai will be limited 1/. With most of the Eastern Terai rice grown under rainfed conditions, a late onset of the monsoon would enable sowing to start only in July. In this case, the duration of the HYV's (which can be harvested only at the end of October) would be too long, leaving the farmer little time for the field prepara- tion and sowing of the second crop of wheat or mustard.

5. Another factor that affects the performance of HYV's in Nepal is the sharp increase in bacterial blight with the late sowings. Attacks of bactertial blight during the early growth stages (which is the case with the late sowings) cause far greater damage than attacks during the later stages.

6. Another criticism raised by the Nepalese farmers is that the straw yields with the HYV's are much less than with their local varieties. High straw yields are important for livestock browsing in the dry season.

7. For the Hill val , initially the "Japonica" varieties Chainan 242 Taichung 176 and Chainan 2 were recommended and they have found wide acceptance in Kathmandu Valley and Nuwakot district 2/. They are now being

1/ If yields of around 4 m ton/ha with IR 8 are obtained under very well- managed experimental conditions the May-June sowings, corresponding yields under average farming conditions usually cannot be more than 65% (2.6 m ton/ha).

2/ Basnyat and Bhattari: Performance of Taiwanese japonica rice varieties in the Kathmandu Valley, IRC, Newsletter, 18/3/1969. ANNEX 3 Appendix 2 Page 3

replaced by newer "japonica" releases Chainan 1, Taichung 75 and IR 20. The "Japonica'" varieties, however, require high fertilizer levels for optimal performance and appear to be susceptible to nematodes, Relminthosporium, false smut and blast 1/. Their duration makes them suited for either double- cropping or a maize-rice-wheat rotation as is often practiced. In general, under well fertilized conditions, they can outyield local short duration var- ieties by 80-100%. However, trials on farmers fields conducted in the Gandaki zone 2/ with local and recommended "Japonica" varieties highlighted two dis- advantages of the new "Japonica" varieties:

(a) Performance was variable. There were places where one improved variety proved to be greatly superior to others, while in other places local varieties did much better. Micro-climate and soil conditions vary considerably in the hill valleys and the range of improved varieties was probably not wide enough to suit local conditions.

(b) The improved varieties generally demand a higher standard of cultivation and plant protection. Being earlier maturing they are more prone to heavy attacks by insects and birds than local varieties.

8. The research program at Parwanipur has made crosses of IRRI varieties with selected local hill varieties of which the F5 and F6 gen-- erations look very promising. It is expected within 2 years time a num- ber of high yielding varieties with local adaptability will be available for extensive field testing and may be released in five years. Meanwhile, the "japonica" varieties and IR 20 are the only improved varieties avail- able for the Hills.

9. Fertilizer Trials with IR8 conducted in the Eastern Terai 3/ over 2 years during the monsoon season showed that 120 kg N/ha and 60 kg P 0 P205 raised yields by about 1500 kg paddy over the unfertilized plot yields (2,400 kg/ha). The efficiency of N was 12.5 kg paddy/ha N.

10. Two-year results with IR 20 on farmers' fields in six districts conducted by DA/FAO 4/ showed linear response up to 140 kg N/ha, significant

1/ Verbal information by Dr. Sai, Rice Coordinator, DA.

2/ Source: Nepalese - German Gandaki Agricultural Development Project, 1969-1971.

3/ Sun Kosi Terai Project, Nippon Koei, Ltd.

4/ Source: P. Y. C. Damen: Preliminary Statistical and Economical Analysis of Fertilizer Experiments on Paddy, Maize and Wheat (in- terim report UNDP/FAO-NEP 70/512) Verbal information by FAQ team. ANNEX 3 Appendix 2 Page 4 response with moderate application (50 kg) of P205 and slight but no signif- icant increases from K20 applications. The response curves and N efficiencies found in the various experiments are shown in Figure 2. Nitrogen efficiencies ranged from 10-28 kg paddy per kg of N.

11. Local varieties appear to respond well to medium N-application in the hills. Fertilizer demonstrations with local varieties conducted in 4 districts of the Gandaki zone 1/ demonstrated that yields of 4.8 m ton/ha could be obtained with application of 40 kg N and 30 kg P205 per ha compared with yields of 3.6 m ton/ha on non-fertilized plots.

Maize

12. Maize research is being conducted in the following locations, corresponding to lower altitudes (Terai and Inner Terai), mid altitudes (Lower Hills) and high altitudes (Upper Hills):

Low-altitude - Rampur, Parwanipur, Janakpur, Nepalganj, Doti, Sarlahi

Mid-altitude - Kumaltar, Khairamitar, Dhankuta, Surhet

High-altitude - Kakani, Jiri, Jumla, Daman and Palpa.

Most of the breeding and selection work will continue to be undertaken at Rampur, Kumaltar and Kakani while other stations will mainly be used for variety testing. The programme has received much technical assistance from USAID in the form of material and personnel (including a CIMMYT maize specialist assigned to assist the program and particularly to introduce and develop high lysine maize varieties).

13. Results of two years of fertilizer experiments on farmers fields with local improved varieties (mainly Kumaltar yellow and Rampur yellow) conducted in six districts showed 2/ generally linear responses up to 140 kg N/ha although the slope of the response curves showed considerable variation from one district to the other (Figure 3). Yield increment above 140 kg N/ha was usually smaller. In most locations, responses to applications of P205 ranged from 35 to 90 kg/ha with exception of Chitwan where no response was found. Responses to about 30 kg K20 occurred in three districts.

1/ Gandaki Project, 1969-71, op. cit.

2/ Damen, op. cit., ANNEX 3 Appendix 2 Page 5

14. Experiments in the high altitude Kakani farm showed increased Kakani Yellow yields of about 83% (with 40 kg N, 40 kg P2 05 and 40 kg K20) above unfertilized yields (1971/72). 1/ Higher N. P, and K levels did not produce significantly higher yields.

15. Fertilizer demonstrations with a 60-60-0 (N-P-K) in some 50 vil- lages in two hill districts in the Gandaki zone 2/ showed the following responses:

Minimum Maximum Average

Yields without fertilizer (kg/ha) 1540 2800 2100

Yields with fertilizer (kg/ha) 2800 4900 4060

The mean increase in yield from applying fertilizer with manure (at farmers traditional rates) was 85.3% (100 demonstrations). Preliminary trials also showed that 16 tons cow manure alone increased the yield about 2.5 times over the unmanured control.

16. Little research has been undertaken in chemical control of stem- borers, despite problems with this pest in Hill areas. Chemical control with DDT, BHC or carbaryl has been found to be very effective in India and can result in yield increases of 100-250%. 3/

17. In addition to these results obtained from India, there are sufficient indications that insecticide application in Nepal can result in large yield increases. Maize grown in the winter season with low incidence of pests and diseases nearly doubled its yield. 4/ Control yields in fertilizer experiments in Terai and Inner-Terai where insecti- cides were applied were considerably higher than the average yields. 5/

1/ Source: G. P. Deo, Effect of Different Combinations of NPK fertilizers on the Grain Yield of Maize under Kakani (Hill) Condition, Crop Science Conference 1973, Lalitpur.

2/ Gandaki Project, 1969-71, op. cit.

3/ J. H. Stapley & F. C. H. Gayner, World Crop Protection Vol. 1, Pests and Diseases, London 1969. M. G. J. Jotwani & W. R. Young, Sorghum insect control in India, World Farming 13 (9) 1971 D. B. Reddy, Plant Protection in India, Bombay, 1968.

4/ Source: Verbal information Maize Coordinator, DA; Development Potential of the Nawalparasi Area of Nepal, Foreign Comm. Overseas Dev. Adminis- tration, 1972.

5/ Damen (1970/71), op. cit. ANNEX 3 Appendix 2 Page 6

With the present prices of insecticides and maize (both at (about 1 Rs/kg) the costs of insecticides application can be covered by a yield increase of 7-10% from the present average (150-200 kg/ha). 1/ Dusting with DDT 5% dust (in the leaf sheath) would probably be the most suitable way to con- trol stemborers since it does not require any equipment on the part of farmers.

18. Soil insects like army and cutworms are the major pest at higher elevations and may cause heavy damage in the hills. They can also be con- trolled quite effectively with products like DDT, BHC, clordane and aldrin. 2/ The problem with these pests is that one cannot forecast the timing and ex- tent of their attacks. Preventive spraying under Nepalese conditions should, therefore, not be recommended.

Wheat

19. Results obtairked with variety trials conducted at the Hardinath Pilot Farm 3/ showed the following yields:

Variety Local Lerma Rojo 64 Ssnora 64 S 227 Pitic 62 Ciano C 306

Yield (m tons/ha) 1.88 3.79 3.55 4.55 3.82 4.10 3.80

S 227 gave the highest yield followed by Ciano, Pitic 62, Lerma Rojo 64 and C 306. C 306 lodged heavily when fertilized and Sonara 64 proved susceptible to smut. In other trials, RR 21 (Sonalika) and S 227 showed highest yields of respectively 4.27 and 4.04 m ton/ha. The superior performance of S 224 Lerma Rojo 64 and Sonalika was confirmed in a coordinated variety trial with DA.

20. Fertilizer experiments conducted at Hardinath Farm 4/ with the var- iety S 227 showed the following results:

1/ For instance three rounds of dusting with BHC dust 5% at 40 kg/ha which provides an effective control of Chilo zonellus would cost about 120 Rs in materials. D. B. Reddy, Plant Protection in India, Bombay, 1968; M. G. Jotwani & W. R. Young, Sorghum insect control in India, World Farming 13 (9) 1971.

2/ J. H. Stapley & F. C. H. World Crop Protection Vol. 1, Pest and Diseases, London 1969; T. K. Mukundan Plant Protection Principles and Practices.

3/ Nippon Koei, Hardinath 1970/71, op. cit.

4/ Ibid. ANNEX 3 Appendix 2 Page 7

Nutrient Rates Yield (kg/ha) (m ton/ha)

nil 0.83

10ON - 70P - OK 3.43

10ON - OP - 30K 2.72

ON - 70P - 30K 1.19

10ON - 70P - 30K 3.61

The experiments also showed that the standard dose of fertilizers necessary to obtain a target yield of 3.0 m ton/ha was 120 kg N/ha, 45 kg P205/ha and 7 kg K20/ha. Results with various N and P rates indicated that adequate P205 was essential for N response and that 100 kg N/ha and 60 kg P205 was the most economic rate. With 60 kg P205/ha the N response was linear (11.8 kg wheat per kg N applied).

21. The results of the DA/FAO fertilizer trials with the wheat variety S 331 broadcast at a seed rate of 120 kg/ha and conducted on non-irrigated farmers fields 1/ showed general linear responses up to the maximum N rate of 120 kg/ha (see Fig. 4). The response to P205 varied with location although in the majority response diminished above 60 kg/ha. The availability of soil phosphate and the response to applied P205 appears to be dependent on the soil acidity and the subsequent phosphate fixation. 2/ Responses to applied K20 did not increase yields significantly above 40 kZg/ha. The N efficiencies expressed as kg wheat produced per added kg N (fig. 4) vary considerably and are influenced by the organic matter and nitrogen content of the soils. In the case of Kavre (Kathmandu Valley) and Chitwan the values are low because in both locations the soil N supply is quite adequate. 3/

Range of Fertilizer Requirements

22. A perusal of the limited fertilizer research results allows the following generalizations on the range of fertilizer requirements for the major foodgrains in Nepal: (a) 40-60 kg P205/ha; (b) 0-40 kg K20/ha; and

1/ Ibid.

2/ R. K. Sharma & H. C. Dewan: Chemical Characteristics of Soils and Their Responses to Added Fertilizers under Wheat (interim paper 1973).

3/ Ibid. ANNEX 3 Appendix 2 Page 8

(c) Nitrogen requirements vary widely with the ecological zones and the crop (40-180 kg/ha). A more precise figure can be worked from simple test plots in farmers' fields. 1/

23. These ranges compare favorably with the official rates of fer- tilizer recommendations (as shown below) with the exception that in cer- tain areas nitrogen requirements may be significantly higher and K20 re- quirements much lower.

N P205 K20 ------(kg/ha)------

Paddy Terai 80-100 40-60 30-40 Hills 40- 60 30-40 20-30

Maize/ 120 80 40 /1 Wheat-/ 80-100 40-60 30-40

Sources: /1 DADO's visited by the Mission.

/2 Maize Coordinator, DA (Personal communication).

1/ Various levels of sophistication could be used. Under present condi- tions in Nepal, nitrogen requirements can be assessed by taking aver- age zonal yields as receiving negligible nitrogen. The expected yield increases can be calculated by applying the estimated nitrogen effi- ciencies which have been generally found (DA/FAO) to be linear up to 70 kg N. Based on actual and projected farmgate prices, revenue cost ratios may then be obtained. M -Iii ORGANIZATION OF THE MINISTRY OF FOOD.AGRICULTURE &IRRIGATION

EVALUATIO PLANNING P.OJ.CTs~~~~~~~~~~~~~~~~~~~~~FOJCSDLSI IVSO

JMNT BLICAFTA~~~~~~~~~~~~~~!'z-.;a~~~~~~~~~ F- DIVMO~~~~~~~~~ ~~~INTSECREIARIJONTSEREAR ADVISERS~ ~ ~ ~~~~~~~~flTSECRETARY

DEPARWENTOF AGRICULTI~~~~RE. DEPARTMIENT aFIROTO DEPARTMEN,OF FOOD DO EOTMN PROSOEIN DEPARTMENTOF AGRICULTURE_ HYDRO- METnOROLCGY DEPARNRENTIOF RE SINSCIORGENERA ~~~~~~~~~~~~~DIRECTOROFRERAL DIEC7ORGENERAL CROPRSESARCH DIVISION I DEPUTYDIRECTOR GENERAL HYORO- MEEOROLOYDIVISION FOODRESEAROD DVISIOPI AGRONIOMYSECTION ROTOMOLOGYSEnONDEPUTY DIRECTORDENEDAL CHIEFRESEARCH OFFICEAR [ AaRON04YsECTION sEcmoN ENTGMDLOGY ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~ECIO BOTANYSECTION SS. "ENCESECTON HYDROLOGYBECON QUALITYGONTROSCCTID VEGETABE DGVDECTON COORDINATROCROP OROLOGYEcTRITION RESAR SECTIN FRIPLAN OIN j O NIREIGSCTPMATEROLOGGYECTONCT OOD RECS-ML.SECTION PLANTPATSOIOGY SECT SDEVELOPMENT PROGR. FOODTESTING LABORATORY

ANIMALRESEARCH DIVISION IRRIGATIONPLANNING A DESIGN DIVISION MARKETINGSERVICES OIVISION OEPLTYDIRECTOR GENERAL DEPUTYDIRECVOA GENERAL CHIEFMARKETING OFFICER

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AGHO ENINN TANN DIVISION' EIIETO AGRSTATISTICS DIVISOR, DEPUTYDlqf.CrOR GENERAL lRArGjio coNsTRucTloNolVISIo. CHIE AGR7STCAIS >CIA.O DEPUTYDIREcToR GENERAL ASREXTENSION SECT RURALVYGTr SECTION CROPSTATISTICS SEFCTROA ANIMA STATISTICSSECTION ACR lNFoRMATnoNEECTHORINFORMATION SECT.TER I ATEEUSECTION STATISTICMETOMCS N ANALYSIS SECTION PLANNINGN ADMAINISTRATIONDIVISION DEPUrYDIRECTOR GENERAL' ECONOMICANALYSID DISISION ADMINISTRATIONSECTION CHIEFAGR ECONDMIST

PLANNINGJEVALUATIONSECTION, FINANCIALSECTON PRODUCTIONECONOSIC SECTION A.MIN. SECTION RUC ECONDMICSSECTION

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REGIONAL I RiSiRIAL REGIONAL ROEGIOAL REGIONAL REGIONAL REGIONAL REDIONAL DIRECTORATE DIRECTORATE DIRECTORATE 0GRCCTORATE DIRECTORATE DlRECToRATE DIRECTORATE DIRECTORATE

LURKHET POXHARA KATHMANOU OHANKUTA SARKHAT POKHARA KATHMANDO DRANAUTA REO DIRECTOR RAG.DIRECTOR REG DIRRECTOR RED DIRECTOR R T E. DIRECTORRED DRECT REGDIRECTOR ( AGRICULTURE AoRlCULTuRE AGRICUTLURE AGRICULTURE IRRIGATION IRRIGATION IRRIGATION IRRIGATION

DAIRYDEVELOPNENT CUAPORaTION |GVICULTIURE ..RKETINGCORPORATION AGRICULTUREOE.ELOP-ENV SANK NEPALREDEYLECMERYOMPASY

GENERALMANAGER GENERALH MANAGER GNNERALAANA(R

1RANCAMANAGERS BRANCHMANAGERS SRANCHMANAGERS Figure 2

FiL'ure 2: NITROGEN FERTILIZER RESPONSES FOR IMPROVED PADDY (IR20) IN SIX DISTRICTS (1971 - 72) PADDY YIELD Kg/Ha

6000 A MAKWANPUR

KAVRE --- PALANCHOK

* a' ~~~~CHITViAN

5000 a /- NUVVAKOT

00~~~~~~~~- /////~~~~~~

3000 --

S-ur- P J C Damen, P-el-i-av Stat.vt.cal and EcnmclA..Iy,., of F.mtl.-er E.P.riments .- PeddY. M.- te ad Wh-at, l971 - t972 R-edJEHei D.p.,".-n of RATES OF

2000 -gdutr 51nsr fFod eeutr kg/ha O Kg N 70 Kg N 140 Kg N 45 P205 45 '' P205 45 - P2O5 30 Kg K20 30 - K20 30 '' K20 Paddy N-rEff.c,e.cy (Kg Paddy/Kg N)- N.mtbe, of Ag,...lt.ral D,sri,cts 70 ICg N 140 Kg N Av Experjrments Practice

NUWAKOT 16.4 106 13 5 53 Ma.My w.rgated KAVRE PALANCHOK 8.3 84 8.4 28 Mamniy Irr,gated MAKWANPUR 17 S 16.7 17 1 33 Partly -rr.gated CHITWAN 14 0 12.3 13 2 47 Ramined BARA 10 6 13 5 121 46 Ra,nfed PARSA 12 6 128 127 32 Ra, nfed

'At 50 Kg P20s and 20 Kg K20

Wodid Eank-3913 ANNEX 3 Figure 3

I %re3: NITROGEN FERTILIZER RESPONSE FOR MaizelYield IMPROVED LOCAL MAIZE kar eld IN SIX DISTRICTS (1971 1972)

6000

RfAUTAFIAT

5000 _ 0

MAKWP ANPUR

*~~~~0 S.00~~~~~~~~~S _ _ Ht_C~ NUWVAKOT

3000 lt of ,/ _ _ _ _ ~~~~~~~~~~CHITiNAN

too

W-00 00fA SoA,ce P.J.C. Dcmen, Prelimifla(y StalisticaJ o ~~~~~~~~~~~~~~~andEconromical An-alysis of Fertsflzer JO Ex vfyl-ents on Parddy,Mnlze nnc Wheat, io, 1971t-t1972 0Feieltapstman, o1 be Agricufture, Ministfy .1 Food, Agroc.ltur. AESO

2000 _-t an APPtICATION O KgN 70 Kg N 140Kg9N 5C - P2OS 5i° " P2°s 'iO -P205 20 "KIC 20 "Ks,0 20 -K20 --D~~~~~~~~~~~~~~~~Wrl ak81

Districts N-Efflcienty (K(Imatze/KgNJ' NumtOr Of 70 Kg N 140 ICS N Av, Experinents NUWAKOT 14.9 7.17 1 4 30 N KAVREfiALANCHOK 10,9 10.1 f0S 44t MAKWANPUR G.B S 5 9 2 32 CFI ITWAN 6.8 5 0 5 9 44 BARA 17.3 12,i3 15,t 13 RAUTAHAT -S.3 109 2.3 5

'At 45 Kg P205 and 3 Kg K20 ANNEX3 Figure 4

Fi&!e 43 NITROGEN FERTILIZER RESPONSES FOR IMPROVED WHEAT (S331) IN SIX DISTRICTS (1971 - 72)

WHEAT YIELD Kg/Ha 4000C

NUWAKOT _ > B~ARA

PARSA

3000 o

o MAKWANPUR

KAVRE *'"' PALANCHOK

0, ~~~~~~CHITWAN

1000j ^,* /~0

Source P J C flaten, Preliminary Statistical and Economical Analysis of Fertlizer E p-rimants on Paddy, Maize and Wheat, 1971 - 1972 Revimedll Department of Agriculture., Mnistrv of Food, Agriculture and Irrigation RATES OF

0 1 I , _ _ i APPLICATION 0 Kg N 60 Kg NIHa 120 Kg NJHa

60- P2 05 60 Kg/P 2 05 60 Kg P2 05 /Ha 40 " K20 40 Kg K20(Ha 40 Kg K2 0IHa N-Efficiency (Kg Wheat/Kg N)

D)stricts Number ol 60 Kg N 120 Kg N Av Exerprments NUWAKOT 27.3 169 22.1 22 KAVREPALANCHOK 134 12.4 12 9 18 MAKWANPUR 13.8 14.3 14.1 20 CHITWAN 10 2 79 9.1 29 SARA 194 184 18.9 32 PARSA | 159 152 156 29

'At 60 Kg P2 05 -40 Kg K2 0 World Eank-8912 ANNEX 4 Page (i)

NEPAL

AGRICULTURAL SECTOR SURVEY

CASH CROP DEVELOPMENT

Paragraph Number

A. INTRODUCrION ...... 1 - 2

B. OILSEEDS ...... 3 - 12

Pungent Oilseeds ...... 4 - 10 Non-pungent Oilseeds ...... 11 - 12

C. JUTE ...... 13 - 29

Jute Production ...... 13 - 14 Marketing and Trade ...... 15 - 19 Relative Profitability of Jute and Paddy ...... 20 Problems and Constraints ...... 21 - 25 Prospects ...... 26 - 29

1). POTATOES ...... 30 - 31

E. SUGARCANE ...... 32 - 42

Production Performance ...... 33 Processing Consumption ...... 34 - 36 Production Practices and Potentials ...... 37 - 38 Supporting Services ...... 39 - 40 Recommendations ...... 41 - 42

F. TOBACCO ...... 43 - 58

Tobacco Manufacturing and Requirements ...... 44 - 46 Production ...... 47 - 49 Curing and Marketing ...... 50 - 52 Relative Profitability of Tobacco ...... 53 Potentials ...... 54 - 56 Recommendations ...... 57 - 58 ANNEX 4 Page (ii)

Paragraph Number

G. TEA ...... 59 - 66

Structure and Production of the Tea Industry ... 59 - 61 Demand Prospects ...... 62 - 63 Production Prospects ...... 64 - 65 A Policy for Tea Development ...... 66

H. HORTICULTURAL CROPS ...... 67 - 74

Production ...... 68 Marketing and Processing ...... 69 Potentials ...... 70 - 72 Future Development ...... 73 - 74

I. COTTON ...... 75

J. PROJECT POSSIBILITIES AND STUDIES ...... 76 - 82

Table 1 - Area, Production and Yield of Jute (1965/66 - 1970/71). Table 2 - Export of Jute and Jute Goods from Biratnagar (By Country in 1970/71). Table 3 - Production of Bags and Hessians by Jute Mills (1965/66 - 1970/71). Table 4 - Average Prices of Nepalese Raw Jute (lightning in Internal and International Markets (Ks/m ton). Table 5 - Sugarcane Production, Area and Yields. Table 6 - Sugar and Sugarcane Exports and Imports. Table 7 - Total Tobacco Requirement, 1970/71 - 1972/73. Table 8 - Tea Estates - Estimated Area and Production, 1970/71. Table 9 - Per Capita Consumption of Tea In Nepal. Table 10 - Projected Production from Available Tea Areas at Full Maturity. ANNEX 4 Page 1

NEPAL

AGRICULTURAL SECTOR SURVEY

Cash Crop Development

A. Introduction

1. Although of minor importance in the agricultural sector, cash crops are the major source of income for many Terai farmers. The main cash crops in Nepal are oilseeds, potatoes, jute, sugarcane and tobacco. The relative importance and performance of cash crops are presented below:

Annual Growth Rates Average 1967-Average 1972" Area Production Yields Area Production Yield Cash Crops (000 m ton (m tons/ha) (%? (%) (%) Av.67 Av.72 Av.67 Av.72 Av.67 Av.72

Oilseeds 97 111 54 57 0.56 0.5 2.7 1.1 - 1.6 Jute 37 57 41 56 1.1 1.0 9.0 6.5 - 2.5 Potato 43 50 274 287 6.4 5.7 3.0 0.9 - 2.1 Sugarcane 11 15 169 242 16.5 17.3 6.4 7.5 1.1 Tobacco 8 9 n.a. 7 n.a. 0.8 2.4 n.a. n.a.

/1 Average 1967 = average of 1965/66 - 1967/68; average 1972 average of 1971/72 - 1972/73. Source: Annex 8, Table 12.

2. Sugarcane is the only major crop in which yield increased from 1967 to 1972; this was primarily because of the expansion of the Birganj Sugar Factory and the accompanying services to its outgrower cultivators. How- ever, a jute yield recovery started since 1970/71 when the Jute Development Board was established to assist farmers in their production and marketing. These two cash crops illustrate the favorable influence of modern inputs and extension on yield improvements. In contrast, the performance of potatoes and oilseeds closely resembled that of foodgrains. The area in potatoes, concentrated in the Hills, expanded even faster than foodgrains, but under similar constraints (including dubious quality of improved seeds and disease susceptibility), and yields declined by 1.1% annually. Oilseeds (mainly mustard and rapeseed) and particularly jute expanded their areas considerably, but yields also declined. ANNEX 4 Page 2

B. Oilseeds

3. Oilseeds occupy the largest area in Nepal after foodgrains. Found mainly in the Terai and Inner Terai the most common are the pungent oilseeds of the Brassica species - mustard (Brassicia gentia) and rapeseed (Brassicia compestis). Mlustard has an oil content of 42% while rapeseed's oil content varies from 33% to 44%. Soybeans and groundnuts (non-pungent oilseeds) are presently of little importance.

AREAS AND PRODUCTION OF OILSEEDS IN 1970/71

Region Area Production Yield % of total oil- ('000 ha) ('000 MT) (m ton/ha) seed production

Eastern Terai 23.0 9.3 0.40 17 Western Terai 28.0 15.4 0.55 28 Inner Terai 36.1 21.9 0.61 40 Eastern Terai 9.8 4.5 0.46 8 Western Hill 8.6 3.8 0.40 7

Total 105.5 54.9 0.52 100

Source: Agricultural Statistics of Nepal, EAPD, MAI, 1972.

Pungent Oilseeds

4. In the past six years, pungent oilseed yields have remained between 500-550 kg/ha.

5. Cultivation Practices. Oilseeds are grown mostly on residual soil moisture after maize on well drained land and occassionally after an early rainfed paddy crop. Farmers prefer to sow as early as possible in October because the crop benefits from the high humidity and heavy dew, occurring in the months following the monsoon. This is especially the case in the large Inner Terai Valleys such as Chitwan and Dang where the crop is very important. Little land preparation is done and the crop is broadcast at a seed rate of about 10 kg/ha on the rough tilth obtained by plowing the maize stubble land once or twice. Farmyard manure or a little sulfate of ammonia is sometimes applied. The duration from sowing to maturity is 105-110 days for mustard, and 96-100 days for rapeseed.

6. The major problem in oilseed cultivation is the lack of adequate soil moisture during flowering and pod formation (in December). This explains the good yields obtained after late monsoons on uplands with low water table. Rape in particular, grows best on soils with a good moisture retention capacity (particularly on low lying land with dense mist covers in the late mornings). The second problem is the infestation of the para- site weed Orabanche which has reduced yields in many areas. Since weeding ANNEX 4 Page 3 of dry season crops is seldom practiced, harvesting is done by uprooting and the pods are dried for 2-3 days on a drying floor and threshed (by hand beating or treading by builocks).

7. Marketing and Processing. The seed is dried to about 14% moisture and then sold to middlemen wbo grade them and pay the farmers according to the graded quality. Farmgate prices vary from Rs 2/kg at harvest to Rs 2.6 in June, the seed prices being mainly determined by the prevailing retail prices for mustard oil, Locally consumed oil is processed in small primitive village mills. Most of the exports consist of seed (and some oil or seed cake) to India. Annual seed exports fluctuate considerably but is estimated to be more than 10% of production. Seed cake is retained by the mill owners as payment for the milling. Oil milling is not a specialized activity and many rice mills also crush oilseeds. The exported seed goes to such towns as Hetaura, Kathmandu, Birganj, Bhairawa, Nenalganj or to India directly. In these towns the seed may be processed and sold as unrefined mustard oil whose pungency is highly preferred by the Nepalese consumer. Because of its high oil (about 15%) and glucoside content resulting from the primitive extracting methods, the mustard seed cake is usually fed to cattle mixed with straw or lentil hay. It is however not very suitable for commercial feed production. Better extraction techniques would enhance the feed value and the durability of the seed cake during storage.

8. Recommendations. Because of the population's preference for pungent oils, the demand for pungent vegetable oil estimated at 3.0 kg per capita, is likely to growv with increasing incomes and population. There is also an expanding market, particularly for seed in India. Improved extrac- tion by modern oil crushing plants will enhance the acceptability of these oil seed cakes for the commercial feed industry both in Nepal and India. Caution should however be taken in building further solvent extraction mills (including that planned for Nepalganj) 1/ without realistically assessing the likely availability of raw materials and the possibilities of improving the efficiency of the small domestic mills. These domestic mills can extract considerably more oil at a higher throughput if they were better maintained. 2f The processors are however paid on the basis of the amount of seed processed rather than on the oil produced. Consequently, they are reluctant to spend extra to achieve good maintenance. Some commercial pressure could be applied by the mandatory display of oil content on the sacks of the final oil cakes.

1/ The planned canacity of the oilseed processing plant in Nepalganj is 60-90,000 m tons of oil per year or a requirement of 170-260,000 m tons of oilseeds (equivalent to four times present production).

2/ Simple changes like (a) seed cleaning before processing to reduce machine wear; and (b) flaking of seed between rollers can improve effective capacity by 20% and reduce final oil-in-cake content from 16% to 8%. ANNEX 4 Page 4

9. Although research started only recently, results with good seedbed preparation and line sowing instead of broadcasting and moderate fertilizer applications (40 kg N, 30 kg P205 and 20 kg K20 per ha) have given yield levels of 1,200 kg/ha in Chitwan with local varieties. The increased use of farmyard manure and green manures on the maize fields to increase the soil moisture retention capacity will increase yields even further.

10. Research for improved varieties should concentrate on selection of local or Indian varieties with a shorter duration as this would result in early flowering and pod formation at higher soil moisture levels. Intercropping of maize with legumes like soybeans or cowpeas during the monsoon will reduce the Orabanche infestation.

Non pungent oilseeds

11. Although soybeans are widely grown in the hills on the bunds of the terraces or occasionally intercropped with maize, their utilization is almost entirely for home consumption of the seeds or the green pods. The straw is utilized as cattle forage. Research has just started selecting and identifying local varieties. The experience in cultivating soybeans for oil extraction is limited although the climatic and soil conditions in the Western Terai appears suitable for soybeans to be grown either in rotation with maize or as an intercrop. Since all the soybean cake requirement for the feed industry and the vegetable oil requirement for the local soap industry are met by imports, feasible local production for such use should be encouraged particularly in Chitwan and Makwanpur where a solvent extracting oilseed plant is being constructed. The incorporation of soybeans in the cropping patterns on Settlement Schemes should be studied. Local trials with U.S. varieties such as Hardy and Bragg gave yield levels of 1,500-1,600 kg/ha. Their relative profitability, especially in rotation with improved rice is worth investigating. 1/

12. Another non-pungent oilseed which is probably more suitable to Nepal's light soils is groundnut. Preliminary trials with varieties such as Grant Dixie and B4 showed yield levels of 1,700 and 2,400 kg/ha shelled nuts respectively. The soil and climatic conditions in the Western Terai and Inner Terai are suitable. Research for including groundnuts in the cropping pattern with maize or upland paddy is needed.

1/ Studies conducted in Uttar Pradesh, India, by I. J. Singh & D. Ramakrishnaiah, Economics of Soybean Production in India, World Crops 24 (2) 1972: 79-81, gave yield levels from 1600-2000 kg/ha and that the cultivation of Bragg soybean and IRRI rice varieties were the most profitable farm activities. ANNEX 4 Page 5

C. Jute

Jute Production

13. Although jute production is scattered over the Terai, its com- mercial production of about 55,000 tons (1970/71) is virtually confined to Morang and Jhapa (contributing about 71% of production), Saptari and Sunsari districts of Eastern Terai. By 1970/71, the area under jute has virtually doubled (table 1) since 1965/66 (most of which took place in 1967/68), but yields have declined mainly from expansion to less suitable areas.

14. The "Tita" or "Sada" (Corchurus Capsularis) varieties of jute occupy about 90% of cultivated area because it is suitable for both light and heavy soils. Although it is suitable for early sowing (in February), it is gen- erally planted in April-May because of the lack of irrigation. The "Tossa" variety (C. clitorious) which can only be sown after mid-April occupy about 5% of cultivated area. Jute is therefore usually a main season crop, harvested in August-November, followed by wheat in October-November. Bullocks are usually used for land preparation. Larger landowners use tractors and some small farmers contract-plough their land.

Marketing and Trade

15. The marketing of jute passes through the village dealers, the secondary agents and wholesale stockists (usually located at the terminal market at Biratnagar). Grading for the local and overseas markets is done by the stockists who also has the storage facilities. He is usually the exporter and finances most of the jute marketing system.

16. A bonus voucher system was introduced under the Exchange Entitle- ment Scheme (EES) in 1963 which succeeded in diversifying exports (previously to India) to Europe (mainly U.K., W. Germany and Poland) and U.S.S.R. (table 2). The incentive for exports overseas was the EES which allocated a portion of the export proceeds in foreign exchange to the exporter who could use it to import goods approved by the Department of Commerce. The latest exchange entitlements are listed below:

Revised Previous (Oct. 1971)

Raw Jute 20% 30% Jute Cuttings 60% 90% Bags 60% 70% Hessian 50% 60% Twins 60% 90% Caddies 60% 90%

17. In 1971/72 there were altogether 479 registered exporters of jute and jute goods (compared with 20 exporters in 1968/69) but only 300 exporters received export licenses for jute and Jute goods. ANNEX 4 Page 6

18. Raw jute and hessian exports respectively accounted for 49% and 33% of the value of jute and jute products exports from Nepal in 1970/71 (Table 2). Two jute mills (the Biratnagar jute mill established in 1936 and the Raghupati jute mills established in 1951) employ nearly 4,500 laborers and produce about 13,000 m tons of sacking and hessian annually from about 15,000 m tons of raw fiber (Table 3).

19. A UNDP Jute Mission in 1970/71 (Report to the Administration, Vol. 11) found that exporters sold jute at a nominal loss because of the poor quality of raw jute, and the use of old machinery, shortage of skilled operators and high transport costs for jute products. This loss has been more than compensated by the profits from EES imports. Despite the implicit subsidy on exporters' jute prices, Nepal's jute export cost is high in relation to its inferior quality 1/. However, the EES has resulted in the diversification of exports to countries other than India. Jute now provides about 70% of total convertible foreign currency earnings in Nepal.

Relative Profitability of Jute and Paddy

20. The only information available on the relative profitability between paddy and jute under comparable conditions are obtained from the 1968/69 Farm Management Survey conducted by the Ministry of Agriculture for Morang district in the Eastern Terai.

COST AND RETURNS FOR 1.7-5.1 HA FARM SIZE GROUP, MORANG

Farm Gross /1 /2 Net Farm Yield Price Income Cost A - Cost B- Income Profit (2) (3) (4) (2)-(3) (2)+(4) (Kg/ha) (Rs/kg) ------(Rs)------

Paddy 1,210 .89 1,077 731 853 346 224

Jute 851 1.76 1,498 953 1,261 545 237

/a Only cash costs excluding interest. /b Includes interest on fixed assets and imputed family labor costs. Source: EAPD, Farm Management Study of Selected Regions in Nepal, 1968-69, Kathmandu, 1971.

Under 1968/69 conditions, although jute returned a higher net income, after deducting cash costs (Cost A), total profit to the farmer (after payments of interest and imputing his own labor costs - Cost B), were approximately the same.

1/ In 1971, average export costs (free on rail) in Biratnagar, Nepal was NRs 2,549/m ton or US$245/long ton. Average f.o.b. price in Chittagong, Bangladesh was US$244/long ton (excluding tax). ANNEX 4 Page 7

Problems and Constraints

21. The poor quality of Nepalese jute is due to:

(a) lack of price differentials and quality standards to provide sufficient incentives for quality improve- ment;

(b) poor retting practices due to scarcity of water 1/

(c) poor supporting services.

22. A US$4 million loan by the Asian Development Bank in 1971 is helping to improve supporting services and facilities for retting. A Jute Development Board (JDBN) became operational in 1971 to regulate, promote and supervise the cultivation, marketing and trade in jute and jute products. It supervises and coordinates: (i) credit and input supply (through ADBN, AMC and cooperatives), (ii) research and extension (through the Department of Agriculture), and (iii) marketing and exports. Its regulatory functions include the issuance of permits for commercial storage, milling and exports as well as price stabilization and buffer stock operations. JDBN also collects and publishes production and trade statistics.

23. Through the Asian Development Bank project, the jute development program focuses on the distribution of improved varieties of seeds (JRO 632, JRO 878, JRC 212, JRC 321), fertilizers and insecticides through four jute development centers and thirty sub-centers. 2/ The use of insecticides is compulsory to those farmers who purchase improved seeds from JDBN or borrow from ADBN. ADBN also provides loans for the construction of flowing retting ponds. JDBN has also provided incentives for seed growers through loans and guaranteed prices announced well ahead of the sowing period. Research at the Tahara Agricultural Station, Sunsari is also being strengthened. The loan also covers modernization of the Raghupati jute mill.

24. The low average yield situation (0.9 m ton compared with 1.4 m ton/ha in Bangladesh) is being improved mainly through the import of Indian varieties. However, they are disadvantaged by early flowering and suscepti- bility to hairy caterpillar and stem rot attack compared with local varieties. The growing environment in the jute areas of Nepal are also different from those prevailing in India and Bangladesh. Soils tend to be more sandy, the daylength, although greater in summer, falls below the desirable minimum earlier (at the start of winter) and the rainfall distribution is substantially different from India and Bangladesh. These conditions necessitates increased adaptive local research for jute, combining local selections with imported varieties.

1/ For the jute planted in February-March, additional reason is the competing claims on farm labor for paddy planting and jute retting usually results in the sacrifice of the latter. 2/ Each sub-center covers 2-5 village panchayats. ANNEX 4 Page 8

25. The primary constraint in jute development is marketing and trade. Because of the profitability introduced by the EES, various methods were used to obtain higher exchange entitlements like reshipping the Nepalese jute en-route for export from India (or even importing Indian jute for the purpose). To reduce such development, the National Trading Company Limited (NTC) was established as the sole exporter of raw jute and jute cuttings in 1971. Due to the relative inexperience of NTC, some exporters were initially licenced as its exporting agents, and the private sector continued to handle about 80% of the jute trade. However, no export licences had been issued in October 1973 for the 1973/74 season. The uncertainty has dissuaded private traders from purchasing for the season and has left many farmers without a market channel for their jute.

Prospects

26. With the assistance of the Asian Development Bank, through the jute development program (para 22), jute production should continue to improve. A decision has to be made concerning the role of the Nepal Trading Company (NTC) in order to alleviate the problems in marketing (para 25). A re-examination of NTC's role in jute marketing is required. The role of NTC is being duplicated with the formation of the Jute Devel- opment Board (JDBN) and its designated functions of supervising jute pro- duction, marketing and trading activities (para 22). Consideration should be given to JDBN taking over NTC's activities and appointing private traders as its agents so that the expertize of the private exporters and traders will not be wasted.

27. World consumption for jute and jute products for the seventies are projected to only increase between 0.6 and 1.2 percent per annum, despite the assumption of a much improved price relationship between jute and synthetics 1/.

28. World prices (in constant terms) for jute are expected to decline (from 1972-73 levels) by about 19% in 1980 2/. Because of the small amount

1/ The increase in the market price in crude oil is not likely to give jute much relief since synthetic production is three steps removed from the refinery level and increased costs will likely be cushioned through the process from oil (or gas) to chemical feedstocks, to the resins and finally to synthetic fibers or fabrics. (Source: Jute and the Synthetics, IBRD Staff Working Paper No. 171, January 1974). 2/ From US$376/m ton (av 1972-73) to US$305/m ton (in constant 1974 prices for Bangladesh white D. f.o.b. Chittagong Chalna). Source: Commodities and Export Projections Division, Price Forecast for Major Primary Com- modities, IBRD Report No. 467, June 19, 1974. ANNEX 4 Page 9

of exports 1/, Nepal should not find much difficulty in selling its jute products, provided it is willing to continue taking some discount on the prices it receives in the international market. The EES will continue to make it worthwhile for private traders to export jute since their primary gains will be from importing. Special care should however be taken by JDBN to ensure that export final destinations provide the best market for Nepal's imports, otherwise greater discounts would be translated into even lower prices for the jute producer.

29. The relative price of jute and rice in Nepal would be the key factor in influencing the expansion of jute production. Projections to 1980 (in constant 1974 dollars) indicate that world jute/rice price ratio would decline from 1.4 (av. 1967-69) to 1.1 (1980). 21 Assuming the same trend (21% decline) for jute/rice price ratios in the Nepalese Terai (Morang), the relative price changes could reverse the farm profitability of paddy in relation to jute (para 20) and make the former more profitable.

D. Potatoes

30. The cultivation of potatoes has been a traditional cash crops activity particularly in the Eastern Hills where they provide farmers with an important source of income. Farmers carry most of the surplus potatoes in their winter migration to Indian border trading posts (Jobari, Sanichare) to be ultimately sold as "seed" potatoes in Bihar, where the market is very good. Terai potatoes are usually sold for direct consumption. High yielding disease-resistant potato varieties have been developed, but the area under them is limited. "Improved varieties" 3/ have benefitted only Kathmandu and the Terai. The remaining Hill area, which account for 67% of the total area under potatoes, have received little. Consequently, productivity in the Hills is low (4 m tons/ha compared to the national average of 5.6 m tons/ha). The traditional varieties are deteriorating in genetic quality and subject to large losses from insects and blight diseases.

31. An important requirement in expanding the potato industry is the multiplication and distribution of improved potatoes in conjunction with other input services and the provision of marketing facilities (including

1/ Nepal's 1970/71 exports of 46,000 m tons represents only 2% of world net imports of jute and jute products. 2/ From US$495/m ton (av. 1967-69) to US$300/m ton (in constant 1974 prices for Bangladesh white F. f.o.b. Chittagong Chalna) for jute and from US$347 to US$265 (in constant 1974 prices, f.o.b. Bangkok) for 5% rice. (Source: Commodities and Export Projections Division, Price Forecast for Major Primary Commodities, IBRD Report No. 467, June 19, 1974). 3/ Only 30 m tons of these varieties have been distributed by DA annually. Yet 4,000 ha was claimed by EAPD, Agricultural Statistical 1972 to be under "improved varieties". ANNEX 4 Page 10

cold storage, where feasible). The joint location of potato marketing facilities with potato seed and input (including credit) supply facilities would enable farmers to take advantage of higher prices and permit a more effective distribution of improved seeds, fertilizers and credit by AMC and ADBN at less cost. The feasibility of such a joint location of facilities should be assessed in the Ilam area where a secondary road to the East-West Highway has been identified for external financing.

E. Sugarcane

32. Although sugarcane is found in the Terai and lower Hill Valleys, about 80% of production is concentrated in about 11,600 ha of the Terai in the Narayani and the Lumbini Zones. The sugarcane is either processed locally into brown sugar or sugar candy (ghur) or processed by three Terai mills.

Production Performance

33. Sugarcane production increased by about 7.6% annually (1967/68- 1972/73) from 169,000 m tons to 246,000 m tons (table 5). This growth was primarily due to expansion of harvested area (6.2% annually). Sugar- cane was one of few cash crops to experience a yield increase (1.4% annually). Of the 3,875 ha increase in total harvested area in the past five years, 2,650 ha took place in Eastern Terai primarily from area expansion of the Birganj Sugar Factory (BSF).

Processing and Consumption

34. The first sugarmill to be established was the Morang Sugar Mill at Biratnagar with a capacity of 250 m tons cane/day. The other sugar mills are the Mahendra Sugar and General Industries at Bhairawa (750 m tons of cane per day) and the Birganj Sugar Factory (BSF) established with USSR financial aid in 1964 (1,000 m tons of cane per day). The capacity of BSF will be raised to 1,500 tons per day within two years and improve- ment of the other two mills are also planned.

35. The BSF receives its cane under contract from 12,600 farmers in Bara, Parsa and Rautahat districts. In the 73/74 season, the contract area was 5,765 ha. The sugarcane is either brought in by the farmers them- selves or by factory transport from 9 collecting stations. Average sugar content from this mill is 11-12%, and the cutting and milling season starts from October for about 4-5 months.

36. The average annual production of refined sugar from these mills 1/ from 1969/70-1970/71 was about 15,000 m tons. The total sugar production

1/ Prospects of Industrial Investment in Nepal, NIDC, 1973, P. 120. ANNEX 4 Page 11

(in sugar equivalent at 10% recovery rates) is estimated at 24,000 m tons. Up to date trade data is not available, but annual net imports in the late 1960's was estimated at about 10,000 m tons. Nepal is therefore sugar deficit and per capita consumption of sugar (1970) is about 3 kg/capita.

Production Practices and Potentials

37. Sugarcane is mainly grown on Terai levee soils which are often marginal in fertility. Although some sugarcane growers use green manures (Sesbania and Chickpea) in rotation with sugarcane, nitrogen supply is generally inadequate without supplementing with chemical fertilizers 1/. In 1970/71 and 1971/72 only 58 m tons and 336 m tons were respectively applied on about 7,000 ha in the Eastern Terai, equivalent to an average of 28 kg/ha 2/.

38. Sugarcane is usually ratooned 2-3 times, the cycle for each crop being about 12 months. Although some tractors are used by the larger farmers who also contract-plough for the smaller farmers, soil prepara- tion is mostly done by bullock. Improved planting material is little used, and little weeding is done in maintaining the crop. Despite sugar cane yield increases, the present average of about 17 m tons/ha is very low compared with the potentials under similar conditions 3/. Progressive farmers south of Bhairawa in Uttar Pradesh have obtained yields greater than 60 m tons per hectare as a result of regular weeding, some irrigation and manuring. A new variety CO-1158 is able to produce 98.8 m tons can/ha for the planted crop and 74 m tons/ha for the first ratoon under experimental conditions.

Supporting Services

39. Credit was initially provided by the mill (BSF) 4/ to purchase fertilizers, insecticides, tractors upon the recommendations of either DA or BSF agronomists. About Rs 17.7 million have so far been disbursed and recovery rates have averaged about 91%. About 100 tractors have also been purchased with BSF credit by large farmers (those with 16 ha or more).

1/ Many marginal level areas showed visual symptons of nitrogent deficiency. 2/ Fertilizer recommendations for the Indo-Gangetic alluvium of North India (generally more fertile than Nepalese Terai soils) ranges from 100-200 kg N and 0-100 kg for both P205 and K20 per hectare respectively. 3/ A 1971 study by Nippon Noei (Sun Kosi Terai Project) showed that 4 Terai Villages could produce an average of 33.6 m tons ha, and average cane yields in Bihar, Uttar Pradesh and total India were respectively 30.3, 33.0 and 39.8 m tons respectively. 4/ ADBN has now assumed responsibility for providing credit to sugarcane producers. ANNEX 4 Page 12

40. Limited research on sugarcane is presently undertaken in only one station (Parwanipur) which also multiplies seedsets for distribution to farmers. The limited capacity at Parwanipur has resulted in shortfalls for improved seedsets distribution 1/.

Recommendations

41. Expansion in the adaptive research of the high yielding varieties found in neighboring Indian districts, and varieties from other countries should be undertaken to diversify the source of improved material. The Research and Development Program undertaken by DA at Parwanipur needs to be expanded, and guidance for external aid should be sought. Variety testing should be extended to cover production areas other than Parwanipur. An arrangement should be made between the Department of Agriculture and the Sugar Mills to improve the multiplication and distribution capacity of available high-yielding material. Improved seedsets can potentially yield 30 m tons of cane/ha under general farm conditions.

42. The expansion program for BSF and rehabilitation of the other two mills should proceed. The concept of smallholder outgrower operations tied to production and credit assistance by the sugarmill (in cooperation with ADBN) appears to be working in the case of BSF, and should be expanded.

F. Tobacco

43. Tobacco is mainly grown in the Eastern Terai (particularly in the districts of Saptari, Mahottari, Dhanusha and Sarlahi) which accounts for 852 of the 6,900 m tons of tobacco production in 1970/71. 2/

Eastern Western Inner Eastern Western Terai Terai Terai Hills Hills Area (ha) 7,500 600 500 100 400 Production (000 kg) 5,800 400 400 100 200 % 85 6 5 1 3 Yield (kg/ha) 773 667 800 1,000 500

Sun cured "natu" tobacco (Nicotiana tobacum or N. rustica) grown for the production of low quality pipe tobacco ("hookha") and cigarettes ("bidi") account for 75% of total tobacco production. The rest (about 1,700 m tons) consists primarily of flue-cured tobacco (mainly Virginia Gold).

1/ In 1970-71 only 133 tons of a targeted 566 m tons of improved seedsets was distributed at Parwanipur. 2/ Source: EAPD, Agricultural Statistics of Nepal. ANNEX 4 Page 13

Tobacco Manufacturing and Requirements

44. Tobacco requirements for the two largest factories in Nepal (the Janakpur Cigarette Factory and Nepal Tobacco Company) 1/ are given in Table 7. In 1972/73, these two factories had to import about 20% of their total tobacco requirements of 2,317 m tons. Of the 457 m tons imported, 397 m tons consisted of imported Virginia flue-cured tobacco. Their import require- ments of Virginia flue-cured have increased despite the introduction of local production of flue-cured since 1967. This increase is due to increased domestic demand and the fact that local manufacturers use only 50-60% of Nepalese flue-cured tobacco in their blends.

45. Because of itnport restrictions, the existing three tobacco and cigarette factories provide virtually all 2/ the tobacco and cigarettes consumed in Nepal. Of the current local production of 2,300 million sticks of cigarettes annually, about 90% is manufactured by the Janakpur Cigarette Factory (JCF) established in 1959 with USSR financial assistance. The rest is supplied by two other factories (Nepal Tobacco Company and Nepal Cigarette Factory) in Birganj and Hetaura, respectively.

46. Nepal's flue-cured tobacco grown on light textured soils produces a light, low nicotine leaf. The local preference however is for strong tasting cigarettes and, for this purpose, high nicotine flue-cured tobacco from USA, Mozambique and some burley from Brazil and USA are imported by JCF. The other two cigarette factories import raw tobacco from India and third countries (Virginia flue-cured as well as air-cured) to be blended with local flue-cured and Natu tobacco.

Production

47. Assistance in tobacco development is provided by the Tobacco Development Board (TDB), created in 1971. TDB acts as an intermediary among the manufacturers, the producers and government service agencies. It contracts manufacturers requirements with producers, co-ordinate input, credit 3/ and seed requirements with AMC, ADBN, and DA respectively, and undertakes the development and extension of technology for production and curing.

1/ No information is available for the Nepal Cigarette Factory. 2/ Except for high quality tobacco and cigarettes consumed by the diplomatic community. 3/ After approval by TDB, farmers receive (i) a first installment of 860 Rs/bigha consisting of Rs 500 in cash and Rs 360 in kind (fertilizers); and (ii) a second installment of Rs 600 in cash and Rs 40 in kind (insecticides). ANNEX 4 Page 14

48. Tobacco is grown as a rainfed crop on the higher lands after the maize is harvested. It relies on late rains and residual soil moisture for its water supply. The flue-cured tobacco is planted in lines about 60-80 cm apart. The fertilizer recommendations from TDB are 134 kg sulphate of ammonia/ha in 2 doses (one half at planting and the other half four weeks later); 250 kg single super-phosphate or 87 kg triple super-phosphate and 107 kg potassium sulphate. In the 71/72 season, the fertilizers supplied by AMC were delivered too late in the growing season and the recommended rates were not applied by farmers.

49. The yields are low for various reasons. Seedbeds are not properly prepared and managed; there is little fungicide spraying against Cereospora and no thinning done, with the result that diseased and spindly seedlings are used for transplanting. Secondly, with the crop grown late, declining temperatures are experienced and flowering starts early resulting in a low number of harvestable leaves (about 14 per plant). Earlier planting (from mid-September) on ridges (to prevent waterlogging from late monsoon rains) instead of unraised beds, should improve yields. It will be essential for TDB to introduce tractor operated or bullock-drawn ridgers in order to enable early planting in September.Harvesting techniques are rough, 5-6 leaves are picked each time instead of two, resulting in many immature leaves going into the curing barn.

Curing and Marketing

50. About 75% of the tobacco produced (Natu tobacco) is sun-cured. Flue-curing is undertaken in curing barns (6m x 6 m x 5m) holding 1,000-1,200 sticks with 90-100 leaves per stick.

51. Flue-cured tobacco growers can apply for medium-term loans from ADBN for the construction of curing barns up to Rs 8,000 repayable in three years. The cost of each barn (Rs 14,000 each) is, however, too high for individual ownership by smallholders. Smallholders growing flue-cured tobacco generally rent curing barn capacity at a fixed rate per curing. This practice leads to overloading of the barns (to get more curings per harvesting season) resulting in a lower quality of tobacco. TDB has built 450 barns (275 and 75 in 1970/71 and 1971/72, respectively).

52. A simple grading system using 5 grades has been devised by TDB. The present prices are Rs 12.50, 11.80, 10.80, 9.90 and 7.27 per kg respect- ively for 1st, 2nd, 3rd, 4th and 5th grades. The first grades have yet to be produced by local tobacco growers. About 50% of the production falls in the 2nd and 3rd grades and 50% in the 4th and 5th grades. TDB also handles the marketing of sun-cured Natu tobacco, which is mainly utilized by the Nepal Cigarette Factory in Hetaura. Sun-cured tobacco prices range from Rs 4.05-6.5 per kg depending on the grades. Relative Profitability of Tobacco 53. The only information on the relative profitability of tobacco in comparison with wheat (competing winter crop) and rice (monsoon crop) is ANNEX 4 Page 15 the 1968/69 Farm Management Survey. Results for Dhanusha District, Eastern Terai (given below) shows the extreme high profitability of tobacco culti- vation.

COST AND RETURNS FOR 1.7-5.1 HA FARM SIZE GROUP, DEANUSHA

Farm Gross /1 /2 Net Farm Yield Price Income Cost A- Cost B - Income Profit (kg/ha) (Rs/kg) ----- (Rs)------…

Tobacco 1,063 6.95 7,386 757 1,815 6,629 5,571

Wheat 760 1.33 1,010 716 1,097 294 -87

Paddy 1,116 0.95 1,060 700 905 360 155

/1 Only cash costs excluding interest. /2 Includes interest on fixed assets and imputed family labor costs. Source: EAPD, Farm Management Survey of Selected Regions in Nepal, 1968-69, Kathmandu 1971.

Potentials

54. Agriculturally, the potential for tobacco expansion is very large with an estimated 122,540 ha of Eastern Terai found to be very suitable for tobacco 1/ and its main use as a winter crop rather than as a monsoon crop in competition with paddy or maize. Prospects of expansion to accommodate domes- tic demand increases will, however, not enable this potential area to be used for tobacco production.

55. For example, plans are underway to expand the capacity of JCF from 2,000 m tons to 2,800 m tons by 1975, the possible expansion of area under flue- cured tobacco cultivation for this increased capacity is only 800 ha 2/. TDB has 5,443 flue-cured growers registered in 1970/71, but had to reduce the number in 1971/72 to 3,469 because of JCF's limited absorptive capacity and increased yields by some growers.

1/ The good tobacco soils in Dhanusha (soil survey of tobacco growing areas of Dhanusha District, DA) are characterized by dark brown, deep and well drained sandy loam with an average PH of 5-6 (generally low in organic matter, nitrogen and phosphorous, but high in potassium). These are found in the Bakeya and Jimum soil series and the loams (silty clay to silty loams) which are the most suitable, occupy 122,540 ha in Eastern Terai (Report on General Reconnaissance Soil Survey of the E.stern Terai Plain, Nippon Koei, Tokyo, Sept. 1970). 2/ Only about 60% of the expansion requires Neplaese flue-cured tobacco; yields are assumed to be 750 kg/ha. AiiŽ4EX 4 Page 16

56. In order to significantly extend the high income benefits associated with tobacco production, a re-orientation towards overseas export is required. Jepalese flue-cured tobacco nas a golden-yellow, bright orange color with a light texture and a good burn and aroma. It's quality is relatively good (between Malawi and Korean flue-cured) and much higher than the Indian flue- cured. It's low nicotine content is also nighly demanded and evaluation of the samples sent to EEC countries have been very favorable. Its quality and moderate price (US$1.90/kg for Nepalese top grade in Nepal compared with US$3.06/kg for U.S. flue-cured in EEC) indicates a favorable competitiveness in the EEC market.

Recommendations

57. Tne limited impact of expanding tobacco production for local consump- tion and the indicative international competitiveness of Nepal's low nicotine flue-cured tobacco requires that TDB assign top priority to exploring the possibilities of export especially to the EEC.

58. Technical assistance is required to strengthen the fledgling TDB not only for export development but also in extension, curing and research. With limited small farm participation (para 51) consideration should also be given to the feasibility of expanding the role of cooperatives in tobacco production and the possibility of TDB undertaking curing for smallholders. Otherwise the remunerative cultivation of tobacco will reach only a few large farmers.

G. Tea

Structure and Production of the Tea Industry

59. The tea industry in Nepal consists only of estates located in the Far Eastern Region of Nepal. Two of these (Ilam and Soktim) are managed by tne Nepal Tea Development Corporation (NTDC) and the other five (in the inadrapur area) are private. Except for the NTDC estates, the existing tea estates aave only been started after 1962. These new estates were set up primarily in anticipation of the Land Reform Act of 1964 which limited private land noldings to a maximum of 28 bighas (19 ha) except for estate crops like tea. Tne quality of teas from these estates are low, suitable mainly for the local market. The bulk of tea exported consists of the high quality teas from Ilam. Exports of these teas are still very low (14 m tons in 1970) and are mainly destined for W. Europe.

60. In 1971, the Ilam and Soktim estates account for 33% of Nepal's estimated tea production of 45.5 m tons (Table 8). The five private tea estates located in Jhapa district have a combined area of about 520 ha with 316 ha still immature and 405 ha yet to be developed. Because of higher ANNEX 4 Page 17

altitude and better quality, the yield 1/ from Ilam are about two-thirds of Soktim's estimated yield of 354 kg/ha. Other estates which produce lowland tea have lower yields primarily because of poor establishment and poor manage- ment. Even the "mature areas" are often not mature. These yields are very low compared with the average of 1,000 kg (made tea)/ha obtained from old, non-irrigated estates in the Indian Tarai. Commercial estates with newer planting material (and no irrigation) are averaging 1,600 kg/ha. Part of the problem in Nepal is that old paddy areas of poor fertility have been planted to tea in many of these estates. Although some have suitable tea areas, site selection nas been rather ad hoc. Nurseries are far from the water sources and areas to be planted. Trees have been planted with little consideration of prevailing winds and no drains have been built. Other poor husbandry practices are evident from the insufficient and improper use of manure and insecticides agd defective pruning. Estate managers, (some expatriate) are in general of dubious quality, and their salaries provide even less incentives for performance. The problem of semi-skilled labor availability is parti- cularly difficult since reliance has to be placed on Indian labor who prefer the nigher salaries and better facilities (housing, medical, education, etc.) available in India. The NTDC estates and Mittal are the only estates with such facilities to attract permanent labor.

61. In most of these estates, little can be done to boost the produc- tivity of their poorly planted trees. Some salvation from better management could be obtained if the owners are willing to invest on capable staff, lift pumps and modernization of factory facilities. Since 1971, the Agricultural Development Bank (ADBN) has been lending to tea estates for modernization of factories, purchases of pump sets and expansion of their tea gardens. It is Aowever unclear whether tecnnical assessment has been made of the feasibi- lity of these investments since NTDC assistance was not actively sought in tne evaluation process.

Demand Prospects

62. The internal market is selective and is accustomed to low quality tea (especially CTC tea and tea dust), preferring color and strength to other characteristics. The mission estimates that per capita consumption increased 7.8% annually from an estimated 28 gm in 1962 to 55 gm in 1971 (See table 9). These per capita consumption figures are much lower than tne 0.3 kg and 0.2 kg for India and Pakistan respectively in 1965. 2/ If the same trends continue, total consumption in Nepal will reach 1,469 m tons in 1980 and 3,801 m tons in 1990. These figures could be under-estimated if development of the hills proceed at a quicker pace. Tea is presently drunk only in the main population centers, which, except for the Kathmandu Pokhara valleys, are in the Terai. North-South feeder roads should open an untouched

1/ Unless otherwise specified, tea yields are for made tea.

2/ FAO, Agricultural Commodity Projections, 1970-1980, Vol. I, Rome, 1971. AiNEX 4 Page 18 market in the hills and in the 1980's, per capita tea consumption may well increase by 12% annually. Total tea consumption in 1990 will tnen be 5,561 m tons. 1/ Per capita consumption in Nepal under this assumption would be equivalent to India's level in the sixties.

63. Foreign demand for high quality tea equivalent to those found in the Darjeeling area provides a potentially better market for Nepal's tea. Ilam tea, for example, is the highest priced tea in the London Auction. 2/ Supply from the Darjeeling area has declined (due to the landslide loss of about 3,000 ha about three years ago) and the possibility of recovery is re- mote unless the whole area is replanted. There is a wealth of new technology consisting primarily of improved planting materials developed in that area which cannot be fully utilized in India because of shortage of new areas for expansion. The opportunity for identifying suitable areas in Nepal similar to Darjeeling conditions to take advantage of these developments should be pursued. The demand for these high quality teas is still very strong and the inability of India to cater for this demand gives Niepal a potential advantage it should exploit.

Production Prospects

64. In addition to about 23 hectares to be developed in the NTDC estates at Ilam and Soktim, land has been acquired in Kanyam near the Eastern Hills border. The Kanyam area has conditions similar to Darjeeling. Because of unanticipated submergence of the Chillimkote area (in the Siwaliks near Soktim) by the Kankai Irrigation project, two new areas in Tokla and Baradasi (in Jnapa) have been allocated. Each of these areas have an alleged 160 hla suitable for locally consumed tea. Under British bilateral assistance a smallholder settlement project nas been proposed in the Nawalpur area in Central Terai where 4,700 ha suitable for tea has been identified. As a first phase however, a preliminary report 3/ has recommended the planting of only 890 ha where surface irrigation can be provided.

65. By 1980, under the assumptions that (a) existing private estates develop all their remaining areas and improve their yields to 361 kg/ha and (b) NTDC estates at Soktim and Ilam improve their yields to an average of 440 kg/ha, the total production of 385 m tons will only cover 26% of projected domestic requirements. If the newly acquired NTDC areas (Kanyam, Tokla and

1/ In 1971, M.K. Prossor, Colombo Plan Tea Advisor to Nepal, projected internal demands of 3,500 and 10,900 m tons for 1980 and 1990 respectively. He applied an annual growth rate of 17.5% in per capita tea consumption derived basically from import trends from 1962-1965. These trends have since not materialized. 2/ The 1973 London Auction prices (new pence/kg) were: All teas 43.3; Nepal - 55.3; Sri Lanka - 45.4; N. India (including Darjeeling) - 45.7; S. India - 37.8; Kenya - 44.3. 3/ Foreign and Commonwealth Office Overseas Development Administration, Development Potential of the Nawalparasi, Area of Nepal, 1972. AkNNEX 4 Page 19 j3aradasi) achieve the yields projected by NTDC 1/ and the Nawalpur project acnieves its projected yields, total production of tea at full maturity in 1990 will reach only 2,521 m tons (table 10). A deficit of 1,280 or 3,040 m tons would arise depending on the demand assumptions. The mission however feels that without careful study of the new areas, and the provision of better management and supporting services, the assumed NTDC yields will not be achieved.

A Policy for Tea Development

66. Although deficits for tea in Nepal will remain in the future, expansion of tea production in Nepal has to be selective. Preliminary indi- cations are that Terai tea yields of 1,500 - 1,750 kg/ha will have to be achieved before production costs are about competitive with Indian tea imports. Past mistakes of the Government in permitting the establishment of private tea estates without properly assessing their suitability and capability should not De repeated. There has been insufficient assessment of the comparative advantage of growing tea in potential areas versus otner activities. 2/ Kanyam and its adjacent areas appears to be suitable for nigh quality tea develop- ment, but further studies are required to verify this, and in particular, to evaluate the feasibility of smallholder participation. Tokla and Baradasi should first be studied for their technical suitability for tea and economic advantage over other crops. Top priority should be placed on strengthening iiTDC so that it can more effectively support the tea industry. The Board of NTDC should have professional representation to (a) provide technical support for policy decisions; and (b) establish closer liaison between the board in Kathmandu and field operations. A suitably staffed adaptive research and extension unit should be set up by NTDC as expansion in tea proceeds.

H. Horticultural Crops

67. Selected sub-regions in the Hills are eminently suitable for horti- cultural crops. Horticultural crops in Nepal include fruits, vegetables, and spices. Although a wide range 3/ of fruits and vegetables are pro- duced throughout most of the country, because of the scarcity of facilities

1/ NTDC, Note on Future Expansion, August 1971, Soktim. 2/ There is of course the possibility of increasing import duties on imported tea to make the local tea industry competitive. This snould only be explored after comparative costs of alternative uses to these areas have been studied. 3/ Fruits consist of bananas, mangoes, papayas, oranges, apples, guavas, pears, peaches, cherries, apricots, plums, lychees, jackfruit, lime, grapres and pineapples; and vegetables consist of onions, radish, beans, peas, carrots, turnip, spinach, okra, egg plant, tomatoes, peppers, cabbage and cauliflower. ANNEX 4 Page 20

for transport, marketing and storage, their consumption is usually limited to local markets and very short seasons. Furthermore, because of limited orientation towards commercial horticulture and poor technical support, quality is invariably poor. The only fruits of general commercial importance are oranges and mangoes. Oranges are concentrated in the lower hills of Far Western and Eastern Nepal; commercial mango production is concentrated in Eastern Terai; spices (particularly ginger and cardamum) are important in the Sallyan - Syangja areas and the Western Hills.

Production

68. Tne Department of Agriculture's horticultural efforts have been mainly in the distribution of fruit trees, especially citrus. No extension service for horticulture exists. Nurseries are Government owned and their grafting, breeding and budding techniques require substantial improvement. Modern orchard cultivation methods (spraying, thinning, etc.) and are not practiced. Rootstock quality is invariably poor and diseased, adversely affecting yields and prolonging their gestation period. Apples, for example, do not come into bearing until the 8th compared with 4th - 5th year in the United States, Western Europe, Korea and Chile. Disease (die-back) has reduced the production of citrus, particularly in the Mid-Western Hills. In the Pokihara Valley, citrus area declined snarply from 4,000 ha to 1,200 ha; and efforts are being made to control this disease. "Commercial" temperate fruit production in Nepal is at an infant stage. Between 1970-73 about 200 ha were brought under apples, pears and peaches benefitting 800 farmers in Makwanpur District. Mortality rates (during first year's planting) for these fruit trees average about 25% (15% in India) and existing and expected yields are low (less than 10 m tons/ha).

Marketing and Proccessing

69. Organized marketing does not exist. Farmers may either carry their produce to nearby urban centers or, more usually, bring their crops to main nignways for sale to middlemen. Farmers receive less than 30% of the retail prices. Most of the fruit is marketed in fresh form; very little is processed. There are only four cottage-sized, privately owned, processing facilities which pack mango and pineapple juices or slices for the domestic market. These plants are poorly equipped and follow outdated processing techniques resulting in inferior quality, lower canned yields and high costs.

Potentials

70. For a number of fresh fruits (eg. grapes, citrus) and vegetables, market availability is not a serious constraint. In the Indian market, Nepal has a seasonality advantage in the summer months, where Indian fresh pro- duction is very limited (particularly in the Northern Plains). Nepal's AiJEX 4 Page 21

domestic and tourist 1/ market is also expanding, requiring a number of fruits and vegetables in fresii (eg. apples, peacnes, grapes, walnuts, almonds, tomatoes, cucumbers) and processed (eg. mango and pineapple slices, jams, peas) forms. Presently, iNepal's canned fruits, fruit juices, and vegetables are imported from India. Highi value foreign markets are available for sniitake (dried oak mushroom), and flower and vegetable seeds, for which selected areas in .4epal are suitable. These products are labor intensive, require only simple processing, can be easily stored and shipped in bulk to profitable export markets.

71. Production problems of late gestation or alternate bearing, poor yields may be solved witlh technical assistance and the importation of source materials from temperate countries who have successfully overcome these problems. Grafting regular rootstock for apples witii the spur variety could, for example, achieve bearing in the fourth year, with 2.5 m tons per ha yields (or about 15 m tons/ha by the 10thi year), 2/ providing substantial financial gains for the grower. Almond and walnut varieties which mature in 5-6 years compared witlh the present 15 years are also available from tne United States.

72. Inaccessibility, thie small size and subsistence nature of farms, and the poor supporting services for production, marketing and processing will continue to constrain large scale expansion of iorticultural pro- duction. A shift from subsistence farming on small holdings to norticulture may oe difficult, but some examples of tne willingness of farmers to try norticulture on their marginal lands provides optimism for potential success. In certain accessible areas, close to government horticultural farm (eg. near Dam.an in :iakwanpur), numerous hill farmers with less than 0.8 ha aave devoted a small portion of their land (tile very marginal areas whicn barely produce any maize or millet crop) to temperate fruits. In suchi areas "orcnard" development costs would De low since terraces are often already establisned. Witn improved nusbandry methods, combined with marketing and organizational support (through technical assistance), these enterprises could oe substantially improved, and expansion to other areas could result.

Future Development

73. Future development in horticultural production should be along the following lines:

(a) Reiiabilitation of existing rootstocks on farms with high yielding, quick maturing and disease resistant grafts. (For citrus, suchi a development could be undertaken in about 2,000 ha located in Kaski, Diiankuta and Ilam districts.)

1/ The numbers of tourists visiting Nepal is expected to at lease double from its present level of 0.5 million by 1980.

2/ Professor Robert Carlson, Micnigan State University. ANidEX 4 Page 22

(b) Expansion of area under existing fruits and vegetables.

(c) Expansion of area under new fruits and vegetables. (Selected areas could develop grapes, flower and vegetable seeds or shiitake.)

To ensure the success of these production programs, external assistance is required for nursery improvement and management, for importing suitable disease free rootstocks and new varieties, and for assisting LlMG in diversifying its horticultural research and strengthen its extension capability.

74. Improvements in marketing infrastructure, including tne packing and grading of selected horticultural products and the organization of farmers sniould also be undertaken. Possibilities for integrating production with processing exist in the development of simple processing facilities for extracting ginger and orange oils. These coomodities nave very good export possibilities.

I. Cotton

75. Cotton is currently grown only under experimental conditions in government farms and settlement schemes under Israeli and FAO/UiiDP assistance in Western Terai. Short duration Australian varieties have been used wnich nave overcome previous problems of nigh humidity and cloudiness on flower- shedding. Adaptive researcn is required over more diversified areas and with other varieties before large scale expansion can be considered. Tne appro- priate areas for initial pilot projects would be in Sepal Settlement Company settlement areas where the possibility of better control of the planting process exists.

J. Project Possibilities and Studies

76. A Cash-Crop Development Project is proposed consisting of the following components:

(a) sugar development - comprising (i) improvements in planting material and diversifying its sources for research and distribution to smalliiolders and (ii) expansion and/or renabilitation of sugar mills in diratnagar and Birganj tied to expanded smallholder outgrower schemes.

(b) tobacco development - involving the strengthening of TDB in its research and extension assistance to small farmers including the development of curing capacity AiNNEX 4 Page 23

for their use (para 58). An important prerequisite is a detailed study of the prospects and requirements for expanding Nepal's flue-cured tobacco exports particularly in the EEC market.

77. Financing cost for this project is estimated at US$8.0 million.

78. A Tea Development Project is proposed for the high quality tea areas of Kanyam (and possibly Lumle) and the low quality tea areas of Toklai and Baradasi pending a feasibility study of the possibilities for tea produc- tion through smallholder development (para 66). British technical assistance nas been offered by ODM for feasibility studies and implementation of a tea project, and the above emphasis is suggested by the mission. Financing costs would probably be about US$4 million.

79. A horticultural development project is proposed primarily to increase the income opportunities of hill farmers and diversify Nepal's export base. Project preparation would consist of: (i) reviewing and evalua- ting past studies, research, existing schemes, marketing infrastructure and demand of selected horticultural crops, (ii) define criteria for selecting areas for horticultural development; (iii) identify prospective areas for a first phase development program and the required research support; (iv) spell out the prerequisites (in production, marketing and processing) and required institutional changes to ensure success, and (v) explore interrelationships with other agricultural enterprises and possibilities of their integration into area development projects.

80. A pilot project for cotton development is proposed as the basis for a gradual introduction of commercial cottoin production in Nepal. It would consist of: (i) selected production on farmer's fields in the areas where cotton research has been undertaken by the 4epal Settlement Company or the ,jepartment of Agriculture; and (ii) expansion of cotton trials in other areas of W4estern Terai. bilateral assistance would be very suitable for this project.

61. Otiner possibilities for cash crop development would be as components of area development projects (e.g. horticultural development in the Trisuli, Nuuwakot area in conjunction with a rural development project; spice and chilli pepper development in the Sallyan area as part of the East-West highway Sallyan road).

82. Commodity Studies are required on:

(a) tne marketing systems (including processing), pricing and export potential of fruits and vegetables; ANNEX 4 Page 24

(b) local and foreign demand for cotton;

(c) the prospects for introducing treenuts (like cashew and Mlacadamia) and expansion of native nut production (walnut, almonds); and

(d) the prospects for introducing pyretnrum. ANNEX 4 Page 25

Table 1: AREA, PRODUCTION AND YIELD OF JUTE (1965/66 - 1970/71)

65/66 66/67 Area Production Yield Area Production Yield (000 ha) (000 MT) (MT/ha) (000 ha) (000 MT) (MT/ha)

EELstern Terai 30.5 36.9 1.21 30.5 36.6 1.20

Western Terai 0.5 o.6 1.20 0.5 0.6 1.20

Irner Terai 1.0 1.2 1.20 1.1 1.2 1.09

67/68 68/69 Area Production Yield Area Production Yield (000 ha) (000 MT) (MT7/h) (000 ha) (000 MT) (MT/ha)

EEstern Terai 44.8 44.2 0.99 49.2 41.5 0.84

We!stern Terai 0.2 0.1 0.50 0.2 0.2 1.00

Irner Terai 1.9 1.5 0.79 2.1 1.6 0.76

69/70 70/71 Area Production Yield Area Production Yield (000 ha) (000 NT) (NT/ha) (000 ha) (000 NT) (MT/ha)

EELstern Terai 49.2 47.5 0.97 52.0 50.6 0.97

Western Terai 0.2 0.2 1.00 0.3 0.2 0.67

Irner Terai 2.2 1.7 0.77 2.7 2.1 0.78

Scurce: EAJPD, Agricultural Statistics of Nepal, Kathnmndu. ANNEX 4 Page 26

Table 2: EXPORT OF JUTE AND JUTE GOODS FROM BIRATNAGAR (By Country in 1970/71) /1

Destinations Raw Jute Jute Cutting Hessian Sacking m ton Rs'OOO m ton Rs'OOO m ton Rs'O0O m ton Rs'OOO

America - - 127 244 22,476 25,854 30 91

Germany 1,025 2,633 155 222 - - 270 396

Japan 163 419 23 34 100 94 - -

Poland 2,595 6,362 - - 110 162 - -

Belgium 1,486 3,660 63 73 - - _ -

India 31 54 1,223 1,635 171 222 4,14'1 8,836

U.K. 7,609 19,125 558 681 305 578 210 670

U.S.S.R. 2,149 7,508 77 243 - - - -

Singapore 23 59 - - - - 216 952

Holand _ _ _ _ 150 147 - -

Iran _o0 393 - -

Ethiopia - -- 30 91

Nigeria ------170 583

Total 15,081 39,820 2,226 3,132 23,712 27,450Q 5,067 11,619

% of Jute & Jute Goods 48.5 3.8 33.5 14.2

/1 Export from Biratnagar only.

Source: Jute Development Board. ANNEX 4 Page 27

Table 3: PRODUCTION OF BAGS AND HESSIANS BY JUTE MILLS (1965/66-1970/71)

Sacking Hessian Total Production Value in Production Vallue in Production Vallue in YCear in Ton Milion Rs in Ton Million Rs in Ton Million Rs

1965/66 11,904.4 36.2 1,188.2 16.0 16,087.7 32.1 1966/67 5,790.8 14.4 5,690.1 18.6 11,480.9 33.0

1967/68 5,667.5 13.3 5,926.2 18.4 11,593.7 31.7 19658/69 7,134.4 23.9 6,288.6 25.2 13,423.0 49.1

19.9/70 7,829.4 27.2 5,o87.4 25.3 12,916.8 52.6

1970/71 7,309.6 26.6 5,669,8 32.9 12,979.4 59.4

Total 45,636.1 141.6 32,845.4 136.5 78,481.5 257.9

Source: Jute Development Board. Table 4: AVERAGE PRICES OF NEPALESE RAW JUTE (LIGHTNING) IN INTERNAL AND INTERNATIONAL MARKETS

(Rs/m ton)

Months/Year 1968 1969 1970 1971 1972 Internal/l International/2 Internal International Internal International Internal International Internal International

J/F 2615 3158 3040 3787 2674 3388 2209 3364 3346 4187

F/M 2316 3122 2923 3775 2617 3400 2151 3379 3580 4216

M/A 2348 3086 2648 3812 2679 3436 2443 3412 3484 4107

A/M 2513 3061 2675 3836 2703 3491 2560 3465 3242 -

M/J 2635 3061 2583 3787 2732 3533 2584 3482 3336 -

J/J 2660 3098 2792 3691 2658 3618 2686 3594 3007 -

J/A 2651 3162 2760 3497 2570 3654 2713 3642 2975 -

A/S 2822 3279 2391 3364 2717 3485 2553 3582 2850 3550

S/O 2988 3340 2190 3340 2610 3372 2507 3551 2775 3550

O/N 3237 3557 2247 3328 2585 3560 2641 3501 2845 3550

N/D 3248 3787 2399 3388 2497 3340 2715 3752 2950 3550

D/J 3304 3812 2627 3412 2305 3364 2827 3879 n.a 3550

Average 2778 3294 2606 3585 2612 3470 2549 3550 3126 3783

/1 Free on rail, Biratnagar. /2 C.i.f., United Kingdon.

Source: T.N. Pant, "The Jute Development Programme," Vyapar Patrika Vol. 10 No. 2 1972,. ANNEX Page 29

Table 5: SUGARCANE PRODUCTION, AREA AND YIELDS

Production Area Yields (MT) (ha) (MT/ha) Zone 1967/68 1972/73 1967/68 1972/73 1967/68 1972/73

Mechi 1,324 2,672 100 190 13.2 1L.1

Koshi 13,013 20,230 h06 1,2!5 32.0 16.2

Sagarmatha 2,408 4,386 105 285 22.9 15.h

Janakpur 3,307 5,35h 225 337 1..7 15.9

Bagmati 9,622 11,831 805 940 12.0 12.6 Narayani 72,313 116,565 4,375 6,510 16.5 17.9 nandaki 3,412 4,233 235 287 1L.5 14.7

Dhanlagiri 233 534 25 45 9.3 11.9 Lumbini 60,690 74,929 4,025 4,660 15.1 16.1

Bheri 983 1,687 75 125 13.1 13.5

Rapti 725 650 45 80 16.1 8.1

Seti 689 1,619 50 116 13.8 14.0 Mahakali 707 945 50 65 14.1 14.5 Total Nepal 169,431 245,635 11,010 14,885 15.4 16.5

Eastern Terai 100,803 137,840 5,050 7,700 20.0 17.9

W1estern Terai 55,340 68,869 3,700 3,904 15.0 17.6 (Lumbini)

Source: FAMSD, NFAI. ANNEX 4 Page 30

Table 6: SUGAR AND SUGARCANE EXPORTS AND IMPORTS

Year Export Import Quantity Value Quantity Value (MT) (1000 Rs) (MT) (1000 Rs) 60/61 801.4 836.1 2,191.1 1,787.6 61/62 62.1 128.0 4,8o1.8 8,911.4 Sugarcane 43,180.O 3,455.5 559.2 44.8 62/63 N.A. N.A. 9,046.9 18,317.4

63/64 N.A. 33.7 N.A. 11,302.7

Raw sugar 488.4 462.4 3,024.3 3,311.7

64/65 24.8 54.o 4,822.0 9,526.5

Raw sugar 337.0 490.3 3,964.8 6,130.6 65/66 28.7 69.0 3,030.1 7,113.6

Sugarcane 8,421.4 850.o 6,172.7 713.6 Molasses & raw sugar 349.0 551.8 4,931.8 6,581.o

66/67 747.1 1,514.7 268.3 590.8

Sugarcane 1,794.2 148.2 141.0 1.3

69/70 25.0 41.2 19,118.2 30,428.9

Raw sugar 612.0 300.8 1,723.2 1,153.7

Souree: Based on information supplied by C.B.S. and Customs Dept. ANNEX 4 Page 31

Table 7 : TOTAL TOBACCO REQUIREMMT, 1970/71 - 1972/73

Years Domestic Production Import Total M7tons (OO0 Rs) /tons ('000 Rs) m tons ("000 Rs) ZJ;nakpur Cigarette FactorZ

1970/71 - - 57 1,450 57 1,450 1971/72 1l871 13,097 154 3,819 2,025 16,916 1972/73 1,800 12,600 217 4,997 2,017 17,597

Nepal Tobacco CQany

1970/71 ------1971/72 - - - - - 1972/73 60 420 240 2,280 300 2,700 Total Requirement

1970/71 - - 57 1,450 57 1,450 1971/72 1,871 13,097 154 3,819 2,025 16,916 1972/73 1,860 13,020 457 7,277 2,317 20,297

Source: K.R. Regini, IndustriaJl Requirements of Vegetable Oil and Tobacco in Nepal, FAMSD, MFAI, June 1973. ANNEX 4 Page 32

Table 8 : TEA ESTATES - ESTIMATED AREA AND PRODUCTION, 1970/71

Area Avail- Imputed Immature Mature Total able for 1Mature Area Estate Area Area Area Developnent Production Yields / (ha) a,F (ha) (ha) Thcgha)

Ilam /2 5 44 49 11 10.3 234

Soktim /2 24 13 37 12 4.o 3.L

Nakalbandha 44 23 67 - 4.6 200

Giribandhu 201 27 228 107 7.4 274

Sattighatta - 27 27 104 6.3 235

Budhakaran 37 36 73 127 8.3 231

Mittal 34 100 134 67 4.0 40

Total 3vs 7FO E:;

/1 Made tea. 7D Government estates run by Nepal Tea Development Corporation.

Source: Mission estimates based on Report on Tea Industry in Nepal,. NIDC, 1971. ANNEX 4 Page 33

Q2:l&9 PER CAPITA CONSUMPTION OF TEA IN NEPAL

Annual Growth 1962 19 1980 1990 1962-71

(1) Production (m tons) n.s. 46

(2) Exports (m tons) - 14 (3) Imports (m tons) 271 590

(4) Consumption (1)+(3)-(2) 271 622 1,469 3,801(5,561)/' 9.8 (5) Population (million) 9.6 11.4 13.6 16.6 2.0 (6) Per Capita Consumption (gus) 28 55 108 229(335)L 7.9

/ Average 1960/61 - 1962/63. 7 Average 1969/70 - 1971/72. /3 Assuming a 12% annual growth in per capita consumption.

Source: CBS; Customs Department, India; NIDC; Mission estimates. ANNEX 4 Page 34

Table 10: PROJECTED PRODUCTION FROM AVAILABLE TFA AREAS AT FULL MATURITY

Total Mature Projected Location Area Yield / ProductiorZ/. (ha) (kg/ha) (m tons)

llam 60 350 21.0

Soktim 49 550 27.0

Sub-total 109 44o 48.o /2

Nakalbandha 67 h00 26.8 Giribandhu 335 h50 150.8

Sattighatta 131 300 39.3

Budhakaran 200 400 80.0

Mittal 201 200 40.2

Sub-total 934 361 337.1 /2

Kanyam 160 750 120.0 Tokla 160 1,500 240.0

Baradasi 160 1,500 240.0

Nawalpur 890 1,750 1s557.5

Sub-total 1,370 1,575 2,157.5Z/

Total 2,L3 1,0_5 2,521_.

/1 Made tea. /2 Available by 1980. J Available by 1990.

Source: Mission estimates. ANNEX 4 Page 5

Table 10: PROJ;CTE_ PRODUCTION FROM AVAILABLE T;A 3REAS AT FULL MATIJ?ITY

Total Mature Projected Location Area Yield /l ProductiorZa (ha) (kg/ha) (m tone

Ilam 60 35C 21.n

SDoktim 49 550 27

Sub-total 109 440 18.,3 /2

Nakalbandha 67 400 26.8

Giribandhu 335 450 150.6

Sattighatta 131 300 39.3

Budhakaran 200 400 30.0

Mittal 201 230 83.2

Sub-total 934 361 337.1l/2

Kanyam 160 750 120.0

Tokla 160 1,500 2L0.0

Baradasi 160 1,500 2h0.0

Nawalpur 890 1,750 1,557.5

Sub-total 1,575 2,157.5/3

Total 2,413 1.045 2 521.h

/A Made tea. /2 Available by 1980. 7 Available by 1990.

Source: Mission estimates.

ANNEX 5 Page (i)

NEPAL

ACRICULTURAL SECTOR SURVEY

LIVESTOCK AND FODDER DEVELOPMENT

Paragraph Number

SUThIARY AND CONCLUSIONS ...... 1 - xiii

A. INTRODUCTION ...... 1 - 4

Livestock Production and Consumption ...... 5 - 7

B. LIVESTOCK HIUSBANDRY AND PRODUCTION

Productivitv of Buffaloes and Cattle ...... 8 - 11 Yak and Chauri ...... 12 - 13 Sheep and Goats ...... 14 - 17 Pigs ...... 18 Animal Nutrition ...... 19 Grazing ...... 20 Feed Requirements and Availability ...... 21 -- 23 Animal Husbandry Research ...... 24 - 25

C. LIVESTOCK PPODUCTS - "ARKETING AND I'TPOVEMENTS

Livestock Trading and Slaughter ...... 26 - 30 -ilk .. 31 - 34 Ghee .. 35 Wool . . 36

D. A STRATEGY FOR IMPROVING LIVESTOCK PRODUCTION ...... 37 - 38

Reduction of Animal Numbers ...... 39 - 40 Improvement of Genetic Stock ...... 41 - 44 Improverment of Pastures ...... 45 - 50 Improvement of Fodder Availability on Farms .... 51 - 53 Yield Increases and Farmyard Manure ...... 54 - 56 Integrating Fodder Crops with Existing Cropping Patterns ...... 57 - 65 ANNEX 5 Page (ii)

Paragrap-h Number_

F. PROJECT POSSIBILITIES ...... 66

Buffalo Breeding and Disrr-buton ...... 67 Fodder Crops and Livestock Ii:zeraciorL Research and Exrensi.n ...... 68 Processing of Livestock Prodlucts and Feed ...... 69 - 70 Pig Development ...... 71 Estimated Costs ...... ,.,, 79

Table 1. EstiTnates of Livestock Populatio.n Table 2. Cattle and Buffalo Ponulation per Hiusehod,ills and Traiai Table 3. Estimates of Livestock Production

Appendix 1. Concentrate Production and Utilization ApDendix 2. Common Crop Rotations and The'iir Ability to Provid.e tre Feeding Requirements of a tiliciggufffalo Anoendix 3. Alternative A.Droaches in Croppinn- Patterns to Integrate Livestock with Crop Production ANNEX 5 Page i

NEPAL

AGRICULTURAL SECTOR SURVEY

LIVESToCK AND FODDER DEVELOPMENT

Summary and Conclusions

Livestock and Fodder Production i. Llxestock, particularly cattle and buffalo, plays an important role in che way o, life in rural Nepal. Most livestock are reared for multi- tlurpcse use. Sheep, yak and chauries 1/ are important in the mountain re?.tiL. Alt.hough bullocks are particularly useful for draft and trans- P.,zrt4tion ir.the Teral., mules, horses, buffaloes and sheep are important mea:-j of transoort in the Hills. The female bovine (especially the she- buff at,) lc an integral part of the farm household, providing possibly the oLy) source of animal protein, from its milk (or ghee), and dung for manure and fuel. Although cattle accounts for about 65% of the estimated bovine po-)ilaticn of 9.7 M, the population of cows and she-buffaloes are approxi- matnly equal (3 M each). The livestock sector accounts for 15% of GDP. Nepal is, however, a net importer of live animals (mainly buffalo) for slaughter. ii. The basic problem in improving the production of livestock and livestock products is the livestock population pressure on existing fodder resources. The bovine (cattle and buffalo) population per holding (5.4) in Nepal 2/ is nearly double the 3.9 for India. The pressure on forests and natural pastures (particularly in the dry season) has been so great that the over grazed vegetation is hardly able to regenerate 3/. This problem is aggravated by the high percentage of unproductive animals (nearly 50% of cattle are unproductive and the general low productivity of the productive animals 4/. The main causes for high livestock population pressure and the

1/ The chauries are off-springs from mountain cattle and yak. The female is used for milk production, and the male (which is sterile) is used for draught and transport.

21 The corresponding figures for Terai and Hills are respectively 6.2 4.4. This implies a bovine population per cultivated ha of 1.6 and 8.8 respectively for the Terai and Hills. The latter figure is unduly large as no account of hill and forest pasture grazing has been taken due to unavailability of data. 3/ The closure of stummer grazing areas in Tibet has aggravated the Situation even further. 4/ She-buffaloes average about 2 liters of milk/day, and local cows yield only 0.7 liters/day. Bullocks are often too weak to produce th.e required dzaught for improved implements. ANNEX 5 Page ii

high percentage of unproductive cattle are the religious and legal prohibi- tion of cattle slaughter and the religious taboos associated with the slaughter of other female animals (especially buffalo).

iii. Within the religious context and the small farming system in Nepal, improving the milk production of bovines should be the priority concern, rather than meat production. Not only are milk and ghee (butter- fat) production traditional activities, but the prospects of generating surpluses and improved incomes are greater.

iv. The low milk production of cattle and buffaloes is not only due to competition between non-productive and productive animals for fodder and lack of improved breeds, but also to poor management and insufficient efforts to improve fodder availability. Productivity improvements should be made at the following levels:

(a) Selective reduction of animal production.

(b) Improvement of genetic stock.

(c) Improvement of fodder availability.

v. Mass castration of inferior bulls and the prohibition of service to inferior cows is one solution frequently prescribed for the selective reduction of animal population. Successful implementation is however constrained by religious resistance and the difficulty of demonstrating the economic advantages to the farmer. Even if such a scheme is implemented (para 40), some mechanisms have to be developed to prevent the rejected animals from grazing competively with "superior" animals and to provide dis- incentives to feed the unproductive animals by: (a) charging of differential grazing fees in village controlled grazing areas, and (b) increasing the price for milk (which would probably be more feasible).

vi. We support the 1971 UNDP/FAO/SATA Livestock Development Missions recommendation that HMG concentrate its limited manpower resources in improving the buffalo stock, particularly in the Lower Hills. With the pos- sibility of buffaloes replacing bullocks for draft in the Hills (particularly since they utilize the available low quality feed more efficienty), HMG's buffalo breeding program should also breed for draft in addition to milk production. Other breeds like the Nili, Randi and the Kundu should also be tried in addition to the Murrah. vii. The improvement of forest and alpine pastures is virtually impossible except in areas commonly grazed by a village or villages. Ex- cept in the Far Western Hills (and other areas where population density is low), a large part of accessible Hill forests and forest pasture (of- ficially government) are claimed by villages for grazing. In these areas, village panchayats could, for example, be given legal rights to charge grazing fees with unproductive animals having to pay higher fees. In selected forest pastures where over-grazing is critical, rotational grazing ANNEX 5 Page iii

should be demonstrated and implemented through the village panchayat. In regeneration areas, grazing should be prohibited for the period seedlings need to be established. viii. W4ith the small holdings and relatively low foodgrain yields, it is generally unrealistic to expect the establishment of permanent pastures on farms or even the substitution of part of the cropland for fodder production. Feasible changes can only be made with minimum competition for land under existing or improved cropping systems. Livestock fodder on farm is pri- marily obtained by grazing on the residual straw of paddy - wheat or maize - fallow rotations. Under average yield conditions, the straw from paddy- wheat rotations (per ha) can supply all the dry matter (DM) and 84% of the total digestible nutrients (TDN) and about 16% of digestible crude protein (DCP) required for the maintenance of a milking buffalo. However, to pro- duce the increments to TDN and DCP required for milk production, average grain yield increases of about 40% and the supplementation of leguminous fodder, oilseed cake or concentrates are required l/. ix. Integrating fodder legumes with traditional cereal cropping can be further expanded 2/. WN'ith some prior phosphate fertilization, intersowing with pulses (sunhemp, cowpeas, mung beans, rice beans, soybeans) between paddy and maize and harvested with the grain crop followed by a second pulse ,rop, one ha could produce sufficient roughage and green fodder to feed 1.5 - 2 milk buffaloes. This practice of intercropping with fodder pulses (part- :Lcularly for maize) followed by a second pulse crop would be more suited for !:he Hills because the main crop is usually planted earlier. The additional advantage against erosion by keeping the slopes under more intensive cover :'s also relevant.

'K. Insufficient emphasis has been placed in more extensive introduc- ,ion and improvement of local fodder sources. The greatest potential comes From the production of turnips or radishes (Brassica spp) in the Hills. In Jiri, 30 tons of roots were obtained from a ha of unfertilized radishes, sufficient to meet the annual needs for 2 milking buffaloes. xi. Another advantage of increasing fodder availability is the in- ,reased production of farmyard manure. Farmyard manure has an important :role as a source of nitrogen 3/ and potassium, particularly in the Hills,

I/ For the maize-wheat rotation (per ha) all requirements for milking buffalo are fulfilled except for 95 kg of DCP. '/ In many hill areas, intercropping with soybean and some pulses is practised, but primarily seeds. 3/ As a source of nitrogen, farmyard manure is more bulky, slower in its action and less effective than nitrogen available in inorganic ferti- lizers. Its soil improving properties are however particularly import- ant in lighter soils and in cooler Hill conditions where less leaching results. INThen used as basal dressing it enhances the responise to inorganic fertilizer. ANNEX 5 Page iv where accessibility and soil permeability problems predominate. Its imoortance has not been sufficiently emphasized but the soaring costs of inorg,anic fertilizers and the need for readily available substitute, makes it now imperative to do so. If proper care is taken to conserve manure, improved leguminous fodder availability could meet 25 - 50% of N and P and 100% of K fertilizer recommended rates for foodgrains 1/.

xii. A number of important corollaries to fodder/livestock/crop cycle should be noted. For instance, the irmportance of shorter duration grain varieties and ploughing (especially for seedbed preparation) would permit better accommodation of fodder crops. In addition, stall feeding would be nore feasible as more fodder becomes available on the farm itself, making it easier to conserve manure. Any trade-off between using manure for fertilizer rather than for fuel can be resolved in favor of the former, as fuelwood is generally more available than fertilizer. With the introduction of fast growing species for fuelwood in waste areas of the farm (without competing with present crops), the problem would also be less critical. Seed multi- plication and distribution of leguminous and root fodder should receive as highi a priority as foodgrains. Initial dairy improvement programs should be located around the centers programmed for processing plants for milk products. The establishment of processing units (particularly small ghee processing plants) should be considered as an important pre-requisite for providing an improved marketing infrastructure for the improvement of livestock production and integration with crops. xiii. A livestock project is proposed, consisting of (a) buffalo breeding and distribution, (b) research and extension development for integrating fodder crops and livestock with foodcrops, (c) processing livestock products and feed, and (d) poultry and pig development around key urban centers.

1/ Ranging from 50 - 150 kg N, 40 - 80 kg P2 05 and 20 - 40 kg K20 (with rice and wheat at the lower levels and maize at the higher levels). ANNNEX 5 Page 1

NEPAL

AGRICULTURAL SECTOR SURVEY

LIVESTOCK AND FODDER DEVELOPMENT

A. INTRODUCTION

1. Livestock plays an important role in the way of life of rural Nepal. Although it is not regarded as an important source of income, in the Terai, it is an important and often the only source of cash income in the Hills. Livestock raising is a traditionally integrated part of the farm operations in Nepalese agriculture. Oxen and, to a lesser extent, buffaloes provide power for the farm work. Bullocks are the major means of transportation in the towns and rural areas of Terai, Inner Terai and Hill valleys. Mules, yaks, horses and even sheep are used for "trekking" in the Hills.

2. Cattle and buffaloes provide the major source of milk and dairy products. Rearing of milk animals, particularly she-buffaloes, is an in- tegral part of agriculture in the Hills as well as in the Terai. The milk is used for domestic consumption or sold as fresh milk. The major part of the milk production is converted into ghee, some of which is consumed locally and some also exported to India.

3. Poultry and goats are important sources of meat throughout the country and are a source of cash income for the small farmers, expecially in the Terai and lower and middle Hills. In the mountain regions, sheep and yaks produce wool that is mainly used for clothing and blankets but surpluses are traded in the Terai or sold to the local cottage carpet industry. Poultry husbandry is basically a backyard activity for egg and meat production, based on the feeding of farm by products and wastes.

4. Estimates of the livestock population (shown in Table 1) are not very reliable but show an upward trend which is believed to be continuing 1/. This increase is expected because of the religious and legal prohibition against killing cattle and she-buffaloes. The total cattle and buffalo population is 9.7 million head, of which 6.2 million is cattle. This cor- responds to about 5.4 2/ bovines (cattle and buffalo) per holding which is nearly double the 3.9 heads of bovines per holding in India. Numerous

1/ K. Pandey, Livestock Officer, Department of Agriculture. 2/ On the basis of the farm management study (1968/69) average numbers of cattle and buffaloes per household in the Hills and the Teral were respectively 4.4 and 6.2 (Table 2). Since the average size of holdings were respectively 0.5 and 2.6 ha, apparent bovine population pressure per hectare were 8.8 and 2.4 respectively for the Hills and the Terai. ANNEX 5 Page 2

landlords, with large holdings, keep large numbers of cattle, not for econo- mic purposes but for religious and prestigious reasons. The unusually high proportion of female buffaloes (86%) reflects the religious taboos against their slaughter and their economic value to the farm household as providers of milk and ghee (butterfat) for food, and dung for manure and fuel.

Livestock Production and Consumption

5. Because of heavy domestic consumption by farm families, the total production of animal products is difficult to assess and the estimates shown in Table 3 should only be used as indications of trends.

6. The livestock sector contributes about 15% of GDP. The value of milk and milk products (Rs 955 million) was 68% of the total value of live- stock production in 1968/69 1/ (Annex 8, Table 4). In 1966/67 1/ the propor- tion of livestock animal products in total agricultural exports was 7%. About 1,700 m tons of ghee valued at Rs 20 M were exported to India 2/. Nepal is however a net importer of livestock and livestock products valued at about Rs 108 million, comprising mainly live animals. About 160,000 heads of live animals, of which about 50,000 are buffaloes and 50,000 are goats, are imported annually from India. Most are transported on hoof via the Hetaura road to Kathmandu for slaughter 3/. Because of lower feed availabilities, buffaloes from India are offered at competitive prices in Nepal.

7. Annual per capita consumption of meat in Nepal is estimated 4/ to be 5.2 kg in 1970. Buffalo (2.7 kg/capita) and poultry (1.5 kg/capita) are the main sources of animal proteins. Sheep and especially goats (0.6 kg/capita) are popular during festivals. Nepal's per capita milk consump- tion of 60 kg compares very favorably with the average consumption of 30 kg/ capita in Asia and the Far-East 5/.

B. LIVESTOCK HUSBANDRY AND PRODUCTION

Productivity of Buffaloes and and Cattle

8. The productivity of a pair of bullocks at the plough varies from 0.8 - 3.2 ha ploughing per day. The bullocks are often too weak to produce

1/ The latest year for which data was available. 2/ Statistical Annex, Table 37. 3/ UNDP/FAO/SATA, Report of the Nepal Livestock Mission, Rome, 1971; C.Y. Lee Marketing of Livestocks and Livestocks Products in Nepal, 1971. 4/ Given the date base, these figures are considered indicative. The derivation is given in the Statistical Annex, Table 32. 5/ FAO, Agricultural Commodity Projections, 1970-1980, Rome, 1971. ANNEX 5 Page 3

the required draft for improved ploughs or other improved implements. On the average, but varying according to farm size, the number of bullocks and she-buffaloes kept per holding is generally higher in the Terai than in the hill districts. In the Kathmandu Valley, where most of the soil preparation is still done by hand 1/, the bullock population for draught purposes is very low and draft buffaloes are relatively few.

9. The milk yield of she-buffaloes is reported to average about 2 liter/day or between 400-500 kg per lactation, to which 300 kg should be added as consumed by the sucking calf. Daily production of 4-5 liter/day during a 300 day lactation have been reported (mainly for larger farmers) with access to credit and feed purchases). Butterfat content varies from 7.5-8% and the average lactation period is from 8-10 months. The local cattle reportedly yield only 0.7 liter/day which is about a third of the yield of buffaloes, with a much lower butterfat content 2/. The 3.2 million cows are estimated to produce 178,000 m tons of milk versus 400,000 m tons produced by 2.9 million she-buffaloes 3/.

10. With the present composition of the cattle population, where no culling and slaughter is permitted in either sex, cows are generally very inefficient and uneconomical milk producers. The low productivity of cattle and buffaloes is not only due to age and poor genetic make-up of the avail- able breeds, but also to poor management and insufficient feeding. Animals live mainly on paddy straw supplemented with green roughage during the mon- soon are not suitable for intensive production and become vulnerable to many diseases. Although buffaloes generally receive more care and better feeding than cattle, even their nutrition leaves much to be desired.

11. Except for the importation of Murrah buffaloes from India, little has been done to improve the genetic potential of local milk producing animals. However, livestock development farms have been set up at Lalitupur, Rampur, Biratnagar, Nepalganj and Pokhara and the Swiss Association for Technical Assistance (SATA) Rural Development Project at Jiri also breeds improved Murrah buffaloes for distribution to the farmers. The demand by farmers near these stations greatly exceeds the potential supply of the breeding herds.

Yaks and Chauri

12. Yaks and naks (female yaks) are high altitude animals which live in the Himalayan zone at an altitude of about 3,000 m. Yaks and naks are mated with local mountain cattle to produce Urang Chauries, Dimzo Chauries, respectively, for milk production. The male offspring are sterile and are used for ploughing the potato and barley fields and as pack animals. The 1/ Farm Management Study of Nepal 1968/69, EAPD, 1971. DADO, Kathmandu (Personnel Communication). 2/ FAO, International Scheme for Coordination of Dairy Development, Nepal, AGA/Misc/yl/33, September 1972. 3/ Report Nepal Livestock Development Mission - UNDP/FAO/SATA, Dec. 1971. ANNEX 5 Page 4

main breeding season is July to August. The estimated calving percentage of naks and chauries is 60-70%. The age of naks and chauries at first breeding varies from 3 - 3-1/2 years. Both have lactations from 6-9 months. Estimated yields are 1.5 liter/day at 7-9% butterfat and 2.5 liter/day at 5-8% butterfat for naks and chauries, respectively 1/.

13. Families who live in the high mountain regions may own 6-30 yaks and chauries, along with some sheep. An individual chauri-keeper generally maintains 10-20 animals; less than 10 is considered uneconomic. A herd of this size will carry one or two bulls. The sole objective of mating is to produce a lactation. The chauri calves are allowed to die. Transhumance is commonly practiced. The migration starts early April and the herds move from pasture to pasture and reach the summer pastures near the snow-line in about 2 months. Each family has a permanent camping summer grazing areas. The animals return to the camps in the evening for milking. Chauries let down their milk without being stimulated by a sucking calf. Cheese factories have been established by the Nepal Dairy Corporation (NDC) at Langtang, Thodung and Pike to collect milk from the surrounding camps and to process it into semi-herd and hard cheese and butter. In areas where there are no cheese factories, the milk is converted into ghee. During winter they are driven to lower altitudes where they have to survive on leaves from evergreens.

Sheep and Goats

14. About 2 M sheep are kept throughout Nepal, 75% of which are mountain sheep living up to altitudes of 18,000 feet in summer and at lower altitudes in winter, sometimes as low as 1,000 - 2,000 feet. Kage sheep are primarily raised for meat. In the Terai, adult rams and ewes weigh about 23 and 15 kg respectively, but in the Hill valleys their weights tend to be lower. Despite very low fleece weight (less than 1 kg from a mature ewe) shearing of Kage sheep is practised, and the coarse wool is used locally for the weaving of carpets. Instead of being raised in large flocks, they are kept in small numbers by farmers and graze on wayside grasses and on paddy bunds. At night they are kept inside for manure production. They lamb twice a year. Wethers are sold for slaughter at 1 - 1-1/2 years of age 2/.

15. There are several breeds of mountain sheep of which the Baruwal or Tibetan sheep is predominant in the Alpine region. Baruwal are kept to provide wool, meat and manure. They produce a much finer quality wool than the Kage sheep. Shorn twice a year (March and October), a mature ewe yields about 1 kg of wool. This wool is used mainly for the weaving of garments, blankets and carpets. Surpluses are however "exported" to the High valleys and Terai. The liveweight of the Baruwal rams and ewes average about 40 kg

1/ UNDP/FAO/SATA, Nepal Livestock Development Mission Report, Rome, 1973. 2/ R. B. Griffiths, Nepal Animal Husbandry, Production and Health Country Study 1966, FAO, Rome, 1967. ANNEX 5 Page 5 and 25 kg respectively. Transhumance of the Baruwal flocks is practised. A single family may own 20-30 sheep, but the sheep are gathered into flocks of 200-300 head herded by each of the owners in rotation. In winter the flocks are grazed at 6,000-7,000 feet or even lower, where wheat and barley farmers encourage grazing on the stubble on the fallow cereal land. LMost ewes lamb only once annually (mainly in December-January). Wethers are sold for slaughter at about 1-1/2 years. Culled ewes are usually kilLed and the mortality of the lamb herd is very high (70-85%) due to attacks by jackals and leopards or grazing on poisonous plants.

16. Goats are maintained throughout Nepal mainly for meat purposes. Their population is estimated at 2.2 million. Their conception-rate is about 3 times in 2 years. The mortality rate of the kids is about 50%. They reach their full liveweight of 35-40 kg in about 2 years after which they are killed. Their carcass weight is around 15 kg.

17. The increasing use of arable land for winter cropping restricts winter grazing and creates problems in transhumance operations due to dis- ruption of the migration routes and decrease of pasturage along these routes. The present production of the sheep and goat industry is estimated at 2,700 tons of mutton, 2,900 tons of goat meat and 3,600 tons of greasy wool. The estimated annual off-take (slaughter) from the national sheep and goat flocks is low at respectively 8.5 and 10.8%. The country also imports about 24,000 goats for slaughtering and 300 tons of good quality carpet wool to meet present requirements 1/. pigs

18. The total pig population is estimated at 300,000 of which more than 95% are of the Susvittatus type (wild pig of East Asia). They are usually raised in backyards and fed on farm waste and allowed to scavenge on village garbage. Some commercial production of pigs are undertaken in Kathmandu and the larger Terai towns (e.g., Birganj, Janakpur).

Animal Nutrition

19. The most serious constraint on livestock husbandry and production is the scarcity of adequate feed. Overpopulation of animals and almost complete absence of systematic fodder production and proper pasture manage- ment have led to a countrywide shortage of roughage. Except on Government farms,.there are few enclosed pastures. The existing pastures are just sufficient to feed the cattle during the rainy season between July and September. Thereafter only coarse grasses are available. All cultivable land is used for food crop production and fodder crops are hardly grown. Ruminant stock subsist very largely on crop stubbles, wasteland and forest grazing. Sometimes hay of soybeans, field peas or lentils (cut at the green stage) may be fed to milk animals. The feeding of concentrates is not widely

1/ Report Nepal Livestock Development Mission UNDP/FAO/SATA, Rome, Dec. 1971. ANNEX 5 Page 6

practised 1/. Some mustard cake and maize is fed with rice straw to draft animals and milk buffaloes during the dry season, but the major part of the cattle population does not receive concentrate feed. Feed mixing plants in Nepal have an annual capacity of only 10,000 tons per year (primarily from the government-owned plant in Hetaura) and are producing mainly poultry feed. Paddy and wheat straw are the main source of roughage during the dry season in the Terai as well as in the lower and middle Hills for milk cows and she-buffaloes, whereas during the monsoon they feed on coarse grass and weeds cut from roadsides or walls and terraces above the reach of grazing animals.

Grazing

20. In the Terai and Inner Terai, large herds of cattle and buffaloes graze the forests. The burning of the grasses at the end of the dry season to stimulate new growth is practised indiscriminately, often causing damage to trees and preventing satisfactory generation of perennial grasses. The situation is further aggravated by the lack of common herding of stock in the grazing areas. Numerous herds ranging from 50 to several hundred heads graze haphazardly. Forest grazing takes place in the Hill regions but it has been so abused that the combined effects of overgrazing, lopping of branches and uncontrolled cutting for firewood have led to the disappearance of some forest stands in the Churia and Mahabharat Ranges 2/, particularly in the valleys and watersheds. Conditions are also serious in some of the higher coniferous forests between 8,000 - 10,000 feet, where the chauries are grazed in the winter. More care seems to be taken in the Khumbu region where the Sherpa villages appoint a "forest ranger," who is responsible for the forests and use of pastures. Although the forests are declared national forests by the Forest Act of 1961, the Forestry Department is generally un- able to control the use of hill forests. The villages regard them as village property and common grazing ground. The pressure exerted on both forest and pasture especially for cattle (roughly 50% of which is unproductive) is so great that the over-grazed vegetation is hardly able to regenerate. The critical grazing period is between January and April in the high mountains and from January to June at lower altitudes. The situation has been consider- ably aggravated within the last few years by the increased cattle numbers in the South and by the closure of the traditional summer grazing areas in Tibet.

Feed Requirements and Availability

21. No work has been undertaken in Nepal to determine the feed require- ments of the various types of animals for optimal performance and production. With an average daily maintenance of 5 kg green fodder, 12.5 dry fodder and

1/ Details on concentrate production and utilization are given in Appendix 1. 2/ R. B. Griffiths, Nepal Animal Husbandry, Production and Health, Country Study 1966, FAO 1967. ANNEX 5 Page 7

0.5 kg oilcakes per day 1/, the annual requirements for the present 9.7 mil- lion head of cattle and buffaloes would be 19.4, 62.5 and 1.9 million m tons, respectively 2/.

22. Even with optimistic assumptions, the amount of straw (dry fodder) produced from 1.9 million ha cereal land is estimated at only 3.5 million m tons. Assuming a yield figure of 5 m tons green roughage/ha from the 4.5 million ha forest land, 22.5 million m tons green roughage is available. The production (60,000 m tons) of oilseeds 3/, mainly mustard, will yield about 35-40,000 m tons of oilseed cake. These calculations clearly show the ln- adequacy of the present farming system and feed resources to maintain the present livestock population, let alone increase the production of milk and draft power.

23. Although the use of feed-mixing units is increasing, they will not be able to satisfy total requirements. With the present efficiency of milking livestock, providing the necessary nutrients for maintenance and basic pro- duction in the form of concentrates is marginally economic 4/.

Animal Husbandry Research

24. Research on animal husbandry, and pasture and fodder is of recent origin and is seriously handicapped by shortage of funds and experienced staff. Most of the activities consist of rearing improved milk buffaloes and cows on government farms for distribution to farmers. For this purpose, a number of Murrah bulls and Haryana bulls have been imported from India. The cost of the improved she-buffaloes to the farmers varies between Rs 1,230-1,470 5/. The demand for improved she-buffaloes far outstrips potential supplies from government farms.

25. Screening of suitable pasture and fodder species started some years ago and is conducted at Rampur, Kumaltar, Pokhara and Lantang. Some yield data are available but the nutritive value has not been determined. Research into the feeding requirements of milk and draught animals has yet to be started. Pasture species under investigation that hold some promise are Teosinte (Sorghum bicolor), Dichanthium annulatum, Botriochloa pectusa, Cenchrus cilliaris , paragrass (Brachiaria sp), Hybrid Napier (Pennisetum purpureum) for the Terai and lower altitudes up to 6,000 ft. Ryegrass, cocksfoot and white clover (Langtang, Jiri) are being tested at higher

1/ R. 0. Whyte & M. L. Mathur, The Planning of Milk Production in India. 2/ The requirements of small animals like goats and sheep should be added to these estimates. 3/ Agricultural Statistics of Nepal EAPD, MAI, 1972. 4/ For example, 1 kg of concentrate mixture sold at Rs 1.45/kg (1972 price) will produce an additional amount of about 2.0 kg milk valued at Rs 1.50-1.86 per liter (6% butterfat) in the Kathmandu Dairy. Source: C.Y. Lee Marketing of Livestocks and Livestock Products in Nepal EAPD, June 1971. 5/ ADBN Impact of Bank Loan on Dairy Enterprise and Financing Programme over 1973/74-1979/80, March 1973. ANNEX 5 Page 8

altitudes. The problem with temperate grasses and legumes so far tested is dormancy and slow growth in winter and their reseeding capacity.

C. LIVESTOCK PRODUCTS - MARKETING AND IlIPROVEMENTS

Livestock Trading and Slaughter

26. Except for a few places like Jitpur (near Birganj in Central Terai) for buffaloes, and Khumbu, Rollwalling and Rasuwa (in the Himalayan region) for chauries and yaks, there are no organized marketing centers for specific livestock types.

27. Cows and bullocks are very commonly traded, but they are generally limited to the same locality or district. In the case of chauries and yaks, there exists a definite marketing channel starting with the trader, who collects the sterile male offspring of cross-breds between yaks and mountain- cattle and sells these in the adjoining areas of Tibet in exchange for naks (female yaks). These naks are sold to the breeding centers in Nepal where they are crossed with "jollung" bulls to produce chauries. She-buffaloes are marketed purely for milking purposes and they move from the Nepal and India Terai into the Hills districts, although in many hill districts replacement stock is reared locally. The trade is more or less confined to the same district 1/.

28. Although locally reared male buffalo calves are traded for slaughtering, he-buffaloes for the Kathmandu market are largely imported from India, because of high calf mortality. Sheep normally are not traded for meat except for the Dashahara festival. Sales of flocks of sheep occur in the mountain areas. There is no organized pig trading.

29. The present marketing channels for buffaloes and goats are dis- organized and unregulated. Although about 60,000 buffaloes and 50,000 goats are traded annually through the Birganj-Kathmandu road, there are no organized livestock trading centers. The market value of each animal is determined by inspection and guesswork whereby the price is negotiated between seller and buyer. The buyer is the middleman who sells to the butchers. The butchers, who have a meat selling license, slaughter in open places or backyards and sell the meat themselves or to the retailers.

30. As long as the killing of cattle is not permitted, meat consumption will be mainly limited to goat and buffalo meat although pig and poultry meats are becoming increasingly popular. Organized slaughter is still at an infant stage. A slaughter-house and meat processing plant is under construc- tion at Hetaura with a planned capacity of 50 buffaloes, 50 pigs and 800 heads

1/ R. M. Upadhyaya, Marketing of livestock and livestock products in Nepal, Agricultural Marketing Conference, Kathmandu, 1973. ANNEX 5 Page 9 of poultry per day. It is estimated that this plant will have a production of 1,700 m tons buffalo meat, 1,100 m tons pig meat and 135 m tons chicken and 165 m tons duck meat 1/. This slaughterhouse will draw its main supply from central Terai and Chitwan, and plans to eventually have its own farm for the raising and fattening of buffalo calves. It will be operated as a limited company, with the Nepal Industrial Development Corporation (NIDC) as major share holder. Buffaloes will be purchased on liveweight basis and a price Rs 0.70 per kg liveweight has been fixed. This arrangement is aimed at substituting for imports of buffaloes and goats from India. Cold storage facilities exist in Kathmandu and Birganj. A cold storage plant is under construction in Biratnagar and similar plants are planned for Janakpur and Nepalganj. An assessment of the feasibility of simple slaughterhouses in these towns should be made, especially for the slaughtering of small farm animals such as goats and pigs. In most areas, the installation of simple slaughter sheds would be sufficient.

Milk

31. Milk and milk products are the most acceptable source of animal protein in Nepal. The potential gains from expansion of dairy development and marketing provide an important means for increasing farm income. All farmers keep buffaloes for milk production, and surpluses above their own requriement are sold as liquid milk or converted into ghee (see para 35). In Kathmandu, a special bonus is paid to those who deliver their milk to the Nepal Dairy Corporation (NDC), but competition with private vendors is quite keen. These vendors of raw milk collect their supplies from individual producers within a radius of 5-6 miles of the towns. The Central Dairy in Kathnandu has a pasteurization plant and a chilling tank with a capacity of 3,000 liter and a bottling machine. The milk is standardized at 2.5% butter- fat and 9% non-fatty solids by partial skimming and reconstitution with skimmed milk. Cream and butter are manufactured as by-products. There are more than 20 milk collecting centers spread in the peripheral rural areas of Kathmandu, Lalitpur, Bhaktapur and Kavre districts. It is estimated that DDC receives less than 25% of all the milk consumed in the Kathmandu Valley 2/. From the point of view of product outturn, the operation in Kathmandu has been quite successful.

1/ Nepal Industrial Development Corporation.

2/ UNDP/FAO/SATA, op. cit. ANNEX 5 Page 10

Production of Milk and Milk Products by

the Nepal Dairy Corporation -/

1966/67 1967/68 1968/69 1969/70 1970/71

Milk (000 liter) 805.6 752.9 896.7 1,469.8 1,622.0

Butter (000 kg) 10.6 7.9 14.1 20.0 18.8

32. Except where milk is purchased and distributed by NDC, the prices of milk and milk products is subject to free market forces. NDC prices of raw milk paid at the Collecting Centers for each percent of butterfat are Rs 0.27/liter in summer (February - June), Rs 0.24/liter in the monsoon (June - October) and Rs 0.21/liter during winter (October - February) 2/.

33. Milk production is considered a profitable enterprise in areas located near population centers. Case studies of dairy producers in Kavre, Makwanpur, Bara, Parsa and Morang by ADBN reported gross incomes of Rs 3,005 and Rs 4,156 (and net profits of Rs 1,554 and Rs 2,431) 3/ per milk buffalo per annum for selected hill and Terai areas 4/. The average net profits per per annum exceeded the costs of acquiring the buffalo by respectively Rs 106 and Rs 879 in the hill and Terai areas but fell short by Rs 1,142 and Rs 777 to cover the total fixed investment incurred in dairy farming. These figures are applicable for the better dairy farmers achieving milk yields (per lactation) from an average of 1,557 liter in the Hills (Kavre) to 2,259 liter in the Terai. Most farmers in the survey supplemented their roughage with soybean hay and concentrates prepared on the farm consisting of maize, barley, pulses, rice bran and oilcakes.

1/ R. M. Upadhyaya, Marketing of Livestock and Livestock Products in Nepal, Agricultural Marketing Conference, Kathmandu, 1973. 2/ These prices are equivalent to a range of Rs 1.68 - Rs 2.16/liter (at 8% butterfat) and are slightly above national average prices from Rs 1.29/liter in 1964/65 to Rs 1.85/liter in 1970/71 (EADP, Agricultural Statistics). 3/ After deducting operational costs consisting mainly of feed produced on the farm (opportunity costs), veterinary charges and repair and maintenance of sheds. The higher average gross and net income in the Terai areas is mainly due to higher milk yield and higher prices for liquid milk and lower maintenance and repair costs. Feed costs, how- ever, were high in the Terai, probably due to higher maize and barley prices. 4/ ADBN, Impact of Bank Loan on Dairy Enterprise and Financing Programme Over 1973/74-1979/80, March 1973. ANNEX 5 Page 11

34. In the Fourth Five Year Plan, most of the increase in milk pro- duction is planned to come from the buffalo herd; buffalo milk output is to rise by 25% to 500,000 MT by 1974/75, while the country's cattle herd of 6.2 million head (nearly double that of the buffalo herd) accounts for less than one third of the total milk production in Nepal. Establishment of new dairies is included in Fourth Five Year Plan for Pokhara, Janakpur, Bhairawa and Nepalganj. Because distribution of liquid milk will be limited to the larger towns, only the farmers around these towns will benefit from this development. For the farmers who are outside the larger towns but in areas which are readily accessible, the possibility of establishing cheese, butter and ghee processing plants should be explored (particularly in the Hills). NDC has assigned priority for upper Hills (para 13). Limited financial resources will prevent the realization of dairy development potentials in the Lower Hills. External assistance should be provided as top priority.

Ghee

35. Annual domestic consumption of ghee is about 4,000 m tons and exports to India are approximately 3,500 tons 1/. About 20% of all the milk produced is converted to ghee. Although ghee is generally produced in areas not easily accessible to population centers, it is also produced from unsold surplus milk in more accessible areas. Ghee is marketed after paddy is harvested. It is taken to the market in tin cans, containing about 16 kg of ghee. Ghee has distinctly defined marketing centers which are mostly situated near the Indian markets. The important ghee producing areas are mainly in the Western Hills (Surkhet, Sallyan, Pyuthan, Dailekh, Baglung, Doti, Syangja and Dang Deokhuri). The most important trading center for export to India is Nepalganj. The major part of the ghee produced in Nepal is done by the traditional method of souring the milk, churning to make butter ("nauri") and boiling the butter to turn it into ghee. It is estimated that about 60% of the butterfat is recovered by this method 2/. Because of unfavor- able price differentials between milk and ghee, the latter is always produced as a residual 3/. Better quality ghee could be produced with small ghee pro- cessing plants. Their feasibility should be explored.

Wool

36. For farmers in the subalpine and alpine regions, wool constitutes an important supplement to dairy as sources of income. The main trading centers for coarse (local) wool are Dimbha and Solukumbu in the Eastern Hills and Jumla in the W4estern Hills. Wool of the Tibetan sheep which is finer in

1/ International Scheme for Coordination of Dairy Development Nepal, FAQ, 1,972. 2/ Ibid., p. 9. 3/ At 1970/71 prices (Rs 1.85/liter or Rs 2.15/kg for milk and Rs 14.47/kg of ghee), 18 kg of milk would yield Rs 38.70 compared with 1 kg of ghee at Rs 14.47. ANNEX 5 Page 12

quality and has a longer fiber (about 12 inches) is mainly used in the woolen carpet industry. The Tibetan carpet industry in Nepal appears able to absorb (through the HMG-owned National Trading Company) increasing quantities of more high quality wool such as produced by the Tibetan mountain sheep. Imports of Tibetan wool have increased from 200 m tons in 1967 to 544 m tons in 1970. The 1970 import figure represents a production from about 270,000 sheep. A breeding programme for the selection and breeding of sheep with higher wool production combined with better quality has been started by the Department of Agriculture (DA) recently with technical assistance by FAO. We recommend an expansion of this programme to more hill stations to establish breeding herds for the distribution of improved stock. Funds and staff are lacking. Greater use should be made of progressive farmers (with adequate supervision) to specialize in sheep breeding, otherwise progress is likely to remain slow.

D. A STRATEGY FOR IMPROVING LIVESTOCK PRODUCTION

37. The low productivity of livestock in Nepal is due not only to the competition between non-productive and productive animals for scarce fodder and the lack of improved breeds, but also to poor management and insufficient efforts to improve fodder availability. Productivity improvements can be made at the following levels:

(a) selective reduction of animal population;

(b) improvement of genetic stock;

(c) improvement of fodder availability.

38. In addition, the necessary supporting services to distribute improve animals (para 67) and the provision of marketing facilities to improve the processed products (paras 30 and 35) are required.

Reduction of Animal Numbers

39. Mass castration of inferior bulls and the prohibition of service to inferior cows have been recommended by various Aid Missions. Such a program would require a tremendous effort by the Veterinary staff and strong religious resistance can be expected from certain ethnic groups. Even if the reproduction rate of the current bovine generation were to be reduced, the rejected cows and bulls would still be allowed to graze and compete for feed with the genetically superior young animals. However, a program to reduce animal numbers might meet with success if the advantages of greatly improved production and income from fewer but more productive animals were well demonstrated.

40. An initial step could be taken in selected areas to reduce the bovine population by restricted breeding. After registering the "commercial" cows or the buffaloes, the less productive males would be castrated and substitute breeding arrangements could concurrently be made (e.g. maintaining of stud bulls and introduction of artificial insemination). ANNEX 5 Page 13

Improvement of Genetic Stock

41. Better management and feeding of average genetic material is generally uneconomic and inadequate to raise the average millk yield per lactation to a satisfactory level. Local buffaloes in Jiri Government farm yielded 332 liters per lactation versus 832 liters and 525 liters for Murrah and Murrah x local cross 1/. The highest yields recorded for Murrah buffaloes at Kumaltar were 1,749 liters per lactation and lowest yields were 1,000 liters. The yield of the local buffaloes with the same feeding stand- ards was only 467 liter per lactations 2/. The mission supports the views of UNDP/FAO/SATA Nepal Livestock Development Mission, that HMG should con- centrate its limited resources on improving the buffalo stock 3/ since the limited feed resources (especially in the Hills) would be better utilized. Selection should not only be based on milk production, but also on draft performance, since the latter could alleviate the need for bullocks in field preparation, especially in the hills, below 6,000 feet. In these areas, the relative slowness of buffaloes for transport is less important than their ability to utilize the available low quality feed better than cattle. Also female buffaloes can be used for draft in contrast with cows, which are seldom used for that purpose 4/. More attention should be paid to the Bhadawari and Jaffarabadi breeds from India. A dual purpose buffalo would appear to be the best approach as a medium term policy. For the hill areas above 6,000 ft, efforts should be focused on cattle, yak and chauries.

42. Cattle with high milk potential are located on larger farms near the dairy centers. Because buffaloes are superior to cattle in converting the low quality fodder to milk, they are the obvious choice for dairy animals up to 6,000 ft. Intensification of the government's bull breeding and dis- tribution program should lead to limitation on imports of nondescript buffaloes for breeding purposes. The government should also explore other breeds for their stock (like Nili, Randi, Surti and Kundu) in addition to the Murrah.

43. We recommend a coordinated program to provide: (a) buffalo and cattle breeding farms and artificial insemination (Al) centers in the Hills where road access is available; (b) credit for the purchase of improved bovines; and (c) market outlets for the increased milk production.

44. We support the recommendation by the Nepal Livestock Development Mission for establishing a yak and chari improvement station in Langtang

1/ Farm Manager Jiri Experimental Farm. 2/ K. Pandey Livestock Officer, D.A. 3/ Report Nepal Livestock Development Mission UNDP/FAO/SATA, 1971. 4/ H. C. Pant & A. Roy in R. E. McDowell, Improvement of Livestock Production in Warm Climates, 1972. ANNEX 5 Page 14 to evaluate the milk production potential of chauries (under improved feeding and management conditions) and to carry out intra-herd selection at various locations. The development of the high mountain areas depends largely on the improvement of chauries, sheep and goats and their feed resources.

Improvement of Pastures

45. Although livestock is grazed on fallow land and wasteland near the farms, forest and mountain pastures are also important sources of grazing fodder. Improvement of the alpine pastures may be technically feasible by oversowing with improved leguminous and gramineous pasture species and fertilization. Because these pastures are communally and nomadically grazed, the costs of developing such a program will be high.

46. More efficient and less costly approaches should be sought. Tech- nical assistance should be sought for the selection of winterhardy white clover species, that could be oversown from the air using the lime pellet- ting technique. With this technique the nodulation of the clover is assured and no further liming of the pastures is required to get the full benefit of the nitrogen-fixed capacity of the clover.

47. Rotational grazing in the vicinity of a village community might offer a practical solution for the alpine pasture lands. The organization and the management of such grazing is highly dependent on the support of the village or panchyat. Rotational grazing of the more remote grazing lands beyond the immediate control of the villages would be impossible to implement. The most acute and detrimental fodder shortage occurs during the winter season when chauries and sheep are taken down the valleys in the forests.

48. Forest grazing is a common practice in the Terai, Inner Terai and the Hill districts at middle and lower altitude. With the exception of the Hill area containing low population density (particularly the Far Western Hlills), government forests are generally claimed by the villages as grazing land. As the villages, in practice, control the hill forests, the most effective way to arrest further deterioration and to control grazing practices is through the village-panchyat. If the village-panchyat is given the full responsibility for the grazing in the forest areas, various solutions may be attempted to check overgrazing. A grazing fee could be levied in exchange for grazing permit. Fees could be fixed according to the economic importance of the grazing animal and the amount of destruction they cause and fees for male buffaloes (e.g. high fees for unproductive cattle). Goats that are particularly destructive should be reared in confinement on forest loppings, for which permits could also be issued. More importantly, reforestation with quick-growing fodder trees need to be undertaken (Annex 2, para 72), since tree loppings often provide the major source of winter fodder in many hill areas. 49. Seriously overgrazed forest pastures would require more compre- hensive approaches. In selected areas, where this situation is critical, a number of alternatives exist. These would entail a change from a year- round grazing system to a system based primarily on hand feeding, in dry lots or yards with controlled grazing on a restricted area for a very limited period. One alternative could be to close one-tenth of the village grazing area (with adequate shade) to all grazing for one year, transforming ANNEX 5 Page 15 it into a dry lot. The grass could then be cut after maturity, when the seeds have shattered. This grass or hay could be rationed or sold to the farmers for stall feeding or stored for use during the dry season. In each of the following three years, another tenth of the grazing area could be added to the first and treated in the same way. When a third of the area has been reclaimed, the improved area could be reopened to controlled grazing on a permit or block system. This procedure could be repeated until the entire grazing area of the village had been reconditioned.

50. Another alternative would be to transform the remaining nine- tenths of the grazing area for pasture management. Useless bunch grasses would be cleared; contour farrowing and planting of suitable foddertrees or sowing of suitable pasture grasses and legumes by the village community could be carried out. Within a period of three years following this con- centration of stock and the adoption of hand feeding, the whole pasture would be considerably improved and would provide more fodder in a cutting region than by the former haphazard grazing. These methods would not require a large cash outlay. They could only be successful if there were complete cooperation among the livestock owners of a village to undertake the key provision - common feeding in dry lots or yards. Most farmers fully realize that many of their livestock are not worth the effort of hand feeding and this method might induce farmers to dispose of their unproductive animals.

Improvement of Fodder Availability on Farms

51. With small farm holdings and relatively low yields, the majority of the Nepalese farmers need all their land for food grain or cash crop pro- duction. It is, therefore, unrealistic to expect farmers to devote part of their crop land exclusively to fodder production. Improvements will have to start with the existing livestock feeding system, and particularly in the Hills, livestock production must be viewed as an integral part of the farm system.

52. Cattle fodder on farm consists of paddy and wheat straw or, in grazing of harvested maize areas. The importance of this system of feeding should not be underestimated. Cattle utilize unused crop residues, and per hectare residues from an average per ha paddy-wheat rotation 1/ could supply all the dry matter (DM) and 84% of the total digestible nutrients (TDN) and approximately 16% of digestible crude protein (DCP) required for the main- tenance of a 450 kg milking buffalo (Appendix 2).

53. Supplemental feeding is required (in the paddy-wheat rotation) to provide, on the average, an additional 440 kg TDN and about 120 kg of DCP to

1/ For the maize-wheat rotation (per ha), all requirements for a milking buffalo are fulfilled except for 95 kg of DCP (Appendix 2). ANNEX 5 Paoe 16 fulfill the requirements for milk production. The more productive farms (with yields more than 40% above average), which supplement their straw fodder with mustard oil cakes or soybean and field pea hay, provide suf- ficient feed for milk production (Appendix 2, para 2). This practice, though not very widespread, is used mainly for the she-buffalo. Alternative cropping patterns which can both improve yield and supplment the deficit DCP in present crop residues are, therefore, very important (paras 58-62). There is a need to examine economic ways of increasing concentrate availability to small farmers. Feasibility of feed mills, and incentives for local rice millers to undertake seed mixing should also be explored.

Yield Increases and Farmyard Manure

54. The impact of increased inorganic fertilizers and HYV 's on yield has already been discussed in Annex 3. The use of organic fertilizer or farmyard manure in the cropping system needs further emphasis, especially with the increasing scarcity and soaring costs of inorganic fertilizer.

55. As a source of nitrogen, farmyard manure is considerably slower in its action and less effective than equivalent amounts of niv:rogen avail- able in concentrated forms of inorganic fertilizers. However, its soil improving properties make it excellent on the predominantly lig,ht soils in Nepal and used as basal dressing enhances the response to inorganic fertil- izers. Their contribution to increasing soil fertility can therefore be very significant if proper care is taken in the collection and production of manure. The quantity of manure collected from one bullock, cow or buffalo, is estimated at two tons 1/. This figure could be doubled with proper bedding, manure conservation and improved feeding 2/. If this manure is well prepared with deep bedding (preferably of rice or wheat straw) so that the animal urine will not be lost and the manure is properly stored in compacted heaps under shelter, about 70 percent of the P and K and about 50% of the nitrogen contrained in the feed is potentially available for return to the land 3/. The attainable annual production of one milk buffalo under these conditions with adequate feeding will be about 20-25 kg of N, 10-12.5

1/ India's Manurial Resources, Kurukshetra 5 (4) 1957; and R. B. Milford, IBRD (Personal Communication). 2/ R. Hamon, Agronomie Tropicale 27 (5) 1972: 592-607. 3/ F. B. Morrison, Feeds and Feeding, 1961. ANNEX 5 Page 17

0 kg of P2 5 and 40-50 kg of k20 1/. This would cover roughly 25% of the N and P requirement and 100% of the K requirement of a rice-wheat crop rotation yielding three tons of grains per ha (present yield levels). Additional N and P for high food grain production would have to be supplied in the form of inorganic fertilizers or green manures. If two buffaloes could be main- tained and fed with the crop residues and legume hay from one ha, which is feasible (see para 58), 50% of the N and P requirement could eventually be covered by farmyard manure.

56. Stall feeding (currently practised only for milk animals), in a manner to efficiently collect livestock manure, will be increasingly import- ant to the farming system. There is, however, a trade-off between the use of manure as fertilizer and its use as fuel. As mentioned in Annex 2, quick growing fuelwood species can be grown on farms on either the steeper slopes or on wasteland, and should, therefore, be used as fuel or for fodder rather than manure. Within the livestock/manure/fodder/livestock cycle, the contri- bution of nutrients is dependent on the livestocks' manure productivity which in turn is dependent on fodder availability 2/. Present cropping systems can improved by integrating fodder crops.

Integrating Fodder Crops with Existing Cropping Patterns 3/

57. Integrating fodder crops into the existing cropping patterns can only be achieved if it is profitable and marketing support is available. The small farm in Nepal is subjected to high risks of crop failure which he can ill afford. A more diversified production base is essential and improved buffalo dairy production provides the best opportunity for diversi- fication and improved cash income, particularly for the Hill farmer. Inte- grating fodder crops must be undertaken within this context, and cropping patterns can be intensified as outlined below.

1/ Assuming a manure production of 4 tons/buffalo per annum with average. N, P and K contents of respectively 1.0, 0.5 and 2.0% produced in covered stalls. NB. Determinations of the contents of the major nutrients N, P and K of dry farmyard manure made in tropical countries show a wide variation of respectively 0.3-2.0% N, 0.1-0.6% P and 0.2-3.4% K. Source: Efficient Use of Fertilizers, FAQ Agricultural Studies No. 43, 1962; R.A. Wood, Tropical Agriculture, Trinidad 40 (4) 1963: 269-273; R. Hamon: op. cit.; A. Jacob en H. von Uexkull, Fertilizer Use, Nutrition and Manuring of Tropical Crops, 1960. 2/ Concentrate feeding is seldom used. Among the larger farmers, where some concentrate mixing is done, combinations of rice bran, maize or barley, and pulses like khesari (Lathyrus sativus) or soybeans, are used. 3/ Detailed discussion is presented in Appendix 3. ANNEX 5 Page 18

58. For early planted rice crops 1/ located on relatively high water tables, but where risks of growing a second rice crop is great 2/ the pos- sibility exists for intersowing legumes (like sun hemp, lentils, cowpeas, mung beans and rice beans) between the paddy before harvest (usually at the end of August or early September). Residual soil moisture at the end of the monsoon would enable the catch crop to be cut for green fodder at the end of October or early November. With green fodder yields of 12-15 m tons/ ha (phosphate fertilization of the preceding rice crops is required), and grazing on the rice straw residues, sufficient nutrients can be provided to feed 1.5 - 2 milk buffaloes. 59. Larger farmers with productive milk animals and good marketing outlets could reorientate their cropping pattern to plant selected grasses like Napier, guinea grass or silage maize. For these farmers, winter cropping with green fodder crops (mentioned above) for dairy, in half of the winter wheat areas each alternate year could return competitive and less risky incomes and improve wheat productivity at the same time. An assessment of the economic feasibility is required. 60. Intercropping of maize with soybean and other pulses, already practised in many hill areas should also be introduced in the Terai and Inner Terai, for both forage and seeds. Forage yields of 4-5 m tons/ha (particularly from cowpeas and mung beans) and the maize crop residues can provide adequate feed supply for 1-1.5 milk buffaloes. Instead of just leaving the land for fallow and grazing after maize harvest, a second sowing of pulses (like peas or sum hemp) would enable the harvesting of a valuable green fodder 3/ at about the end of October. This practice and the practice of intercropping cowpeas, soybeans, or dry beans have better chances of success in the Hills because maize is generally planted earlier.

61. Improved rotations and the intensification of cropping patterns suggested for maize farms on hill slopes would greatly reduce erosion from the hill terraces, and the land would be under close cover through most of the monsoon period. In the dry season, improvement of local fodder crops and feeding methods should be given more prominance. The biggest potential comes from turnip or related Brassica species or varieties. In Jiri, for example, unfertilized radishes yielded about 30 m tons of roots/ha, suffi- cient to meet the annual requirements for maintenance and milk production for 2 milk buffaloes. A selection and improvement program for Brassica species should be initiated by DA.

62. In the higher subalpine and alpine regions, barley and potatoes are grown on soils which are nitrogen short, relatively acid and of low fertility, emphasis should be shifted from clover (currently grown in government experimental stations farms) to winter hardy white clover (para

1/ Of short duration HYVs. 2/ Due to insufficient soil moisture after the monsoon. 3/ Phosphate fertilization of the maize crop is necessary. ANNEX 5 Page 19

46) and other winter hardy legumes to provide the nitrogen for barley and potatoes because they can tolerate these soil conditions as well as drought.

63. The recommendations set out above can only be achieved if the foodgrain improvement programmes are integrated with fodder production. Without the benefits of fodder crop production in the form of an increased supply of farmyard manure and residual nitrogen effects of leguminous crops, increase in foodgrain-production will rely largely on fertilizer inputs which are scarce and very expensive. It is estimated that 25-50% of the recommended N and P requirement per ha for foodgrains (50-150 kg N and 0 40-80 kg P2 5) and 100% of K20 requirement (20-40-kg K20) could be met by including leguminous fodder crops and the return of increased nutrients (removed by the crop residues) in the form of farmyard manure.

64. We recommend that fodder crop agronomists should be stationed in the proposed Regional Crop Development Centers. They should work in colla- boration with the foodgrain agronomist, to develop and extend a complete package of crop and livestock husbandry according to the cropping patterns outlined above. The necessity of short duration rice, wheat and maize varieties to accommodate fodder crops in the cropping patterns is obvious. Also improved plows and improved draft animals will be required to reduce the time of seedbed preparation. Seed multiplication and distribution of leguminous and root fodder crops should receive a high priority next to the distribution of foodgrain seeds.

65. This program should be phased and located in coordination with the programme for dairy and milk processing plants and the breeding and distribution of improved livestock.

F. PROJECT POSSIBILITIES

66. A livestock project is proposed for Nepal with the following components: (a) Buffalo breeding and distribution; (b) fodder crops and livestock integration research and extension; (c) processing of livestock products and feed; and (d) pig development.

(a) Buffalo Breeding and Distribution

67. i The importance of buffalo as a source of milk and milk products, and its efficiency in utilizing feed (particularly in the Hills) necessi- tates priority programs for their improvement and distribution. Buffalo development centers will be established in the livestock research centers in buffalo-concentrated areas to undertake (a) upgrading of the local buffalo with imported breeds; (b) providing artificial insemination (AI) services which would include an AI center, and mobile veterinary units (where applicable); and (c) construction of bullsheds for direct servicing in less accessible areas. ANNEX 5 Page 20

(b) Fodder Crops and Livestock Integration Research and Extension

68. Research on fodder crops and its integration into the farming system (paras 58-62) should be conducted, either at the livestock develop- ment centers or at HMG's crop development centers which will be associated with the livestock development centers. The production and distribution of appropriate fodder seeds should also be undertaken, including demonstration courses for extension personnel including "leader farmers" assisting the extension activity.

(c) Processing of Livesotck Products and Feed

69. Corresponding marketing support for livestock improvement and distribution programs in buffalo concentrated areas is essential. The feasibility of milk processing plants (and associated chilling stations) for milk, cheese, butter, and/or ghee production should be explored, especially the construction of small ghee processing plants in the Hills in relation to secondary road development. Preinvestment studies are required to examine these processing alternatives as well as to study the. marketing and pricing of these milk products in conjunction with the domestic and the Indian markets.

70. In view of the need to supplement on-farm feeding for milk pro- duction (para 53), the feasibility of establishing new feed mills versus the possibility of using existing private grain mills to produce con- centrates (from rice bran, surplus maize, wheat bran, etc.) should also be explored.

(d) Pig and Poultry Development

71. Pig development in rural areas around Biratnagar, Janakpur, and Nepalganj (para 30) may be assisted by the provision of assistance in purchase and distribution of pigs (including AI service) and the establish- ment of minor slaughter houses. Outgrower schemes for pig and poultry production in Chitwan and Makwanpur to provide meat for the slaughter-house and meat processing plant in Hetaura (para 30) is also required.

Estimated Costs

72. The estimated project cost for components (a) and (b) in six development centers is about US$2.5 M. Milk processing facilities would require about US$1.5 M (and if feed mills are required a further US$1 M) to serve the command areas corresponding to the six centers. Total costs for external financing would probably be about US$4 M (Including technical assistance). The pig development component which could be assisted as a separate project will cost at most US$1.5 M. ANNEX 5 Page 21

Table 1 - ESTIMATES OF LIVESTOCK POPILATION

1966/67 1967/68 1568/69 1969/70 (000 heads)

Cattle

(ows 3.010 3.074 3.136 3.198

Oxen 2.850 2.911 2.969 3.028

'Total 5.860 5.985 6.105 6.226

3uffalo

She-buffaloes 2.802 2.862 2.919 2.977

He-buffaloes 475 485 495 505

Total 3.277 3.347 3.414 3.482

Sheep

Ewes 1.500 1.533 1.567 1.601

Rams 475 485 496 507

Total 1.975 2.018 2.063 2.108

Goats

She-goats 1.650 1.686 1.723 1.761

He-goats 450 460 470 480

Total 2.100 2.146 2.193 2.241

Pigs 300 307 313 320

Source: EAPD, Agricultural Statistics of Nepal, 1972

February 26, 1974. Table 2 - CATTLE AND BUFFALO POPUIATION PER HOUSEHOLD. HILLS AND TERAI

Cows Total She-buffdloe6 Total Total Cattle Hills Bullocks Dry Milch Total Cattle He-buffaloes Drv Milch Total Buffaloes and Buffaloes

Ilam 1.65 1.17 0.68 1.85 3.50 0.22 0.98 0.54 1.52 1.74 5.24 Kafbre 0.65 2.24 0.12 2.36 3.01 0.14 0.25 0.03 0.28 0.42 3.43 1hading 0.99 1.81 0.34 2.15 3.14 0.36 1.45 0.50 1.95 2.31 5.45 Syangja 1.02 1.04 0.04 1.08 2.10 0.23 1.88 0.58 2.46 2.69 4.79 Sallyan 1.95 1.44 0.30 1.74 3.69 0.13 1.11 0.21 1.32 1.45 5.14 Kathmandu 0.23 1.46 0.23 1.69 1.92 -- 0.08 0.06 0.14 0.14 2.06 Chitwan B 2.04 2.38 0.38 2.76 4.80 0.16 0.58 0.13 0.71 0.87 5.67

Average 0.99 1.60 0.25 1.86 2.84 0.17 0.87 0.36 1.44 1.60 4.44

Terai

Chitwan A 3.56 2.70 0.47 3.17 6.73 0.40 1.71 0.56 2.27 2.67 9.40 MQrang 5.00 2.06 0.21 2.27 7.25 0.41 0.39 0.20 0.59 1.00 8.25 Saptari 1.72 1.07 0.15 1.22 2.94 0.12 0.51 0.15 0.66 0.78 3.72 EhanuAha 1.81 0.38 0.02 0.40 2.21 0.04 0.21 0.49 0.70 0.74 2.95 Parsa i.64 0.59 0.18 0.77 2.41 0.18 0.12 0.15 0.27 0.45 2.86 Ruper;dehi 2.65 0.94 -- 0.94 3.59 0.29 0.60 0.10 0.70 0.99 4.58 Bardia 4.64 6.40 1.47 7.87 12.51 2.42 -- 0.13 0.13 2.55 15.06 Kailali 4.04 6.00 0.02 6.02 10.06 3.65 0.53 0.18 0.71 4.36 14.40

Average 2.89 1.82 0.20 2.02 4.91 0.60 0.43 0.24 0.67 1.28 6.19

Nepal Average 2.02 1.72 0.22 1.95 3.96 0.40 0.63 0.30 1.02 1.43 5.38

Source: EAPD, Farm Management Study, 1968-69. Page 23

Table 3 - ESTIMATES OF LIVESTOCK PRODUCTION

1965/66 1966/67 1967/68 1968/69 1969/70 ------(000 m tons) ------

Meat

Buffalo 17.5 17.8 18.3 18.7 19.0

Sheep 2.4 2.5 2.6 2.6 2.7

2oat 2.5 2.6 2.6 2.7 2.9

Pig 3.6 3.6 3.9 4.0 .2

Poultry 15.0 15.6 16.4 16.9 17.5

Total 41.0 42.1 43.8 44.9 46.3

Milk

Buffalo - - 375.0 386.0 400.0

Cow - - 170.0 173.5 17.0

Others - - 4.5 4.5 4.6

Total - - 549.5 564.o 582.6 Milk Products

Cheese A 20.0 30.0 42.0 50.0 55.0

Butter & Ghee 8.0 8.2 8.5 8.7 9.0

Tl In m tons.

Scurce: Agricultural Statistics SATA Rome December 1971.

February 26, 1974. ANNEX 5 Appendix 1 Page 1

CONCENTRATE PRODUCTION AND UTILIZATION

1. There are five feed mixing plants in Nepal. Four of them are owned by commercial firms which besides producing animal feed are also distributors for some Indian based chemical companies. They are located in Kathmandu Valley and are minimally equipped. The fifth is a recently installed government plant in Hetaura. The total production capacity of these plants is about 10,500 m tons/annum 1/. Ninety percent of their pro- duction is poultry feed. The remainder (cattle and pig feed) is mixed mainly for Government farms.

2. At present, 75% of the local raw materials used in the feed mixes are produced in the Terai and 25% in Kathmandu Valley. The main ingredients used and their approximate percentages are maize 30%, rice bran 22%, wheat bran 11%, mustard oilcake 10%, fishmeal 8%, groundnut and soybean cake 10% and other ingredients 9%. Fishmeal groundnut and soybean cake, oyster shells and bonemeals are imported from India. It should be possible to replace Indian imports of oil cakes and bonemeal locally produced material if the carcass utilization plant built with assistance from UNDP/FAO at Hetaura and the solvent extraction oilseed plant (also at Hetaura) commence operations. The present requirement forgroundnut and soybean cake (about 1,000 m tons per annum) of the existing feed mix plants could be met by a regular production and supply of 1,500 - 1,600 m tons of groundnuts and soybeans together (assuming an extraction rate of 35%) equivalent to the annual production of 1,500 - 2,000 ha yielding 800 - 1,000 kg.

3. The area which would probably benefit from the requirements of the existing feed mixing plants would be Chitwan and Makwanpur and the beneficiaries would probably be some of the larger farmers and the rice millers.

4. Farmers mix their own concentrates, if they feed any, from rice bran, maize and/or barley and mustard oilcake sometimes supplemented with pulses like khesari (Lathyrus sativus) or soybean. The composition and the amount of these concentrates fed to their own livestock varies considerably and is not based on any experimentation or scientific lines.

5. The concentrate requirement of 1 milking buffalo producing 1,000 - 1,500 kg of milk and fed on a daily ration of 5 kg green fodder and 12.5 kg straw is estimated for Indian conditions at 0.65 oilcakes and 1.5 kg concentrate mixture per day 2/. This works out at about 250 kg oil- seed cake and 500 kg concentrate mixture per annum. One ha with a yield

1/ Report Nepal Livestock Development Mission UNDP/FAO/SATA, December 1971. 2/ R.O. Whyte & M.L. Mathur, The Planning of Milk Production in India, 1968. ANNEX 5 Appendix 2

COMMON CROP ROTATIONS AND ThEIR ABILITY TO PROVIDE THE FEEDING REQUIREMENTS OF A MILKING BUFFALO

1. Table 1 presents the requirements of a due milking buffalo of 400-500 kg liveweight both for maintenance and for milk production (equiv- alent to 1,000 liter of 7% butterfat milk per lactation). The supply of nutrients from the fodder (straw) obgained from common rotations practised in Nepal (paddy-wheat and maize-fallow) under average yield conditions are also presented.

2. A one hectare paddy-wheat rotation provides sufficient dry matter (DM) and 84% of the total digestible nutrients (TDN) and 16% of digestible crude proteins (DCP) for maintenance; and only sufficient DM for milk pro- duction (Table 1). The rotation provides about 75% of TDN and 15% of DCP needed for maintenance plus milk production of 1,000 liter location. If the average yields for paddy and wheat were increased by 40%, all the DM and % of the TDN needed for both maintenance and milk production would be obtained (Appendix 2, Table 1). Supplementation with concentrates or high quality pireen fodder is required to fulfill the DCP requirements. In the case of the maize-fallow rotation, the dry maize stalks can almost provide the TDN requirements for maintenance and DM requirements for both maintenance and milk production. A higher percentage (28% and 27% respectively) of the maintenance and milk production requirements for DCP are however obtained, than from paddy-wheat rotation. A maize-wheat rotation under average yield conditions could potentially provide all the DM, TDC, and 32% of the DCP requirements for one milking buffalo. Supplementation with about 95 kg DCP from concentrates and/or high quality green fodder would still be required. ANNEX 5 Appendix 1 Page 2 potential of 3 ton of paddy in sumn.er and 0.5 ton of rape or other oilseeds and 0.8 ton of wheat (assuming that half is sown under oilseed ind the other half wheat) would produce about 300 kg oilseed cake (extraction 35% oil), 150 kg of rice bran (5% of paddy) and 130 kg wheat bran (17% of wheat). Thus the oilseed cake requirement could be met for one milk buffalo, but the concentrate production would fall short by 50% unless foodgrains are used in concentrate mixtures. This will be unlikely in the case of rice and wheat, but is more likely for barley and maize. It is obvious that the present population of she-buffaloes in milk production (estimated to be roughly 1.5 million heads) cannot cover the optimal requirements unless a part of the foodgrain production is diverted for that purpose. The most likely source could be eventually maize if maize yields can be rufficiently increased to generate surpluses at the farm level. FEDING REQUIREMaNTS FOR A MILK BUFFALO AND THE AVAILABILITIES FROM COMMON CROP ROTATIONS

Equivalent Nutrients Per Year(In Kg) Weight of Type of Fodder Fodder of__ TD____ _DCp_3 (kg) 1. Requirement by 450 Kg Milking Buffalo:

(a) For maintenance 2,000 1,550 134 (b) For milk productionL 200 6 (c) Total 2,000 1,750 140

2. Supply per ha from Average Yields of:

(a) 2 m tons paddy Straw 2,400-2,500 2,200 875 14 (b) 1 m tom wheat Straw 900 431 7 (c) 1.8 m tons maize Dry stalks 2,500 2,300 1,500 38 (d) 40% yield increase from paddy-wheat rotation Straw 4,240 1,560 29

/1 Dry matter. 7T Total digestible nutrients. 73 Digestible crude proteins. 7w Producing 1,000 liters of 7% butterfat milk per lactation. ANNEX 5 Appendix 3 Page 1

ALTERNATIVE APPROACHES IN CROPPING PATTERNS TO INTEGR.ATE LIVESTOCK WITH CROP PRODUCTION

1. This appendix spells out in detail, the alternative changes in cropping pattern to integrate livestock with crop production.

Cropping Pattern for Rice Farms

2. On the irrigated farms in the Terai and Hill Valleys or on the farms with high watertable land in the Eastern Terai, where single or double cropping with rice is practised during the monsoon, followed by wheat or wheat/khesani or mustard, the monsoon period leaves little room for inter- cropping or a catchcrop. An exception could be an early planted rice crop on high-watertable lands which could be followed by sunhemp (Crotalaria juncea) intersown between the paddy before it is harvested, when the soil still retains ample moisture. Other leguminous crops that could be sown at the same time are cowpeas (Vigna sinensis), mung (Phaseolus mungo) or rice bean (Phaseolus calcaratus). This practice should be recommended on those farms where the risks of growing a second rice crop are great, due to insufficient soil moisture after the monsoon. When sown at the end of August or early September, the crop can be cut as green fodder in an early stage at the end of October or beginning November. Green fodder yields of 12-15 m tons/ha should be obtainable if the preceding rice crop is adequate- ly fertilized with phosphate (50-60 kg p2 05 /ha) 1/. Assuming DCP contents of 2-3'%and TDN contents of 10-12%, it would provide 240-450 kg DCP and 1200-1800 kg TDN/ha which would permit the farmer to feed 1.5-2 milk buffaloes, when fed in combination with the rice straw from the preceding rice crop 2/. This would require a short duration high yielding rice crop (3 m tons/ha) well fertilized. This foddercrop could well be followed by wheat, barley or potatoes as wintercrops which will benefit from the small amount of nitrogen supplied by the preceding leguminous crops. Another crop that could be con- sidered for the paddy areas which is already grown in Nepal is lentils (Lens esculenta). The seed can be sown after the preparation of the paddy fields and will pass the rainy season ungerminated. It will germinate when the paddy fields are allowed to dry up. Grain yields and straw yields of 6-8 quintal/ha each should be obtainable 3/. Especially on the badly drained lands in the Eastern Terai solely used for single or double cropping with paddy, this crop should be considered. After the harvest of the late paddy crop the fields should be ploughed once or twice, after which lentils can be low seeded or broadcast.

1/ M. R. Reddy Indian Farming 18 (6) 1968: 45-46, B.R. Majumdar, S. Sen & S. R. Roy Indian Farming 18 (6) 1968: 29-30. 2/ F. B. Morrison, Feeds and Feeding, 1968. 3/ D. M. Mauyra, Indian Farming 18 (18) 1968: 23-24. ANNEX 5 Appendix 3 Page 2

3. The planting of foddergrasses as such on the paddy farms could only be done on the well drained lands. This method of fodder production is recommended for the larger farmers with productive milk animals and good marketing outlets for their milk. Good fodder production of 40-50 m tons green roughage with high protein content can be expected from selected Napiergrasses (Pennisetum purpureum), Guinnea grass (Panicum maximum), Signal grass (Brachiaria mutica) and silage maize especially if they are intercropped with creeping legumes such as cowpeas or Desmodium species.

4. During the winter season, when a considerable amount of paddy land is under wheat, a reorientation of cropping pattern is recommended by halving the wheat area, intensifying the wheat cultural methods and fertilizer applications and sowing the other half under pulses like gram, mung, and in the hill valleys more cold tolerant crops like mixtures of oats and peas or oats and berseem clover (Trifolium alexandrium). Green fodder yields of 15-20/m tons/ha could be expected under unfertilized conditions producing 300-400 kg DCP and 2000-2500 kg TDN 1/. The following year the other half of the wheat land should be grown under fodder crops. As wheat is a relatively new crop with considerable hazards due to the climatic conditions, this form of land use in winter might prove acceptable. In the Terai areas near urban centers with good outlets for milk production, this investment in foddercrop production that could enable the farmer to produce an average addition of 1000-1500 liters pf milk and enable fodder production for milk to compete income-wise with wheat growing 2/. The production of green foddercrops is much less influenced by weather conditions than production of grains. Alternate rotation of wheat and green fodder crops would also increase wheat yields.

Cropping Patterns for Maize Farms

5. In the maize areas in the Terai and Inner Terai more opportunities are available for intercropping during the monsoon. Intercropping with soy- beans and other pulses is already practised in many places in the Hills. This method should be improved by selection and distribution of improved varieties (see section on oilseeds). Yields of maize will only be slightly less than compared with monocropping of maize 3/. The pulsecrop could be

1/ L. L. Relwani, Indian Farming 20 (3) 1968: 23-24. 2/ Under 1970/71 average wheat yields of 500 kg/half ha. and average price of Rs 1.5/kg, net returns to labor (above production cost of Rs 250/half ha) would be Rs 500. At average yields of 1,000 liter/buffalo of new milk production and Rs 1.9/liter (1970/71 prices) for example, net returns (to estimated costs of Rs 1,400) would also be about Rs 500 per milk buffalo per half ha. 3/ S. D. Narang, Indian Farming 19 (6) 1969: 21. S. B. Roy & M. N. Ihahani, The Allahabad Farmer 54 (1-2) 1970. ANNEX. 5 Appendix 3 Page 3

harvested for seed and the remainders fed with the maize stalks as a valuable hay, considerably richer in digestible protein and total digestible nutrients than ma:bze stalks alone. Alternatively, if the pulse crap is not harvested for seed but cut together with the maize stalks after harvest of the maize cobs at the end of August, a very valuable hay is obtained. Cowpeas and mung bean would be particularly suitable since they produce considerable quantities of forage. Total forage yields of 4-5 m tons/ha containing 250-350 kg DCP and 2000-2500 kg TDN can by produced in this way guarantee- ing an adequate feed supply for 1-1.5 milk buffalo on the residues of the maize crop 1/. The investment would only be the purchase of pulse seed.

6. The availability of improved legume seeds thtough multiplication and distribution would be a major step towards improved animal feeding. After the maize harvest, the land is usually left fallow for some months and is allowed to be grazed by the cattle. A more sensib'Te practice would be to immediately sow a pulse crop like peas or sunhemp in Adgust and harvest it at the end of October for an additional supply of valuable hay. Yields of 12-15 tons green fodder can be expected if the preceding maize crop is well supplied with phosphate. The key to the success of maize-legume inter- cropping or 'legume cropping after maize is an ample phosphate fertilization and short duration maize varieties.

7. For the wheat crop following maize,,the same practice can be recommended as mentioned earlier for wheat grown after paddy. Alternating' wheat in the first winter season with a fodder crop of peas .+ oats or peas + barley in the second winter season would proably produc~e.fodder yields of 15-20 m tons/ha under unfertilized conditions resulting in an additional amount of 300-400 kg DCP and 2000-2500 kg TDN 2/. There is also potential for high quality fodder production on the maize farms by growing a mixed crop of fodder maize and pulses cut in the green stage early August for ensiling. This would allow ample time to grow a leguminous crop for hay production before land preparation and sowing of wheat or mustard in November.

8. What has been said for the mWize farmers in the Terai and Inner Terai certainly applies to the maize farmers in the Hills w4ere maize is generally planted earlier than in the Terai. In the Eastern and Central Hills, as is already practised, maize should be intercropped with cowpeas or soybeans for consumption of the green pods. In the Mid-Western and Far Western Hills, climatic conditions are generally more suitable for the pro- duction at the dry beans.

9. The relatively larger farms in the Western Nepal would be more favorable for the production of fodder crops, particularly sorghum. Pre- sently, composite varieties would be more advisable than hybrid sorghum

1/ Same sources as Footnote 3, p. 3. 2/ L. L. Relwani Indian Farming 20 (9) 1970: 26-31. ANNEX 5 Appendix 3 Page 4 because of the complexity of hybrid seed production. Contacts should be made with the Rockefeller Foundation and the Tarai Development Corporation in Uttar Pradesh for the production of sorghum composite seeds. With N applications of 60 kg/ha and P applications of 30 kg/ha grain yields of 5-6 m tons/ha are reported from the seedcrop and 3 m tons/ha of the ratoon- crop with m 17 ton of fodder 1/.

10. The intensification of the cropping patterns recommended for the maize farms on the hill slopes for the monsoon period would greatly reduce erosion from the hill terraces because the land is kept under a closed crop cover for most of the monsoon period. For the dry season, when either wheat, barley or potatoes are grown (and very often the land is fallowed), a number of alternatives exist. They are: growing mixtures of barley or oats/peas; fodder radishes, forage rape (Brassica napus); Italian ryegrass and turnips. Most of these fodder crops are not new to Nepal and are already grown and used as cattle fodder in some areas 2/. Instead of con- centrating on ryegrasses and especially white clovers, which grow little in winter, D.A. should improve on already existing local fodder crops and feeding methods. Winterhardy clovers should be introduced and selected for oversowing of perennial pastures in the higher Hills.

11. Yields of 30 tons/ha roots have been obtained with unfertilized radishes grown in Jiri Experimental Farm 3/. This represent roughly yields of 4500 kg DM/ha consisting of 900 kg DCP and 3600 kg TDN 4/, sufficient to meet the annual requirements for maintenance and a 100 liter milk produc- tion of 2 milk buffaloes. There is a wealth of indigenous Brassica species and varieties 5/ and a selection and improvement program to be initiated by D.A. would be highly rewarding.

Cropping Patterns for High Altitudes

12. There remains the fodder problem for the Sub-Alpine and Alpine regions where the fodder shortage during the winter season is most acute and aggrevates the already serious overgrazing in the forest pastures at

1/ r. 0. Whyte Land, Livestock and Human Nutrition, 1968. 2/ Observations made during field trips and discussions with District Agricultural Officers. 3/ Farm Manager, Jiri. 4/ F. B. Morrison Feeds and Feeding, 1961. 5/ S. Kitamura, Fauna and Flora of Nepal Himalaya. Scientific results of the Japanese Expedition to Nepal Himalaya 1962-1953, Vol. I, Kyoto University; personal observations during field trips. ANNEX 5 Appendix 3 Page 5

lower altitudes. What little cropping practised consists mainly of,potatoes and barley for human consumption. Both crops have very low yield levels (respectively 4-5 m tons/ha for potatoes and 0.9-1.0 m ton/ha for barley). Increases in productivity for potatoes would lead to more exports outside the area, particularly in the Eastern Hills. Increases in barley yield would definitely affect the fodder situation as this crop is already partly used for livestock feeding. Barley yields could be raised by better varietal material and applications of manure and fertilizer. In view of the N shortage in the soil and the low financial returns from fertilizer applications in these areas, the N supply of this crop should be sought in winterhardy leguminous crops, which can be grown on acid soils of low fertility and possess drought tolerance.

13. "lovers currently grown on some government experimental farms are not so suitable as they require lime for nodulation and phosphorous fertilization for optimum production. Efforts should be concentrated on legumes such as hairy vetch (Vicia villosa), horse beans (Vicia faba), Phasemy bean (Phoseolus bathyroides), perennial lespedeza (Lespedeza cumeata), Korean lespedeza (L. stipulacea) and Common lespedeza (L. striata).

14. These crops could be intersown in between the barley about a month before harvest. They will continue their growth until December and could provide substantial grazing or green fodder. The potato crop planted in January - February would benefit from the N residues supplied by these crops. Some of the perennial species could remain on the land during the winter and could be cut for green fodder until the following spring.

15. Good results can be expected from rootcrops like winter hardy forage rapes and turnips to be sown after the barley harvest in August. Yields of 25-30 m tons/ha are recorded in temperate countries 1/. When harvested before snowfall and heavy frost, they could be easily and cheaply stored in trench silos covered with earth. Apart from the seed costs and family labour input, no investments are involved. The cropping patterns proposed for the Alpine Regions, however, represents a great change in population habits since it involves a change from semi-nomadic life to sedentary farming. No results are known of the production performance of chauries when kept on stall feeding during winter time. The advantages of collecting stable manure with stall feeding during winter time, which is highly desirable, for the growing of potatoes and turnips are clear.

1/ R. D. Toosey. Profitable foddercroping, Farming Press Ltd. 1972. ANNEX 6 Page (i)

NEPAL

AGRICULTURAL SECTOR SURVEY

IRRIGATION AND WATER RESOURCE DEVELOPMENT

Table of Contents

Paragraph Number

SUMMARY AND CONCLUSIONS ...... i - xiv

A. THE WATER RESOURCE BASE

1. Major River Systems and Their Discharge ...... 1 - 11 2. Irrigable Areas ...... 12 - 13 3. Hydropower Resource ...... 14 - 18 4. Groundwater Resource ...... 19 - 22

B. PAST IRRIGATION PROGRAMS AND EMPHASIS

1. Short History of Schemes ...... 23 - 30 2. Past Policies and their Effects ...... 31 - 35 3. Performance of Irrigation Systems ...... 36 - 37 4. Recent Changes ...... 38 - 39

C. WATER RESOURCE DEVELOPMENT POSSIBILITIES AND CONSTRAINTS 40

1. Surface Water Irrigation and Hydropower ...... 41 - 44 2. Groundwater Irrigation ...... 45 3. Developing Water Resources in the Hills General ...... 46 - 50 Expansion of Hill Irrigation ...... 51 - 54 Types of Hill Irrigation Projects ...... 55 Constraints and Requirements in Developing Hill Irrigation ...... 56 - 60 Need for Improved Water Management ...... 61 - 67

,D. ORGANIZATION FOR WATER RESOURCE DEVELOPMENT

1. Organization and Staffing ...... 68 - 76 2. Development Planning and Institutional Development . 77 - 80 ANNEX 6 Page (ii)

Paragraph Number

E. FUTURE IRRIGATION POLICY EMPHASES 81 - 83

1. Improved Functioning of Operating Projects ...... 84 - 86 2. Improving Water Management and Supporting Services . 87 - 92 3. New Projects of Short Gestation and High Payoffs ... 93 - 94 Low-lift Pumps .. 95 Tubewell Programs .96 - 100 Policy Guidelines for Groundwater Development . 101 - 106 4. Irrigation at or near Food Deficit Hill Areas ...... 107 - 110 Policy Guidelines for Minor Hill Irrigation Projects ...... t11 - 113

F. ISSUES

1. Geographical Concentration ...... 114 - 115 2. Small vs Large Projects ...... 116 - 117 3. Water Charges ...... 118 - 120 4. Erosion Control ...... 121 - 122

G. RECOMMENDED PROGRAMS AND STUDIES 123

1. Quick Payoff Programs ...... 124 2. Longer Gestation Programs ...... 125 3. Inventory Surveys ...... 126 4. Investigation Programs ...... 127 5. Studies ...... 128 6. Technical Assistance ...... 129

H. PROJECT POSSIBILITIES FOR EXTERNAL FINANCING

1. Key Projects Supporting the Development of the Gandaki Corridor ...... 130 The Lumbini Groundwater Project .... 131 - 135 Pilot Project in Water Management (Pokhara Valley). 136 2. Other Irrigation Projects ...... 137 3. Minor Irrigation Projects ...... 138

BIBLIOGRAPHY

FIGURES

Figure 1: Basin-wise distribution of Theoretical Water Power Potentiality of Nepalese Rivers Figure 2: Department of Irrigation, Meteorological and Hydrology - General Office Organization (Present) Figure 3: Regional Directorate for Irrigation, Hydrology and Meteorology (Present) Figure 4: Proposed Reorganization of Planning Section, DIMH ANNEX 6 Page (iii)

TABLES

Table 1: Monthly Mean Rainfall in Nepal Table 2: Monthly Runoff of Nepalese Rivers Table 3: Major Level Areas in Inner Terai and Hill Districts Table 4: Areas Irrigated by 1970 Table 5: Areas Irrigated by 1973 and 1974 and Areas Being Developed for Irrigation Table 6: Minor Irrigation Projects Completed by 1973.

Appendix 1: Assessment of Meteorological and Hydrological Investigations Appendix 2: Selected Projects in the Current Irrigation Program Appen'dix 3: Assessment of Available Planning Studies Addendum I - Rainfall recharge in Birganj, Butwal and Bhairawa ANN'EX 6 Page i

IRRIGATION AND WATER RESOURCE DEVELOPMENT

SUIIARY AND CONCLUSIONS

i. Irrigation is needed in TNepal to overcome the uncertainties of the monsoon and to extend the growing season beyond the four-month monsoon period during which SM0% of the annual rain occurs. Some 250,nOO ha of a total ir- rigable area of 1.3 million ha has been developed so far. Only a minor portion of the potential benefits are being realized because of incomplete distribution systems, poor water management and the absence of year-round irrigation.

WAater and Hydropower Resources

ii. The annual runoff of the rivers constitutes a great underdeveloped resource of the nation. It can cover Nepal's irrigable area of 3.3 million acres with some 38 feet of water annuallv against an Irrigation requirerent of only about 5 feet. With storage for regulation, some P5 percent of the river water (over 100 ?TAF) is in principle available for export. iii. Nepal's hydroelectric potential is estimated to be as high as P3,noo nMW (comparable to the combined installed hydroelectric capacitv of Canada, the U.S.A. and lexico). Nepal cannot use the vast quantities of power that can be produced cheaply (e.g. 1.15 ITS cents per KWH estimated in the Karnali basin), but can sell it to its neighbors -- principally to India where powqer demands are great. Fconomies of scale are significant in hydro- Dower generation and transmission generally, and this is also true in Nepal. Both countries can therefore profit from cooperative ventures in developing the viable Nepalese hydropower sites. iv. Significant groundwater resources have been established in the Terai and Kathmandu Valley. Two artesian areas have been located at the Lumbini and Janakpur Zones of the Terai. The former has by far the great- est potential. It consists of an extensive area (200,000 ha) of high arte- sian pressure (up to 40 ft), located between Butwal and Bhairawa.

Past emphasis of Programs and Projects v. Past emphasis of government programs have been characterised by the building of large canals, regional concentration in Kathmandu Valley, Eastern and Nlid-Western Terai, and inadequate pricing of water. Many of these irrigation facilities have had minor impacts in relation to anti- cipated benefits. Major constraints in expanding the impact of irrigation have been linked primarily with Nepal's virtual dependence on India, poor utilization of existing capacity due to lack of coordination between en- gineering and agricultural groups; emphasis on supnlementarv monsoon rather than year-round irrigation; emphasis on large canals without the essential on-farm distribution works; lack of water control; and shortage of skilled ANNEX 6 Page ii

manpower. In the hills, the instability of hillsides and the lack of know- ledge of the nicro-environment (particularly in the smaller hill valleys) have meant that many hill irrigation projects have incurred much higher operation and maintenance costs than that of building these schemes. vi. New starts have recently been made to resolve these problems. The Department of Irrigation, Hydrology and Meteteorology (DIHM) has been transferred from the Ministry of Water and Power to the Ministry of Food, Agriculture and Irrigation (MFAI) in 1972. The new foreign assisted proj- ects (ADB in Kankai and Chitwan Valley, IDA in Birganj) are designed to: (a) ensure that the previous functional isolation between agriculture agen- cies and water-engineering groups can be considerably reduced; (b) provide for optimum water management and multiple cropping; (c) provide for adequate pricing policies for water which should ensure that total maintenance costs and part of the capital costs will be covered by revenues from water charges. vii. Within the next Five Year Plan, we recommend that Nepal's policy thrust be reorientated to:

(a) complete promising irrigation systems (similar to IDA's Birganj Project) which have not generated an- ticipated benefits because of the lack of minor canals or on-farm development;

(b) focus on new projects of short gestation and high pay- offs relative to additional financial and manpower resources invested; 1/

(c) improvement of water management and anciliary support- ing services;

(d) irrigation at or near deficit areas in the Hills to meet requirements for income distribution and increased food production. viii. An action program to implement (a) and (b) would require:

(i) an initial inventory of the existing "completed" projects to select those for abandonment (e.g. Tinao), completion or rehabilitation (e.g. Chandra Canal);

(ii) the selection of river systems in Hills (as well as the Terai and Inner Terai) where year round irrigation from low lift pumps are possible; the river valleys with extensive flat lands like Barigad, Kaligandaki would be prime candidates;

1/ These would consist primarily of tubewells and low lift pumps. ANNEX 6 Page iii

(iii) initiation of preparation for a tubewell project in Lumbini on the basis of the IISAID/USGS/HIG groundwater study of the W4estern Terai. ix. Irrigation projects practising continuous ponding of water on permeable soils have resulted in extensive leaching of nutrients leading to long term paddy yield decline. The experience of the 50 year old Chandra Canal 1/ illustrates the importance of water management on per- meable soils. An action program for water management is needed at both the organizational front (training of irrigation extension workers) and through the initiation of pilot projects in farmers' field, particularly in areas where soil permeability problems (hill valleys) exist. In addi- tion to research, these projects can be used to, not only introduce better distribution systems and irrigation practices, 2/ but also to demonstrate the gains from integrating credit, input - supply and improved crop husbandrv with water management. We propose the location of these pilot projects in hill valleys where paddy will continue to be important (primarily because of taste or lack of alternative crops) like Pokhara, Surkhet, Palpa, Baglung, Jumla, Gorkha; and Inner Terai Valleys in Dang, Makwanpur and Chitwan. Water management in the Chandra Canal area could be part of a rehabilitation proj- ect. x. An action program for the hills should start with the valleys and tars. 3/ Case by case studies will have to be made, initially in the larger hill valleys (e.g. in Pokhara, Baglung, Surkhet), for alternatives 4/ to the traditional diversion structures which are frequently damaged by large boul- ders moving with flood flows. Further water storage projects in the hills should be preceded by a multidisciplinary approach (using geologists, en- gineers, land use specialists, soil scientists and agronomists) to identify areas where slope stabilitv problems and interference with flood flows can be kept to a minimum. For minor irrigation projects (particularly in the smaller valleys where accessibility is more difficult), local participation in construction and maintenance is essential.

Issues xi. The acceptance of the above strategy will resolve many of the issues facing the irrigation subsector. The issue of what region to con- centrate irrigation activities would be resolved in favor of the selection

1/ Pre-irrigation paddy yields were 2 m tons/ha. Upon completion of the project irrigated yields were 3 m tons/ha for about 10 years. The yield has since declined to the present yield of about 2 m tons/ha. 2/ For example, independent inlet systems for field channels, puddling of soil prior to transplanting and intermittent irrigation for paddy. 3/ Tars are raised flat lands along rivers. 4/ Like diversions from underground water traps; lift pumps; tubewells. ATNEX 6 Page iv of programs which can fulfill the criteria for policv emphasis alreadv outlined. Programs for irrigation rehabilitation, extension and upqrading, and groundwater, should remain in the Terai and Inner Terai where the onpor- tunities exist. Irrigation programs in the hills for water management, lift pumps and selected studies should also he concurrently encouraged. Fven in the Terai past investments have been made in Fastern ard Central Terai, pri- marily in response to locations where population and political influence have been concentrated. We recommend that increased emphasis be given to lWestern Terai because of (a) the groundwater potential, and (b) climatically (in terms of lower and less dependable rainfall) the need is greater. In- creasing migration pressure in Western Nlepal and the fact that it is the last stronghold of unsettled flat forest land necessitates concurrent attempts to combine irrigation with settlement programs there. xii. The issue of large vs small irrigation projects is, in our judge- ment, a problem of timing. The tremendous potentials for foreign exchange gains in the export of hydropower and irrigation water to India and the importance of irrigating the Inner Terai Valley are important reasons for large irrigation projects. Our suggested re-emphasis on quicker gestation and relatively small projects in the next five years is dictated by the necessity to realize projected benefits and the constraint on Nepal's imple- mentation capacity. In the longer term (by 1980), with the strengthening of Nepal's obsorptive capacity, developing large multi-purpose (hydropower- irri&ation projects) projects would be more appropriate. Because the primary consumer of Nepal's excess hydropower and irrigation water from such projects would be India, it would be mutually beneficial for dialogue to be initiated between Nepal and India. xiii. Given the traditional long gestation periods in preparing such projects, it is not too early to decide whiich of the identified large irrigation-hydropower projects need to he studied further. W4e recommend the Bhagmati project as the prime candidate since initial background work is completed; the lessons from Birganj would he annlicable; it is relatively unemcumbered by previous works or agreements; it would be large enough to have important impact and would not be too large to overwhelm the scarce manpower available.

Improving Planning and Imnlementation CapacitY xiv. In the past, the planning and construction of several major proj- ect have been left to the countries providing the assistance, and little attention was paid to exploring and assessing alternative irrigation possi- bilities for NTepal's benefit. HMG realises that it has to pav greater attention in systematically planning for projects. We recommend that tech- nical'assistance be requested for a senior water resource planner who will be a joint advisor to the Planning Commission and DIHM, and a supporting team (attached to DIP!). This group would assist 1IMG in (i) evaluating water'resource potentials and their multipurpose uses; (ii) assessing the results of past studies and implementing further studies; (iii) developing guidelines for the review and improvement of existing prolects. ANNEX 6 Page 1

IRRIGATION AND WATER RESOURCE DEVELOPMENT

A. THE WATER RESOURCE BASE -/

Major River Systems and Their Discharge

Major River Basins and Sources

1. The major river basins (Map 1) are: The Karnali in the far west- ern part of the country, the Gandaki in the west and center and the Sapt Kosi in the eastern part 9f the country. The total drainage area of these three rivers is 125,000 Km including the portions lying in the territory of the People's Republic of China.

2. Nepalese rivers may be classified into three types -/ according to their source of dry-season discharge, as follows:

(a) The Snow and Glaciers in the Himalayas. The snow and glaciers have a reservoir function which is the reason why the Karnali, Narayani and Sapt Kosi rivers carry significant flows in the dry season (Table 1). This makes them attractive sources of water supply for irrigation with several promising sites for run-of-the river power generation such as Chisapani, Lakarpata, Kaligandaki, Barakshetra, in their basins.

(b) The Mahabharat Range below the Snow Line. Rivers originating there are fed by groundwater regeneration, including springs, and do not dry up in the low flow season. Rivers of this type a reKankai Mai, Kamla, Bagmati, Rapti, Babai, and Manhari rivers. Many feasible hydropower sites are found or expected in these river basins such as Kulikhani, Mainachuli, Kamla, Sarada-Babai, Babai-Rapti, etc.

3. The Siwalik Hills. Rivers originating in the Siwalik Hills are dry in the low-flow season and unsuitable for perennial irrigation and hydropower generation without surface storage.

1/ Principal sources used are: (a) DIHM/USGS, 1969; (b) FAO/NK, October 1969 (c) HMG/NK, August 1970; and (d) HMG/NK, May 1970. (See Bibliography for complete reference). 2/ HMG/NK, May 1970 (Chapter 4). ANNEX 6 Page 2

Hydrology 1/

4. The average annual precipitation in Nepal is 1,516 mm or about 61 inches. 2/ The average annual runoff coefficient is 71.1 pe5cent, and th Sotal annual runoff from the territory of Nepal is 152.6 km (152.6 x 10 m or 124 mill ion acre feet); the average annual discharge of the major rivers is 4,840 m /sec or 171,000 cfs. About 90 percent of the precipita- tion is concentrated in the wet season. Table shows that 79 percent of the annual runoff of the ten major rivers in Nepal occurs in 6 months from June to November, and 21 percent in the remainini 6 months. The monthly riverflow declines to its minimum in March of 1,050 m /jec (2.7 x 109m3 9is the month) and reaches its maximum in August of 15,450 m /sec (40.0 x 10 9m in the month).

Floods

5. The mountainous terrain of northern and central Nepal combines with the southwestern monsoon to produce disastrous floods annually. In addition to these floods, the rivers are subject to landslides, which fre- quently block narrow gorges temporarily, and then upon collapse release the water quickly, causing floods. During floods most rivers also move large boulders (the Tinao river moves particularly large boulders, up to 20 tons in weight, which have caused serious damage to the Indian-built barrage near Butwal).

Silt & Bed Loads

6. Suspended material in surface water and sediment loads transported by the rivers of Nepal also have a direct effect on the feasiblity and cost of water resources development. The unusually large quantities of bed load materials moved in streams during the monsoon markedly limit the useful life of reservoirs and river control structures. As the river discharge increases, the silt content also increases, sometimes up to 1.5% of the river water. With an average silt content of 0.25%, the totgl3silt volume removed by the Karnali River, for example, amounts to 75 x 10 m annually. This volume is equivalent to a top soil layer of 1.7 mm bein removed from the catchment area, and Nepal is losing as much as 240 x 10m 3 of soil annually. 3/

1/ HMG/NK, August 1970, page 4. 2/ Details for different stations are given in Table 1. 3/ HMG/NK, August 1970, p. 7. ANNEX 6 Page 3

7. Light soils are generally found on Tars and Hill Valleys due to prevailing steep river gradients resulting high-velocity flood flows prevent- ing deposition of suspended materials. The river gradients vary from 0.7 and 0.006 averaging about 0.04, or 364, 31 and 208 ft per mile respectively, for the major rivers, while the slopes of smaller streams are even greater. 1/ With these steep gradients fine suspended materials are carried into the flatter Ganges plains after some deposition in the Terai where the gradients are much less steep but still high in terms of Ganges basin gradients.

Other Problems

8. Other problems exist that must be overcome before the water re- sources potentials can be developed. There are serious problems in trans- portation, communications, financing, and the availability of construction materials. Concerted solution of these problems is a primary requirement for the overall development of the country.

Water Availability for Export

9. The annual runoff of the streams of Nepal constitutes a great underdeveloped resource of the nation. The average annual discharge of the major rivers of 171,000 cfs to the Ganges River in India is equiv- alent to enough water to cover all of Nepal to a depth of 44 inches. With an average annual runoff of 124 million acre feet (MAF) and a potentially irrigable area of 1.3 million hectares or 3.3 million acres, available river flows could cover this irrigable area with some 38 feet of water against an annual irrigation requirement of some 5 feet (or 14 percent of the average annual flows in the main rivers). Furthermore, several 100,000 ha can be irrigated by tubewells, which will more than compensate for domestic, municipal and industrial water supply requirements. The total volume of sur- face water required for consumptive use in Nepal will therefore not exceed 15 percent of the average annual river flows. This means that, with storage for regulation, some 85 percent of the river water (or some 100 MAF) is in principle available for export to India.

The Value of Irrigation Water

10. Berger 2/ has determined that the annual net farm benefits from irrigation 3/ in the Lumbini zone are NRs. 2,770 per hectare or Rs. 1,110 per acre for two rice crops. If 4 feet of irrigation water is used, the

1/ This compares to average gradients of the Indus and its tributaries in the Pakistan Punjab of 1 to 1.5 ft per mile and Ganges gradients of 0.3 to 0.4 ft Der mil in Rwnplatipsh. 2/ Berger, 1972 (p. 46). 3/ i.e. net returns to the farmers exclusive of irrigation project costs. ANNEX 6 Page 4 value of water would be Rs 280 or US$28 per acre foot (AF); with 5 feet of water the value would be Rs 220 or US$22/AF. Berger's analysis is made for average yields over a period of some 25 years, i.e. lower returns ini- tially which increase gradually with time.

11. Kamla and Bagmati reservoirs have live storage capacities of 0.85 and 1.26 million acre feet (MAF) and their estimated costs are US$32.7 million and US$38 million, respectively. 1/ This means a capital cost per AF of storage of US$38.5 for Kamla and US$30 for Bagmati. The useful lives of these reservoirs are not known but the above figures for the annual value of water (US$28 or 22/AF) and the capital cost for storage (US$38.5 and 30/AF) indicate that surface water storage can be very attractive, particularly if the stored water is used in existing canal systems for irrigation intensifi- cation in either Nepal or India.

Irrigable Areas

12. Farmlands in Nepal are distributed over three categories of land, i.e. on the slopes and flat lands (Tars and river valleys) of the Hills, and on the Terai and Inner Terai. Terai and Inner Terai have the greatest irrigation potentials. This area occupies 26.8 percent of Nepal and in- cludes an estimated irrigable area of 1,050,000 ha 2/. It has ample water resources, a climate suitable for a wide variety of crops, and a fairly favorable soil fertility. The Terai area has also ready market channels for most agricultural products. In view of these conditions, the emphasis with respect to irrigation must remain in the Terai and Inner Terai, while supporting selective expansion of irrigation in the Hills.

13. The total area of relatively flat lands in the Hills is estimated to be:

1/ FAO/NK, Final Report, 1972. 2/ FAO/NK, August 1970, Table 5.1, p. 63. ANNEX 6 Page 5

('000 ha)

For lands up to 5,000 ft elevation with slopes of 10% or less 255 with slopes between 10 and 30% 50

305

For lands with elevations between 5,000 and 12,000 ft and slopes between 0 and 30% 115

Total 420 1/

The 420,000 ha area is a gross area including villages, streams, forests, areas with uneven micro-topography, etc. Probably not more than 70 percent (about 300,000 ha) can be developed for irrigation. Some valleys are already receiving supplementary irrigation (e.g. most of Pokhara Valley). A summary of the flat lands in the Hill region is given in Table 3.

Hydropower Resource

Potentials

14. Nepal, although a small country, is one of the few in the world with a very high but still undeveloped hydroelectric potential, 2/ Esti- mates of this potential are as high as 83,000 MW, 3/ which is comparable

1/ This figure does not include Kathmandu Valley of 25,000 ha. Only the first area, with slopes of 10% of less and below 5,000 ft elevation, has actually been measured from topographic maps prepared by the Survey of India to a scale of 1:63,360 or one-inch-to-one mile, having contour intervals of 100 ft. The other acreages have been estimated by inspec- tion of a 1:506,880 scale topographic map prepared by the Ministry of Defence of the United Kingdom. 2/ The causes for the high hydropower potentials are the high river flows (Table 1) combined with steep river gradients. These gradients vary from 0.07 to 0.006 averaging about 0.04, which are equivalent to drops of 364, 31 and 208 ft per mile respectively, for the major rivers; the gradients of smaller streams are even steeper.

3/ HMG, "Water Power Potentiality of Nepal", by Dr. H.M. Shrestha, Electri- city Department, Ministry of Water and Power, 21 pages, 1971 (It is not known what percentage of this potential can be economically developed). ANNEX 6 Page 6

to the combined installed hydroelectric capacity of Canada, the U.S.A. and Mexico. Only the Karnali River basin has so far been systematically ex- plored. A study of this basin, financed by UNDP, was undertaken during 1963-66 and the report identified ten possible schemes, with potential capacities ranging from 18 MW to 1,800 MW and a total capacity of 6,800 MW. The study demonstrated that vast quantities of power could be produced at low cost -- e.g., eight billion KWH annually at less than 3.5 Nepalese paisa (0.3 US cents) per KWH. 1/

15. Nepal's geographic features offer potentials for large, medium and small hydropower projects. The country slopes down from an average altitude of 7,000 meters to 200 meters. Three large drainage areas cover 80 percent of the country, and feed three major tributaries of the Ganges River: The Kosi with 1,930 cubic meters per second, the Narayani with 283 cubic meters per second, and the Karnali with 510 cubic meters per second, average flow. These large quantities of water with tremendous fall imply huge quantities of hydropower if they can be harnessed (Figure 1). Most power developments so far are run-of-the-river plants. The problems of containing the tremendous volumes of water by dams, providing for spill- way capacity for maximum storms, and finding suitable abutments and materials for dams, remain yet to be resolved.

16. Several medium and small-size run-of-the-river hydropower possi- bilities are currently under study by HMG Electricity Department. Some power potentials become attractive with surface storage reservoirs built for irri- gation, e.g., the Kamla Storage Project, Bagmati Storage project and Sunkosi High Dam project which can have firm power outputs of 10, 40 and 200 MW, respectively. 2/

17. Despite its enormous hydroelectric potential, Nepal's per capita power production and consujmption are among the lowest in the world and 40 percent of existing electric plants consists of steam and diesel units which are dependent upon coal and diesel fuel imported from India. The present total installed generating capacity is about 55 MW. Total generated 1/ A recent desk study (Nepal: Karnali Hydroelectric Project, S. Asia Programs Dept., December 1973) indicated that at 10X return on capital, power from the project can be sold at 1.15 US cents (12.14 Nepalese paisa) per KWH. This level is still low compared with current costs and charges for generation, transmission and distribution (IBRD, Report No. 125a-NEP, June 1973, Volume III, Power): Bhairawa Kathmandu ------(in NRs)------Cost per KWH without interest charges 0.43 0.60 Tariff rate per KWH 0.50 0.20 The value of power for a 200 MW thermal power plant presently under con- struction near Delhi is about 1.36 US cents per KWH, assuming a 10% return on capital. 2/ FAO/NK, October 1969; different figures are given in HMG/NK, May 1970. ANNEX 6 Page 7 power in 1972/73 was about 104 million KWH corresponding to a per capita figure of less than 9 KWH per annum. This compares with 20 KWH and 120 KWH in Bangladesh and India respectively.

18. Nepal cannot use the vast quantities of power that can be produced cheaply, e.g., in the Karnali basin and elsewhere, but can sell it to its neighbors -- principally to India where power demands are great. Economics of scale are significant in hydropower generation and transmission generally, and this is also true in Nepal. Both countries can therefore profit from cooperative ventures in developing the viable Nepalese hydropower sites.

Groundwater Resource -/

19. Emphasis to date has been on investigations rather than develop- ment of groundwater in Nepal because little was known about potentials. However, the presence of significant ground water resources has now been firmly established in the Western, Central, Eastern and Far Eastern Terai and in Kathmandu Valley, where several 100,000 ha can be irrigated from tubewells.

20. Prospects for tubewell development in other valleys and tars also appear promising. In order for such development to proceed effectively, exploration and basic geohydrologic studies have been undertaken on a continuing basis to establish the physical limits of underground reservoirs and their potential for development.

21. Two extensive artesian areas have been located and can be devel- oped; one in the Terai of the Lumbini Zone and the other in the Terai of the Janakpur Zone. The former has by far the greatest potential. It con- sists of an extensive area (about 200,000 ha) of high artesian pressure (up to 40 ft) and high transmissivities 2/ located between the towns of Butwal and Bhairawa.

22. No inventory of existing tubewells is available for Nepal. It is known that in 1968 3/ more than 1,000 dug wells and well points were in use in the Terai for village water supply and irrigation. A recent field in- ventory 4/ showed that nearly 1,000 dug wells and 8 old tubewells were in

1/ The geohydrologic, hydrologic, meteorologic investigation programs are described in Appendix 1.

2/ The transmissivities vary between 60,000 and 400,000 averaging 160,000 US/gal/dry/ft or 750, 5,000 and 2,000 m3/day/m respectively.

3/ Swarzenski, W.V. and Babcock, H.M., June 1968.

4/ HMG/USAID, January 1973. ANNEX 6 Page 8

use in the Lumbini Zone. Private irrigation tubewells are being installed in several areas, particularly in the artesian groundwater areas of Lumbini and Janakpur (about 300 in each as of September 1968) and elsewhere 1/. Some wells are being used for highly profitable fish-farming near the towns of Janakpur, Birganj and Bhairawa. Some 39 deep tubewells (120 to 150 meters) have already been provided by the Government for irrigation in the Birganj, Malangwa and Siraha areas (22, 10 and 7 respectively). In the Lumbini Terai, 14 investigation wells are completed and suitable for irrigation or public water supply.

B. PAST IRRIGATION PROGRAMS AND EMPHASES

Short History of Schemes

Past Programs and Projects

23. The farmers of Nepal have in the past developed their own irriga- tion systems, and although detailed records are absent, total acreage is estimated at 155,400 ha. 2/ Prior to 1950 and before the launching of Nepal's first five-year plan, no substantial irrigation works had been undertaken by the Government. An area of 14,700 ha was irrigated by four projects (13,000 ha by the Chandra Canal Project, Saptari).

24. During the First and Second Development Plans -/ (1957-62 and 1962-65 respectively), medium to small irrigation facilities covering 43,700 ha, were built in Kathmandu and Pokhara valleys, and the Terai. In the Third Plan (1965-70) a minor irrigation program was launched country-wide in 1966/67. 4/ Current Programs and Projects -

25. For the Fourth Five-Year Plan (1970-75), the target was to pro- vide irrigation facilities for 183,632 ha of land (Table 5). During the first two years of the plan, most irrigation projects continued to remain in the construction stage. In 1972, a Two-Year Plan (1972-74) was launched as part of the original Five-Year Plan. The area proposed for irrigation

1/ Information provided by G. C. Tibbitts, Jr., Chief, USGS Field Party in Nepal. 2/ Ministry of Agriculture Food and Irrigation, September 1973. 3/ Details are given in Table 4. 4/ As of September, 1973. ANNEX 6 Page 9

was increased to 240,014 ha of which major, minor and tubewell schemes accounted for 239,550, 5,924 and 3,540 ha respectively. Project works to be completed within the two-year plan would provide irrigation facilities for 79,714 ha of land in one major, 3 medium, 17 minor and some tubewell projects. Most of the area proposed for development would be in the Terai.

Minor Irrigation Schemes

26. A program for the construction of minor irrigation projects started on a country-wide basis in 1966/67 to encourage greater farmer participation. A Central Board for Minor Irrigation was established under the chairmanship of the Minister of Water and Power. In addition, every district had a Committee for Minor Irrigation Project Development.

27. The aims were (a) rapid expansion of irrigation and, (b) maximum participation by farmers. Project size was limited by funding (less than NR 2.5 lakhs per project). This arbitrary limitation led to partially com- pleted structures and canals. The program included canal diversion projects (in the Hills and the Terai), and tubewell irrigation (in the Terai).

28. In the first year (1966/67), 125 projects were taken up on a cam- paign basis and it was claimed that 100,000 new acres had been put under irrigation. However, the projects had not been investigated properly (hy- drological studies were particularly inadequate), the construction was of poor quality, and many were as yet incomplete by the end of the first year. Other projects had high 0 & M costs. In the second year, it was found that the farmers would not maintain the irrigation systems. The Board stopped taking on new projects and worked on completing and improving the first year's projects. Some projects could be rehabilitated but many required too much investment. A separate minor irrigation department was created in 1970 to sort out the problems and was merged with DIHM in 1971. The minor irrigation schemes "completed" to date are listed in Table 6.

29. Private tubewells were installed in the groundwater areas of Janakpur and Bhairawa (about 300 in each area as of September 1973). Gov- ernment tubewells were installed in the Birganj groundwater area where several of the 22 wells continued to pump sand because wrong slot sizes had been selected. Public tubewell construction was stopped completely in 1969 and DITHM switched to medium-sized canal projects, mainly in the Terai.

30. In 1972/73 four Regional Directorates were established by DIHM - and minor irrigation projects are now under the control of the regional offices. Project investigations have improved but are still incomplete. The principal problems and uncertainties with respect to Hill irrigation projects relate to: (a) landslides; (b) poor water management; and (c) costly maintenance.

1/ The regional offices are located in Kathmandu, Pokhara, Nepalganj and Biratnagar. ANNEX 6 Page 10

Past Policies and their Effects

31. The main features of past irrigation policy are: (a) poor utili- zation of existing capacity, because of lack of coordination between engineer- ing and agriculture groups and poor water management, (b) emphasis on "sup- plementary irrigation", (c) inadequate pricing of water, and (d) limited irrigation expansion in the Hills.

Lack of Coordination between Engineering and Agriculture

32. Irrigation programs to date have emphasized preinvestment surveys, large-scale projects and construction of large canals while distribution net- works (channels of 4 cusecs and less) and on-farm development have been neg- lected. As a result, increased irrigation capacity has been translated only partially into actual utilization. The causes for this ineffective use of irrigation capacity are diverse. With some exceptions, the major concern has been with the engineering aspects which is only part of irrigation development. There has been no combined action of agriculture and water- engineering groups. This lack of coordination among agencies which should have been closely associated, make difficult the design and construction of detailed networks of tertiary and on-farm channels for water distribution. Project selection was not always optimal. Most major projects were located in the vicinity of the Indian border and the closer the location of the canal to the border the smaller the command area tended to become.

Supplementary Irrigation

33. Until recently, the underlying philosophy behind public irrigation development has not been multiple cropping but provision of supplementary water to the wet-season rice crop. All completed projects and almost all ongoing ones were based on this "supplementary irrigation" concept. This approach does not provide for optimal water management. Present systems can be useful for supplying irrigation water at two critical times: the seeding and transplanting, and the reproductive stages of paddy. The re- productive stage of rice takes place some time in the monsoon months of June to September when the rainfall is two to four times the evapotranspi- ration and hardly any irrigation applications are needed. The more critical stage is at seeding (from March-April) to which supplementary irrigation has traditionally been geared. In many schemes, even this supplementary use has not been achieved.

Inadequate Water Charges

34. The fourth characteristic of public irrigation development has been'the inadequate pricing of water. At present, farmers are charged only about Rs 19 per crop per ha, with the result that revenue from water charges amounts to a small and declining fraction of maintenance expenditures for irrigation (7 percent in 1972/73). 1/

1/ R.B. Pradhan, Public Sector Enterprises and Pricing of Products and Services, January 1973. ANNEX 6 Page 11

Slow Irrigation Expansion in Hills

35. The fifth characteristic of public irrigation policy has been the difficulties encountered in expanding irrigation in the Hill areas with the exception of Kathmandu Valley. Local irrigation works, such as tanks, wells and small drains and channels constructed by the farmers themselves (both in the Terai and in the Hills), supply water to some 154,000 ha.

Performance of Irrigation Systems

36. Nepalese farmers are irrigation conscious and keen to get irriga- tion water either by their own efforts or from government projects. Farm- ers' irrigation systems presently irrigate some 154,000 ha mainly in the Hills but also in the Terai, while government systems cover some 150,000 ha, mainly in the Terai. Practically all irrigation projects are based on run- of-the-river diversions from streams and have not come up to expectations. They have proved difficult to maintain, owing to repeated damage to head- works and to heavy sediment deposition at barrages and in canals during monsoon floods.

37. The main weaknesses of existing schemes are:

(a) Rapidly decreasing amounts of water available in the river as the dry season progresses.

(b) High seepage losses underneath several existing river weirs and high seepage losses from canals.

(c) No minor distribution systems (with capacities of 4 to 5 cusecs and less) are provided within irrigation command areas.

(d) Inadequate control structures in canals for maintaining water levels high enough to allow field diversions as canal supplies decrease.

(e) Lack of drainage systems.

(f) Lack of routine operations and maintenance.

Recent Changes

38. New starts have recently been made which aim at resolving the problems referred to above. The Department of Irrigation, Hydrology and Meteorology (DIHM) has been transferred from the Ministry of Water and Power to the Ministry of Agriculture and Irrigation (MAI) in 1972. In addition, ANNEX 6 Page 12

HMG has recently signed loan agreements with the Asian Development Bank for two projects: one in the Kankai Area (5,000 ha) in the Eastern Terai and another in the Chitwan Valley (11,000 ha). A third one, the Birganj Irriga- tion Project (31,400 ha) is receiving financial support from the World Bank Group.

39. In common, these three projects are designed to ensure that the previous functional isolation between agriculture agencies and water- engineering groups is brought to an end, recognizing that water supply is only one, albeit fundamental, aspect of agricultural development policy. The three projects are also designed for optimum water management and mul- tiple cropping. Similarly, these projects will provide for adequate pricing policies for water which should ensure that total maintenance costs and part of the capital costs will be covered by revenues from water charges.

C. WATER RESOURCES DEVELOPMENT POSSIBILITIES AND CONSTRAINTS

40. With the assistance mainly of India and also of USAID, DIHM has gained considerable experience in designing and executing weir-diversion canal projects. However, several weirs have been built across streams that carry little or no water during the dry season; others are located on highly permeable subsoils causing the dry season flows to disappear underground; some weirs are subject to frequent damage by the huge boulders moving with flood flows; and finally, some large costly weirs have been built to irrigate small areas of only a few hundred acres. DIRM is aware of these problems and realizes that its water development program must be diversified. There are many and varied opportunities for water develop- ment in Nepal which are discussed below.

Surface Water Irrigation and Hydropower

41. Streamflow data produced by the Hydrology Section of DIHM clearly indicate the areas where surface water is available for irrigation and hydro- power. In the Terai Belt, with the exception of the major rivers that cross the belt (para 2), there are practically no reliable surface-water sources for year-round irrigation.

Large Low-Lift Pumping Stations

42. Terai areas adjacent to the large rivers can be brought under irrigation most easily by using large low-lift pumping stations for divert- ing river-water into feeder canals. Construction of diversion weirs on these large rivers can thus be avoided or delayed until the irrigated area is large enough to make the weirs worthwhile. Some pumping plants could then be moved to other sites. Substantial pumping plants are included in the ADB-financed Kankai and Chitwan projects. ANNEX 6 Page 13

Small-Capacity Low-Lift Pumps

43. In addition to large permanent pumping stations, there are many opportunities for small-capacity low-lift pump units. These units can be used to pump water from rivers, creeks, ponds, irrigation canals and drains. They can also perform a useful function in (a) expanding the irrigated area and (b) lengthening the period of irrigation in canal areas with defective or inadequate delivery systems. About one thousand small pump units of 0.7 to 1.5 cusec capacity have been imported and there appears to be a potential for several thousand more. This potential should be assessed by determin- ing the surface water supplies available from all sources during the dry season from (a) the stream flow records of the Hydrology Section and (b) field inspections and surveys.

Surface Storage for Irrigation and Power

44. The tremendous potentials for foreign exchange gains in the export of hydropower and irrigation water to India and the importance of irrigating the Inner Terai are compelling reasons for large hydropower and irrigation projects. Although field studies of surface storage and hydropower poten- tials are available, no comprehensive inventory is as yet available of the overall surface storage potentials of Nepal for either irrigation on low-cost hydro-power generation. Considerable data and information are now available regarding the river regime, rainfall and meteorologic conditions which would also permit an assessment of low lift pump possibilities. Assistance is required to analyse these data and undertake supplemental studies for policy planning and programming (see para 80). An important prerequisite for these projects is the agreement with India on water rights.

Groundwater Irrigation

45. Tubewells provide a year-round water supply and have the advantage that they can be designed and constructed at all scales and levels of invest- ment, ranging from a few tens of tubewells to several hundreds or more. Con- straints are related to the lack of capacity in Nepal to develop and main- tain them and the legal aspects of ownership rights need to be reviewed (paras 97-106).

Developing Water Resources in the Hills

General

46. In the Hill regions there are about 600,000 ha of crop lands of which 150,000 ha are paddy fields. 1/ The remaining 450,000 ha are com- prised of upland terraces on which maize and wheat are the principal crops.

1/ HMG/NK, August 1970. ANNEX 6 Page 14

The cultivated lands in the Hill regions may be grouped in the following three types:

(i) terraced fields on steep hill sides (with slopes of 20 to 80%, most having slopes of 50% or more);

(ii) cultivated fields on tars (with slopes of 5 to 20%); and

(iii) cultivated fields on valleys (with slopes of 2 to 10%).

47. The terraced fields occupy about 450,000 ha. The steep hill slopes have been terraced to prevent the loss of the top soil due to ero- sion by rainfall, to maintain soil fertility and to conserve rainwater. To irrigate hill terraces, long canals would be needed for gravity diver- sion or provision of high pump lifts. Both methods are costly and have only limited application.

48. Tar lands, commonly defined as flat lands along rivers, are generally well developed along the larger rivers and have slopes between 5% and 20%. Some tars occupy only 10 ha and others have more than 5,000 ha.

49. There are many valleys scattered over the Hill territory (Table 3); some are large such as the Valleys of Kathmandu (25,000 ha) and Pokhara (13,000 ha) and there are several smaller valleys such as the one near Tansing of 2,000 ha.

50. The paddy fields are mostly found on tars and in the valleys of which some 130,000 ha are receiving supplementary irrigation, mainly from irrigation systems built by the farmers. These paddy fields receive water during the wet season but very little water is being diverted in the dry season because most smaller rivers run dry and the farmers' diversion works are primitive.

Expansion of Hill Irrigation

51. The term "Hill irrigation", as used in Nepal, is not clear but refers mainly to the irrigation of relatively low-lying, flat lands that occur among the Hills. These lands occupy an area of about 420,000 ha dis- tributed over many tars and valleys of which probably some 300,000 ha can be irrigated. Some higher lands are irrigated from the many springs whose discharge is high during and immediately after the monsoon and whose flows decline as the dry season progresses. The best opportunities for irriga- tion expansion exist in the larger Valleys: the Surkhet, Pokhara, Kathmandu, Tansing, Chitwan, West Rapti, Palpa and Dang Valleys, and on the larger tars. These should have the high priority assigned to them by DIHM wherever the soils are suitable for sustained irrigation. The combination of irrigation and horticulture on the higher terraces and tars will become possible only when hydraulic lifts can be provided economically using low-cost hydropower. ANNEX 6 Page 15

52. In the dry season, the small rivers and streams near tars are usually dry. It is generally possible to pump water from the larger rivers, but the required pump lifts are often high. Construction of farm ponds for irrigation water storage will be preferable in several cases. Groundwater utilization is another promising method for Tars and valleys. This requires a case-by-case evaluation of the subsurface conditions.

53. If the catchment areas are sufficiently large, small reservoirs can be constructed to provide irrigation water in the dry season. The re- quired capacity of these small reservoirs ranges from a unit capacity of 8,000 to 10,000 m3 per ha. With an average water depth of 5 m in a small reservoir, one reservoir with a water surface of 20 ha will be needed for every 100 ha of command area. The silt runoff from catchments must be determined to ascertain the reservoir life. Since they require little foreign exchange if constructed under a labor-intensive rural works program, reassessment of selected projects should be undertaken to determine the eco- nomic costs and benefits to the economy.

54. Pump irrigation is indicated where a stream or river has suffi- cient discharge in the dry season and pump lifts are within economic limits. Studies of the potentials for tubewells, pumps and farm pond irrigation systems should be initiated, and detailed plans and designs developed and analyzed for each area before construction is undertaken.

Types of Hill Irrigation Projects

55. There are six principal types of Hill irrigation projects:

(a) Diversion Projects: this is the only type used to date in the Hills and ranges from simple and cheap to very complex and costly. Principal problems are costly diversion structures for small command areas and contour canals cut into hill slopes (several of which are unstable). The diversion structure is frequently damaged by large boulders moving with flood flows and the countour canals are subject to landslides due to slope cutting and seepage above and below the canal.

(b) Diversion from Underground Watertraps (trenches and thrash racks): same type as above except that there is no superstructure above the riverbed inhibiting boulder movement. Particularly suitable for rivers at boulder stage, river flows are trapped into trenches through thrash racks (free from heavy silt and carried into clhannels). One such structure is already in operation in Bagmati Zone.

(c) Pumplifts: pumplifts can be used in areas witlh hill slopes unsuitable for contour canals. Pumps are particularly attractive if electric power is available either from exist- ing power lines or nearby micro-hydropower units. ANNEX 6 Page 16

(d) Minor Storage Reservoirs: The geology and topography are such that minor storages can be provided economically in several locations. This makes it also possible to combine micropower units with pumplifts downstream. Several small lakes exist in the Hills of which the level (and storage) can be raised by levees (e.g. Begnas Tal, a lake of about 700 acres near Pokhara, can be raised by some 20 ft with a levee of 3/4 mile length).

(e) Tubewells: tubewells will have application in Hill valleys, their potential appears promising but access with drilling equipment is generally difficult and impossible in many cases.

(f) Improvement of Farmers' Irrigation Systems: improved structures for diversion and distribution would increase water supplies and double cropping, and expand irrigated areas. Other areas could profit from improved drainage in the hill slopes above the canals thus preventing landslides.

Constraints and Requirements in Developing Hill Irrigation

56. Access. Access to Hill projects is usually difficult and several days of foot travel is required for inspection purposes. Survey equipment and construction materials must frequently be carried to the site on animal or human backs on foot paths across steep hills. Roads and cableways will improve development opportunities.

57. Farmers' Participation and Ownership of Minor Projects. Farmers operate and maintain the old private systems and even have 24-hour surveil- lance during heavy rains to prevent damage from becoming serious. The ex- perience from past programs (para 28) indicate the need for minor irrigation projects to be built only with farmers' participation and a contract between the farmers and HMG regarding financing, ownership, construction and opera- tion and maintenance (para 112). The same applies to dispersed tubewells and small-capacity low-lift pumps which are to be owned and operated by private farmers (paras 97-98). ADBN is successfully financing tubewells and pumps and could participate in the funding of minor surface water proj- ects as well.

58. Role of DIHM. Traditionally the farmers have been able to oper- ate and maintain their own projects. We agree with DIHM that it is in no position to operate and maintain minor projects (say, less than 1,000 ha) particularly in the Hills because access to Hill projects is too difficult, DIHM lacks staff and does not yet have a functional irrigation extension service.

59. The role of DIRM with respect to minor projects must be defined but should be limited to survey, design and supervision of construction. Construction supervision should be limited to normal engineering layout of ANNEX 6 Page 17 channels which would mainly be dug by the future owners of the project. External skilled labor would be brought in only for structures and other complex construction items that may occasionally be required. Ideally DIHM would function as the consulting engineer to the financing authority deal- ing with the farmers (e.g. ADBN or the Village Panchayat).

60. Lack of Inventory and Detailed Knowledge of Hill Projects. There is an urgent need for an inventory survey of irrigation opportunities in the Hills and feasibility analyses for individual projects. With the experience gained thus far and with some intensive survey work, and technical assist- ance (para 115) DIHM should soon be in a position to advise Government what Hill irrigation projects can be undertaken.

Need for Improved Water Management

61. Two good opportunities exist for making more dependeable supplies of water available to larger areas in existing canal projects. These are: (a) reducing present excessive water supplies to field plots by controlling irrigation applications and (b) reducing water losses from existing irriga- tion delivery systems thus increasing dry-season water supplies. Functional drainage systems are required in irrigated areas for the removal of excess rainwater and irrigation wastes.

62. There are two levels where improved water management should be implemented. First is the village and farm level where the following con- ditions prevail: (a) heavy over-irrigation during the monsoon; (b) inadequate or no water in the dry season; (c) inability of the individual operator to control or depend on his water supply unless he owns a tubewell or pump; (d) lack of people trained in the basic elements of water management; (e) high seepage losses from canals with little or no information concerning quantities lost and alternative means for reducing losses (costs); (f) lack of maintenance of irrigation and drainage facilities; and (g) systems of pricing and schedules for delivering water than encourage inefficient water use practices from a village and national point of view.

63. Second is the government level. The Government must become more attuned to agricultural needs and requirements. Irrigation projects should have delivery systems capable of supplying sufficient water when needed. Such a system is commonly called a demand system -- a system which can re- spond to farmers' needs. This cannot be achieved by rigid rotation or con- tinuous overland flow.

64. Continuous overland flow of water from one paddy field onto the next is however the usual method of irrigation distribution. Under Nepal's ANNEX 6 Page 18

soil conditions -/ this method causes (a) excessive water losses due to deep percolation, (b) slow water distribution particularly in the period of land preparation and (c) leaching of soil nutrients due to prevailing high infiltration rates and deep groundwater levels before the onset of the monsoon.

65. Several measures can be tried to improve the irrigation efficiency under Nepal conditions. The feasibility of providing an independent inlet from a field channel or watercourse to each field plot needs investigation. The soil can be puddled prior to transplanting to reduce percolation losses if the infiltration rate is high. The fields can be irrigated intermittently and continuous ponding of paddy land should be practiced only if (a) the infiltration rate of the natural or puddled soil is low (say, less than 0.01 to 0.02 ft/day) or (b) the groundwater level is at shallow depth below land surface. With higher infiltration rates and deep groundwater levels, paddy can only be grown as an upland crop; under these conditions, except for taste preference reasons, alternative to rice should be sought.

66. Growing irrigated rice without continuous water ponding is unfami- liar to Nepalese farmers to date but its introduction into most valleys in the Hills, Inner Terai and in large areas of the Terai may be necessary be- cause of the soil conditions. Improved irrigation therefore requires not only better water distribution systems but also changes in irrigation prac- tices on the farm. The latter will take time and intensive extension efforts.

67. There will be large areas in Nepal where paddy will continue to be grown because of taste (Surkhet, Jumla, Gorkha) or because there may be no feasible alternatives (Pokhara, Baglung, Dang, Makwanpar, Chitwan). It is in these areas that water management efforts should be concentrated.

1/ High infiltration rates and deep water tables are common in Nepal, resulting in the irrigation of small acreages per unit of discharge as supported by the following observations:

(a) The lowest measured infiltration rate in the Birganj and the Sun Kosi Terai Projects is 3 cm/day or 90 cm/month (FAO/NK, September 1970 and June 1972). (b) DIHM observations in Pokhara Valley have established that one cusec is used to irrigate 10 to 12 acres compared to 50 to 60 acres for rice on good paddy land. (c) Serious soil degradation and loss of fertility have occurred in the 50 year old Chandra Project in the Eastern Terai where current irrigated paddy yields are 0.5 tons/ha while yields in adjacent non-irrigated areas have remained 2 tons/ha (HMG/NK, August 1970, p. 26). (d) Ponded rainwater disappears rapidly in Terai areas where groundwater levels are deep (Berger, 1972, and observations by mission members). ANNEX 6 Page 19

D. ORGANIZATION FOR WATER RESOURCES DEVELOPMENT

Organization and Staffing

Ministry

68. The Ministry of Water and Power used to have two independent departments: an Irrigation Department and a Department of Hydrology and Meteorology. These departments were combined in 1972 to form the Depart- ment of Irrigation, Hydrology and Meteorology (DIHM) which was then trans- ferred to the Ministry of Food, Agriculture and Irrigation (MFAI). This transfer facilitates the integration of the engineering and agricultural aspects of irrigation projects. Continued contact between DIRM and the Ministry of Water and Power will, however, remain necessary for (a) multi- purpose projects involving hydropower generation and irrigation for Nepal and/or exports of water or electricity to India and (b) assessment and co- ordination of requirements for power requiring irrigation projects (e.g. Lumbini groundwater).

Present Organization and Suggested Changes

69. The present organization of DIHM is depicted in Figures 2 and 3. Two points deserve special mention: (a) Four regions have been established with offices in Surkhet, Pokhara, Kathmandu and Dhankuta, and (b) the organi- zation is beginning to show differentiation in tasks.

70. The groundwater resources and meteorological sections (Figure 2) have reasonable technical competence but the surface water resources, special studies and climatology sections are weak and need strengthening. The soil survey section of the Department of Agriculture is also small and weak. The present budgets of the meteorology and groundwater survey sections are NRs. 1.3 million and NRs. 2.0 million, respectively. Current studies and surveys and associated technical assistance requirements are discussed in Appendix II.

71. The present planning and design division (Figure 2) has nine sec- tions directed mainly to the preparation of routine weir-diversion canal projects with which DIHM has gained considerable experience. Diversifica- tion towards pumplifts, tubewells, minor storage reservoirs, river stabili- zation and drainage projects is essential for both Terai and Hill projects. A revised organization is suggested in Figure 4 for the planning section together with a definition of the principal aspects to be considered by each subsection.

72. An outline of the regional directorates is given in Figure 3. The size of each regional organization depends on the number of projects under construction and required repairs on old projects. Figure 3 indicates ANNEX 6 Page 20 the strong emphasis on engineering and the total absence of project opera- tions following completion of projects. The maintenance and repair section should be replaced by an operation and maintenance section whose principal functions would be: (a) Headworks and canal operations, (b) controlled water distribution, (c) agriculture and irrigation extension, (d) main- tenance, and (e) recovery of water levies.

Staffing

73. DIHNI has one Director General, three Deputy Director Generals, four Regional Directors, some 40 professionals and 130 junior professionals (mainly engineers), and overseers. The academic qualifications are generally adequate but many lack in-depth work experience. This substantial number of partially-trained staff needs advice, guidance and supervision by trained experts. DIIIM lacks qualified staff in agricultural economics, engineering geology, soil and water conservation, and operation and maintenance of projects.

Internationally-Financed Projects

74. Three canal irrigation projects (Birganj, Chitwan and Kankai) are being constructed under Development Boards supported by expatriate consult- ants, and DIHM should now gain the experience required to profit fully from year-round irrigated agriculture. Considering the extensive groundwater poten- tials of the country, DIHM should next be assisted in developing the high- pressure artesian area in the Lumbini Terai.

Implementation of Program for Minor Irrigation

75. DIHM has received some 1,100 requests for minor irrigation projects from farmers' groups. Most of these projects are located in the Hills. DIHM knows where they are and needs a breathing spell to sort them out. The Depart- ment is being pressed by the Planning Commission to take up a large number of specific projects immediately. We recommend that DIHM be given policy guidelines only and that selection of projects for execution be left to DIHM as the technical arm of HMG.

76. Departmental operation and maintenance of minor projects is clearly not possible because of access difficulties and staffing problems and the farmers must be made fully responsible for minor projects. They should own the minor projects and manage operations themselves.

ANNEX 6 Page 21

Development Planning and Institutional Development

Planning Practices

77. The problem of planning for the specific water and power projects is important and deserves close attention. The only organizations authorized to deal with major planning in the country are the Electricity Department (ED) for power projects and DIHM for irrigation projects. No organization exists that is authorized to deal with multi-purpose projects such as Bagmati, Kamla, or the Sun Kosi High Dam project. This has resulted in the various planning reports 1/ which fail to give a clear picture of the functional aspects of each of the purposes or their integration.

78. The personnel of DIHM is responsible for project management, cons- tructidn, operation and maintenance, in addition to project and program plan- ning for irrigation and planning development of the vast water resources of the country, including water export to India. With all these tasks to perform, DIHM's limited personnel is over-burdened and as a result great difficulty is experienced in properly fulfilling some of these responsibilities.

79. In the past, water resource planning has not been properly under- taken in relation to the needs of the country. All aspects of the planning and construction of several major projects have been left to donor countries e.g. Chatra Canal (67,000 ha), Gandak East and West Canals (38,000 ha), Tinao (14,100 ha) and Sirsia (1,350 ha). However, Nepal has now reached the stage where systematic planning is of great importance. Detailed surveys of alter- native irrigation development possibilities should be undertaken as soon as possible. Existing projects should be critically reviewed to improve their performance and agricultural output. These surveys and reviews should be followed by a ranking study of development possibilities to determine the most economical sequence of projects and programs. Once a tentative program has been drawn up, detailed feasibility studies of individual projects and programs (such as distribution of pumps and private well drilling) should follow. The existing "Master Plans" are no more than project lists together

1/ Different figures are given for the installed generation capacities between reports. HMG/NK, May 1970, Plate 4-2, shows an output of 60 MW for the Kamla Dam Project while FAO/NK, Final Report, 1972, page 38, states that firm power will be as low as 8.5 MW and that the installed capacity may go as high as 30 MW; comparable figures for Bagmati are not given but for the Sun Kosi High Dam project HMG/NK, May 1970, gives 180 MW for the peak power output and FAO/NK, 1972, page 39, suggests a possible installed capacity of 360 MW. There are several other discre- pancies. IDA has been requested to consider the initial phases of these projects for immediate financing. However, both require further preparation. Bagmati probably needs another two years and Kamla one more year before an acceptable project analysis can be ready. ANNEX 6 Page 22 with some of their characteristics. They are based mostly on very preliminary reconnaissance and map studies and do not consider the relative merits of the projects. Present "planning" activities focus only on project feasibility studies which have been selected almost arbitrarily (see Appendix 3 for an evaluation of water resource planning studies). Recommendations

8U. Because of the importance of the water resource potential (both for irrigation and hydropower) we recommend thiat HMG request (from international sources) for a senior water resource evaluation and planning (WREP) advisor 1/ and a small supporting team 2/ to assist government in its water resource evaluation and planning. The senior water resource evaluation and planning advisor should have a dual role as advisor to the National Planning Commission (where he should be attached) and advisor to DIHM. At the NPC level, he would assist in co-ordinating the requirements needed to plan for, and evaluate multipurpose projects among ministries and foreign assistance agencies. At the DIHM level, he would assist in the review of existing projects, and how to implement the required surveys and studies.

1/ DIHM has already requested for such an advisor from UNDP. We recommend that this advisor, if approved, should be given the role outlined in this para. 2/ This team, to be attached to DIHM, should consist of (i) a water resource economist, (ii) a hydrologist knowledgeable in meteorology, and (iii) a soil and water conservation specialist with knowledge of hill erosion control and river stabilization - for three to four year terms. With short term assistance from specialized expertise (like engineering geologist, foundation engineer, structural engineer, power systems ana- lyst, electrical transmission engineer) to be determined by the Senior WREP advisor. The team could (a) make an inventory of the surface- storage and hydropower potentials; (b) determine local-use and export potentials for both water and power; (c) conduct and supervise hydrolo- gic studies from existing data and assist the hydrologic and meteorolo- gic division of DIHM to gather additional data as necessary; (d) prepare preliminary designs for dams and hydropower plants for cost estimating and economic analyses at the pre-feasibility level. The effects of the geologic and seismic instabilities in the region and the locally-severe hill erosion problems would be included as part of the analysis. ANNEX 6 Page 23

E. FUTURE IRRIGATION POLICY EMPHASES

81. DIHM is aware of the fact that the overall impact of irrigation on crop production has been minor and even harmful where heavy over-irriga- tion has taken place for several years. Major constraints to expanding beneficial year-round irrigation are linked primarily with Nepal's dependence on Indian-aided projects, emphasis on supplementary rather than distribution works, lack of water control, inadequate project preparation and follow-up, and shortage of construction materials and experienced manpower.

82. Realization of projected agricultural benefits from operating projects requires change to year-round irrigation where feasible, multi-cropping, improved water control and increased use of agricultural inputs other than water (e.g. improved seeds, fertilizers and pesticides).

83. Given the wide scope and need for proper irrigation, and the need to stay within the country's financial and manpower capacity, a reorienta- tion of policy emphasis is necessary. The mission recommends that the thrust of irrigation policy for the Fifth Five Year Plan 1/ should be towards -

(a) Improvement of the functional aspects of operating projects;

(b) Improvement of water management and supporting services;

(c) Concentration of new projects of short gestation and high pay-offs; and

(d) Irrigation at or near food deficit areas in the Hills.

Improved Functioning of Operating Projects

84. The objective is to provide the physical facilities needed to improve the functioning of operating projects thus creating an environment in which agricultural production can be increased.

85. An inventory and analysis is needed of the current irrigation pro- gram, i.e. of all projects, to determine priorities for rehabilitation of existing projects works, construction of minor irrigation channels (of less than 4 cusec capacity) and drainage systems (where needed), provision of addi- tional control structures in larger canals, controlled irrigation outlets and expanded 0 & M procedures including periodic clearing of existing chan- nels. DIHM knows that, in addition to rehabilitating projects, some should

1/ Longer term strategy is discussed in para 116. ANNEX 6 Page 26

94. Low-lift pumps, tubewells and minor irrigation projects are cur- rently in great demand. Many of the wells and pumps are paid by the farmers, and ADBN is providing credits for tubewells and pumps. DIHM has constructed several minor irrigation projects in the Hills and the Terai and some tubewells in the Terai.

Low-Lift Pumps

95. The numerous opportunities for low-lift pumps (para 43) requires close cooperation between DIHM and the Credit institutions (ADBN, village committees) and the extension service. Small-capacity pump sets and spare parts can be imported by a suitable public or private agency and sold to the public with1 ADBN credits as required. DIHM could be the initiator and tech- nical advisor on a small-capacity low-lift pump program but should not be involved in pump sales. The distribution and sales of pump units can be managed by the importer and the agricultural-cum-irrigation extension service can function as advisor to the farmers. The program can be large or small, and should be limited to areas in which (a) water sources have been identi- fied and (b) fuel or electric energy is available.

Tubewell Programs

96. About 1,000 irrigation wells have been installed in the Nepalese Terai over the last few years for private farmers by Indian contractors. These contractors should be allowed to continue because there are no others who can meet the existing demand for irrigation wells. There is little pub- lic or private Nepalese well-drilling capacity and H1MG has as yet no exper- ience in groundwater development. Pending the inclusion of a training compo- nent in future groundwater projects (like the Lumbini Project), training could also be included in the USGS - type investigative projects presently undertaken in Nepal.

97. Development of the groundwater potential requires two approaches: (i) under international contracts (say, 600 to 1,000 wells) for contiguous areas with high potentials in order to make optimum use of the artesian pressures in recovering the groundwater with minimum losses in water and pressures and (ii) by developing private or semi-public capacity for well drilling in the other groundwater areas.

98. Concentrated tubewell projects (e.g. for the high-pressure artesian Lumbini area or the Birganj area are justified if (a) the local groundwater resources are extensive, (b) there is a general demand for irrigation wells, (c) conditions are favorable for the construction of standardized wells (economies of scale), and/or (d) special electric distribution systems are required. Programs for constructing individual wells are indicated if (a) the demand for wells is spotty (an individual farmer or small groups of small farmers), and (b) the groundwater source is isolated and small (tars and small river valleys). Large-scale contracts for well projects and individual well construction both have a place and require separate programs. ANNEX 6 Page 27

99. It is important that simple well drilling techniques and cheap well materials be developed for Nepal so that farmers can profitably irrigate from their own wells preferably constructed by Nepalese well drillers. Several of these techniques and materials are readily available in India and Pakis- tan. HMG (Nepal) should look into these and arrange for assistance in deve- loping private well-drilling capacity.

100. An additional approach could be to establish a government corpora- tion which would own large capacity tubewells for use by the farmers against payment of an equitable charge per hectare.

Policy Guidelines for Groundwater Development

101. Groundwater is a valuable and large resource in Nepal and policy guidelines are necessary at this time to accelerate its development.

102. HMG must decide on the extent of its involvement (financially, managerially and operationally) in well development before embarking on large groundwater programs. Several approaches are possible (paras 97-100) for which the financial and economic implications and the management and operational requirements have yet be determined.

103. Other important issues are:

Drilling Code: Well drilling as currently practised in the artesian zones should be forbidden artesian pressures are being dissipated and more than half the water wasted. These practices must be discontinued immediately. A primary requirement is that HMG/USGS develop a drilling code for the Terai, applicable to both Indian and prospective Nepalese well-drilling contractors. This will ensure that farmers get wells of acceptable quality. A few staff members of the existing DIUIM groundwater section could be trained to become drilling inspectors on behalf of DIHM who would log the drill holes and con- duct an acceptance test on the completed wells.

104. Availability of Tubewell Material: No groundwater program or drill- ing can be successful in Nepal unless HMG ensures unimpeded importation of essential supplies such as well piping, screens and pumps. Stockpiles of these should be available in several centers in the Terai.

105. Control of Overpumping. The water volumes pumped should not exceed the average annual recharge. This can be enforced by developing guidelines for a given area after determining the total average recharge and calculating the number of wells needed for removing this volume, assuming average-capacity wells at optimal spacings operating at normal utilization for normal per- hectare water consumption. These initial calculations are to be followed by regular phreatic and pressure-level observations in the area after wells come into operation, enabling adjustments in the guidelines from time to time as appropriate. ANNEX 6 Page 28

106. Data on Groundwater Conditions and Development. DIHM already has regular groundwater and water-pressure level observations for limited areas. This program should be expanded to include (a) all areas where extensive well development takes place, (b) performance surveys of private wells, and (c) occasional water quality observations. Well drillers should be required to submit a log of each well drilled to DIHM.

Irrigation at or near Food Deficit Hill Areas

107. The objective is to increase agricultural production near food deficit hill areas to provide additional employment on farms and reduce the need to seasonally migrate for food.

108. In the Hill region, difficulties have been encountered with the weir- diversion projects with contour canals cut into hill slopes. Other project types, such as underground water traps, tubewells, minor storages and elec- trically-driven pump lifts (para 55) must be given more attention. Initial emphasis should be on irrigation development in the larger Hill valleys: the Surkhet, Pokhara, Tansing, Chitwan, West Rapti, Palpa and Dang Valleys and the larger tars. Some pilot projects should be initiated to gain experience in alternative approaches to hill irrigation.

109. The lack of inventory and analysis of potential minor projects (para 60) will initially inhibit program development and engineers alone will not be sufficient to develop a viable program. Hill irrigation poses very different problems from these encountered in flat land areas such as the Terai. These problems result from variable geologic makeup of the Hills, the land-use patterns above and below the proposed canal alignment and the flood and low- flow regimes of the rivers from which water is drawn. In evaluating and designing potential projects; particularly storage projects in the smaller valleys, a multidisciplinary group approach is required. Technical assistance is needed in the form of qualified manpower, helicopters and survey equipment. Two to three years of assistance by such a group (which would include an irrigation engineer, a soil and water conservationist, an engineering geologist, an irrigation agriculturist and a project economist) is needed.

110. Meanwhile, preparations should proceed in the development of Hill irrigation programs particularly in (a) assessing lift pump possibilities and the development of the larger valleys and pilot projects to gain expe- rience in alternative approaches to Hill irrigation (para 55); and (b) undertaking an inventory analysis of existing minor Hill project.

Policy Guidelines for Minor Hill Irrigation Projects

111. HMG should develop policies that will ensure (a) farmers' participa- tion in project construction, (b) local ownership of the project, (c) project ANNEX 6 Page 29

operation and maintenance by the farmers, and (d) partial or complete recov- ery of project costs.

112. Farmers' Participation. Further project should not be undertaken unless the majority of the beneficiaries want them. A written agreement should be prepared by DIHM and signed by the farmers whenever possible. The agree- ment would spell out (a) the farmers' responsibilities in construction, opera- tion and maintenance, (b) the ownership of the project and (c) project costs and repayment requirements. Import of labor should be limited to essential skills such as equipment operators, masons, etc. The project beneficiaries should do all routine work, even if this slows down project construction.

113. Financing of Minor Projects. HMG should develop methods for financing and repayment. Ideally the financing and cost recovery would be done e.g. through the ADBN in the same way it handles the purchase of equip- ment, pumps and wells, with a reasonable repayment period of, say, 10 to 15 years. This would simplify government operations and provide incentive for increasing production by beneficial use of project facilities. Subsi- dies could be provided in the form of low interest loans, equipment, cement or payment of labor, for which definitive guidelines must be developed on the basis of financial and economic analyses, taking into account family income objectives and prevailing socio-economic conditions in the project areas.

F. ISSUES

Geographical Concentration

114. Implementation of the strategies suggested in Chapter E will resolve many of the issues facing the irrigation subsector. The issue of geographi- cal concentration of irrigation activities would be resolved in favor of the selection of programs which can fulfill the criteria for policy emphasis out- lined in Chapter E. This implies that the focus of future irrigation programs should remain in the Terai and Inner Terai given the availability of lands suitable for sustained irrigation and the substantial opportunities for small pumps and tubewells.

115. Even in the Terai itself, past investments have been made mainly in the Eastern and Central Terai, primarily in locations where population and political influence have been concentrated. The mission recommends that increased emphasis be given to Western Terai because (a) the tremen- dous groundwater resource potential, and (b) the greater need in terms of climate (lower and less dependable rainfall). Increasing migration pressure in Western Nepal and the fact that it is the last stronghold of unsettled flat forest land necessitates concurrent attempts to combine irrigation with settlement programs there. ANNEX 6 Page 30

Small Prolects Vs. Large Projects

116. The issue of the extent to pursue large irrigation projects is, in our judgement, a problem of timing. The tremendous potentials for foreign exchange gains in the export of hydropower and irrigation water to India and the importance of irrigating the Inner Terai Valley are compelling reasons for large irrigation projects. Our suggested emphasis on quicker gestation and relatively small projects in the next five years is dictated by (a) the necessity to realize projected benefits from operating projects, (b) the many profitable opportunities that exist for irrigation expansion by small pump units and tubewells and (c) Nepal's limited implementation capacity. In the longer term (by 1980), the outlook for large irrigation and hydro- power projects would be more favorable with:

(a) the strengthening of Nepal's planning and implementation capacity in water resource development; 1/

(b) the programs underway for irrigation expansion by small pumps, tubewells and other small-scale projects;

(c) the experience gained from IBRD-financed irrigation and settlement projects;

(d) the worsening land pressure and food deficit problems in Nepal;

Because the primary consumer of excess hydropower from such projects would be India, it would be mutually beneficial for dialogue to be initiated between Nepal and India.

117. Given the traditional long gestation periods in preparing such projects, it is not too early to decide which of the identified large irriga- tion hydropower projects need to be studied further. We recommend the Bag- mati irrigation project as the prime candidates, since initial background work is completed; the project is relatively unencumbered by previous works or agreements; they would be large enough to have an important impact on irrigation expansion and low-cost hydropower generation: and they would not be too large to overwhelm the scarce manpower available.

Water Charges

118. Pricing of irrigation water is a difficult exercise, particularly for supplementary irrigation without adequate distribution systems and with- out guaranteed water deliveries. DIHM is receiving only seven percent of its

1/ As detailed in Chapter D of this Annex. ANNEX 6 Page 31

regular expenditures from water charges. Supplementary irrigation without water management has unknown but limited benefits which may or may not justify a charge of more than the present Rs 10 per crop per ha.

Revenue from Water Charges (in Rs 1000)

Regular Development Revenue from (4) as % Fiscal Year Expenditure Expenditure Water Charges of (2) (1) (2) (3) (4) (5)

1970/71 (Actual) 11.99 374.85 1.71 14% 1971/72 (Rev. Est.) 24.20 376.55 1.70 7% 1972/73 (Est.) 26.69 496.74 2.00 7%

Source: Public Sector Enterprises and Pricing of Products and Services, R. P. Pradhan. January 1973.

119. Berger -/ has made an analysis of the benefits and costs for tubewell irrigation in the Lumbini area for wells with diesel engines, with electric motors and for flowing artesian wells. He reports the following annual costs and benefits per hectare for two paddy crops per year:

Benefits Costs Benefit/Cost Ratio (Rs) (Rs)

Diesel power 2,770 1,945 1.42 : 1.00 Electric power 2,770 1,006 2.75 : 1.00 Artesian pressure 2,770 530 5.23 : 1.00

The above annual costs cover the initial investment, operation and maintenance and replacement costs. The electricity tariff used by Berger is Rs 0.35/KWH.

120. Berger's analysis shows that with artesian wells, about 20% of the net benefits would cover all costs. For wells with electric motors nearly 40% of the benefits would be required. How acceptable such charges will be for farmers not accustomed to large obligations remains to be determined. The 1972 figures of Berger also indicate the need for a study of the effect of current fuel prices on the viability of diesel-driven low-lift pumps and tubewells.

Erosion Control

121. The denudation of land from heavy rainfall, and floods (para 5) in the river basins presents one of the most difficult problems for improving land availability and productivity. Primarily as a result of steep slopes,

1/ Berger, R. L., 1972, p. 46. ANNEX 6 Page 32 deforestation and cultivation expansion to marginal and less stable farm lands in the Hills (Annex 1), the result has been the loss of cultivated land due to sand coverage in the Terai and Inner Terai served by the larger rivers (particularly in the southeastern Terai).

122. In practical terms, it is not feasible to undertake a general program of erosion control particularly in the larger hill valleys, because unless very high cost protection is provided, protection efforts would be ineffective. HMG has to decide on a priority basis which areas need to be protected, and such protection when undertaken should be in conjunction with rural development or production programs or projects.

G. RECOMMENDED PROGRAMS AND STUDIES

123. The programs and projects recommended in this Annex are summarized below.

Quick Payoff Programs -

124. There are opportunities for these in both the Terai and the Hills.

A. In Terai and Larger Valleys:

(a) Sales program for low-lift pumps of small capacity; 2/

(b) Program for providing dispersed tubewells; 2/

(c) Program for improving operating projects (para 84);

(d) Well project for the Lumbini artesian zone; (paras 21 and 131).

B. In Hills:

Diversified program of minor irrigation projects (paras 55 and 109).

Longer Gestation Program

125. More time will be needed to achieve results with:

(a) Year-round irrigation with new canal systems (Appendix 2) as exemplified by:

1/ Programs which can be completed within the Fifth Five Year Plan (1975/76-1980/81). 2/ Private sector or credit and extension agencies participating through panchayats or village committees (para 95). ANNEX 6 Page 33

(i) Kankai (HMG/ADB)

(ii) Chitwan (HMG/ADB)

(b) Year-round irrigation in the larger hill valleys (e.g. Barigad, Kali Gandaki);

(c) Water management programs to reduce soil deterioration in operating projects including introduction of an irrigation extension service (paras 87 - 92);

(d) Medium size canal projects from perennial rivers in the Terai with permanent pumping stations, preferably in the Western Terai; (para 42).

Inventory Surveys

126. Five inventory surveys are required:

(a) Potential hill irrigation projects (para 109);

(b) Potential for low-lift pumps (paras 44 and 110);

(c) Rehabilitation requirements of operating projects (para 85);

(d) Surface storage and hydropower potentials (para 44);

(e) Soil and land resources (see Annex 1).

Investigation Programs

127. Investigations are underway on soils, hydrology, hydrogeology and meteorology. The program for soils is discussed in Annex 1, and the others are discussed in Appendix 1 of this Annex where it is noted that they need strengthening and reorientation. Several proposals for this purpose are al- ready with HMG and DIHM which should be reviewed and implemented.

Studies

128. Several studies are needed in connection with the suggested deve- lopment program, and background papers should be prepared on:

1. Approaches to improvement and rehabilitation of operating projects;

2. Approaches to improving water management in irrigated areas; ANNEX 6 Page 34

3. Government approach to private tubewell development;

4. Approaches to expanding Hill irrigation, and

5. Analysis of water charges for functioning projects.

Technical Assistance

129. The technical assistance program needs to be expanded to overcome current institutional limitations and lack of planning and implementation capacity. New requirements are:

1. Senior Water Resources Planner who will be joint advisor to NPC and DIHM and a supporting team to assist HMG in ti) evaluating water resource potentials and their multipurpose uses, (ii) assessing the usefulness of past studies and implementing further study needs including foreign assistance; (iii) review- ing existing projects and required improvements (para 85);

2. Assistance in developing the Hill irrigation program (para 109);

3. Assistance in developing well-drilling capacity and preparation of a drilling code (paras 96 and 103);

4. Assistance in developing new approaches to project repayment and water and land taxation (para 120);

5. Consultants to complete feasibility studies for the Bagmati project (para 117).

H. PROJECT POSSIBILITIES FOR EXTERNAL FINANCING

Key Projects Supporting the Development of the Gandaki Corridor

130. Two projects in irrigation can be undertaken by foreign assistance as part of the governments corridor development strategy. Possibilities exist in the Bhairawa - Syangja - Pokhara corridor 1/ for the development of two projects suitable for foreign assistance:

1/ Also called the Gandaki Corridor, it has substantial agricultural resources (the larger hill valleys occur in Tansing, Syangja, and Pokhara), hydropower, forests and trained manpower (retired Gurkha soldiers and graduates trained by the Butwal Technical Institute established and run by the United Mission). ANNEX 6 Page 35

(a) The Lumbini Groundwater Project

(b) Pokhara Valley - Pilot Project in Water Management

The Lumbini Groundwater Project

131. The high-pressure portion of the Lumbini artesian area (para 21) can be developed for year-round irrigation with very low energy requirements for pumping. The project size is flexible but could consist of 1,200 wells or even more. The artesian wells must be constructed under international contract because there is no well drilling experience in Nepal.

132. Status of Groundwater Investigations. DIHM/USGS/USAID -/ have pre- pared a report on the groundwater investigations in the Lumbini Terai. The report summarizes the data collected between April 1969 and June 1972 on the groundwater potential conclusions regarding the occurrence, hydrology and chemical quality of groundwater.

133. Special construction methods must be followed in the high pressure artesian area, as described in the interim report. The aquifer data show that large areas of the Lumbini artesian area have equal or higher transmis- sivities than the Birganj tubewell area. The chemical data show that the water quality is generally good and is suitable, with few exceptions, for dom- estic supply, livestock and irrigation. Most water analyses indicate a low to very low sodium hazard and a low salinity hazard.

134. An economic study of the economics of tubewells and water use has been undertaken by a consultant to the United Missions in 1973. 2/ An up- dating of this study will probably be required.

135. A feasibility analysis of this project should include the follow- ing:

(a) Reconnaissance soil surveys, development of cropping patterns, and determination of irrigation requirements;

(b) An analysis of the groundwater potentials for different intensities of development;

(c) Definition of the works required in sufficient detail to allow reliable cost estimation. These works would include the tubewells, irrigation and power distribution works, and the drainage works.

(d) Evaluation of the economic benefits and internal rates of return, determination of repayment requirements and recom- mendations on repayment policies.

I/ DIHM/USGS/USAID, 1973. 2/ Berger, R. L., 1973. ANNEX 6 Page 36

Pilot Project in Water Management - Pokhara Valley

136. An investigation into the feasibility of irrigation improvement and expansion in Pokhara Valley should also be considered. This valley of 13,300 ha (gross) has already 7,000 ha (net) under irrigation and some 2,000 ha (net) do not yet have a canal system. The soils are generally sandy, infiltration rates are high, the groundwater table is deep, and the canals serve only 10 to 12 acres per cusec (compared to 50 to 60 acres per cusec for rice on good paddy land). A water management scheme involving some redesign of existing canal systems, provision of additional control structures in canals, measures field diversions, and the introduction of intermittent irrigation may be possible.

Other Irrigation Projects

137. Other projects (similar to the Birganj Irrigation Project) involving (a) the completion and/or extension of existing systems of supposedly completed projects (along the lines of Birganj Project), (b) rehabilitation of past schemes, can be identified pending inventory of past projects (para 85). In addition to that recommended for Pokhara Valley, other pilot projects should also be considered in other relatively large hill valleys in Sukhet, Sallyan, Palpa, Baglung, and in Inner Terai Valleys in Dang, lMakwanpur and Chitwan.

Minor Irrigation Projects

138. The low-lift pump and private tubewell programs and the program for minor irrigation projects in the Hills (para 124) may become attractive for external financing after DIHM has developed organized approaches for them. With the cooperation of the Agricultural Extension Service and Credit Agencies they could be considered as part of Integrated Rural Development Programs. ANNEX 6 Page 38

BIBLIOGRAPHY

Berger, R.L., "Appraisal of Alternatives, Butwal Area", United Mission to Nepal, mimeo. report, 57 pages, 1972.

Bower, C.A., and Maasland, M., "Sodium Hazard of Punjab Ground Waters". Symposium on Water logging and Salinity in West Pakistan, Golden Jubilee Session of West Pakistan Engineering Congress, pages 49-61, 1963.

DIHM/USGS, "Hydrology and Water Resources Development in Nepal", 94 pages, 1969.

DIHM/USGS/USAID, "Groundwater Resources Investigations in Lumbini Zone, Western Terai, Nepal", Interim Report, by G.C. Tippetts and W. Ogilbee of USGS and C.K. Sharma and staff of DIHM (Nepal), in press with USGS (Washington), 200 pages, 1973.

FAO/Nippon Koei Co., Ltd., "Report on the Soil Survey in Birganj-Gandak Irrigation Project (with Soil and Land Capability Maps)", June 1972.

FAO/Nippon Koei Co., Ltd., "Annual Report No. 2 (1970/71) on Hardinath Plot Demonstration Farm Sun Kosi Terai Project", October 1971.

FAO/Nippon Koei Co., Ltd., "Irrigation Development Study in the Central and Eastern Terai Plain, Nepal, Feasibility of a Combined Surface and Groundwater Project in the Birganj Area", Main Report (with separate Annexes), August 1971.

FAO/Nippon Koei Co., Ltd., "Report on the General Reconnaissance Soil Survey of the Eastern Terai Plain in Nepal", September 1970.

FAO/Nippon Koei Co., Ltd., "Interim Report on Feasibility Study on Sun Kosi Terai Project", (Draft), October 1969.

FAO/Nippon Koei Co., Ltd., "Final Report on the Development of Irrigation in the Central and Eastern Terai Plain, Nepal", 1972.

HMG/Nippon Koei Co., Ltd., "Master Plan for Power Development and Supply", May 1970.

HMG/Nippon Koei Co., Ltd., "Master Plan for Power Development and Supply", May 1970.

HMG/USAID, "Joint HMG/USGS/USAID Evaluation of Groundwater Investigation in the Western Terai, Nepal", mimeo. report, 8 pages, 1 App., Kathmandu, January 1973.

ANNEX 6 Page 39

IBRD, "Current Economic Position and Prospects of Nepal!', Vol. II, Agricultural Development, SA-7a, pages 26-27, June 26, 1969.

IBRD, "Economic Situation and Prospects of Nepal", Vol. III, power, 24 pages, June 1973.

IBRD/IDA, "Land and Water Resources Sector Study, Bangladesh", Technical Report No. 20 - Overall Water Resources Potential and Technical Report No. 21 - The Groundwater Potential, Vol VII, Report No. PS-B, December 1, 1972.

Pradhan, R.B., "Public Sector Enterprises and Pricing of Products and Services", January, 1973.

Rajbhandary, K.B., "Natural Environment and Crop Distribution in Nepal," Department of Agricultural Education and Research, HMG, Nepal, April, 1968.

Swarzenski, W.B. and Babcock, H.M., "Groundwater Investigation Program for the Western Terai, US Geological Survey Open-File Report, 57 pages, 12 figures, June 1968.

US Salinity Laboratory, Dept. of Agriculture, "Diagnosis and Improvement of Saline and Alkaline Soils", Agriculture Handbook 60, 160 pages, 1954. DISTRIBUTION OF THEORETICAL WATER POTENTIALS OF NEPALESE RIVERS BY BASINS

MAJOR RIVERS MINOR RIVERS 2 2 2 (WATERSHED SIZE GREATER THAN l,000 km I IWATERSHE0 SIZE BETWEEN 300 kEm AND 1,000 km ) 306 28894

25 5- TOTAL TOTAL 72.38 10.83 mil kwt mil .kwt

20 4 18,75 1795 360

_ _m ~~~~~~~~~~~~~~~~~~~~~~~~~~~317 15 37 7 1S _ _ S _ ~2.70 3 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~

10 2

s5_ 1043 2 I 1 _ 384

t300 0 32

OL- ot,~~~~~~~- SOUTHERN MAHAKALI GANDAK KOSI KARNALI MAHAKALI SOUTHERN GANDAK KARNALI KCSI RIVERS BASIN BASIN BASIN RIVERS BASIN BASIN BASIN P ° (

Fdo,udElank-2911

Sourc- R.port bV 0D H M Sh,.,th. Figure 2: DEPARTMENT OF IRRIGATION, HYDROLOGY AND METEOROLOGY CENTRAL OFFICE ORGANIZATION, 1973

IDtFPUTY DIRECIOH GLNERAI. METEOROILt)(Y &HYDROLOGY I)IVISI()N

Chief Meteorolog,st || Ch'.-f Hyd-l"hylo |

*~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I"* ." .. Sr. Meteorologist S| Hyd-I, Istr Forecasting C iir,irrlrniv

Forecasting Telecommusnicatio,tton Netmork ln.i,riyS w. G iI rIwriSi iSii,, Section Section s &Expan- nn Syuli iiit |i I

SUrve-s Hydrogeoloqy Economics PldR . | |..&il

PLANNINGS&RDESIONDIVIl)

Wiil B-nk 8956 Figure 3: DIRECTORATE OF IRRIGATION, HYDROLOGY AND METEOROLOGY

| DI RECTOR l

PRELIMINARY PROJECT PROJECT IMPLEMENTATION MAINTENANCE HYDROLOGICAL GENERAL ADMINISTRATIO PLANNING AND EVALUATION AND REPAIRS SU1.RVEY

SECTION OFFICER DIVISIONAL ENGINEER HYDROLOGIST NAUBSUBUR SUPERINTENDING ENGINEER SUPERINTENDING ENGINEER ENGINEER OVERSEER KHARIDAR DIVISIONAL ENGINEER OVERSEER TYPIST OVERSEER DRAFTSMAN PROJECT IMPLEMENTATION PEON/CHOWKIDAR TRACER DIVISIONAL ENGINEER ENGINEER OVERSEER SENIOR ACCOUNTANT W.rd ACCOUNTANT PROGRESS REFPORTING lSUB-ACCOUNTANT _ AND EVALUATO |

DIVISIONAL ENGINEER ENGINEER OVERSEER

IRRIGATION PROJECTS| |PROJECT CHIEFSl

World Bank-8955 Figure 4: PROPOSED REORGANIZATION OF PLANNING SECTION, DIHM

PLANNINGi SECTION|

INVESTIGATIONS AGRICULTURE PROGRAM DEVELOPMi&N MEDIUM MiNOR & &S| & & PROJECTS -SURVEYS ECONOMICS IREVIEW LARGE PROJECTS Hydrology Crops & National Pre-feasibility Inventory Aerial crop yields objectives Phasing (country- photography Inputs Resource base Pilot wide Topography Prices Review of opera- projects survey) Geology Repayment ting projects International Farmers Soils capacity Revenues & aspects partici- Meteorology Economic expenditures Post- pation analysis Program analysis construction Multidisci- & preparation development plinary Project review programs approach & surveiilance Priority projects

World Bank-8958 Table 1: MONTHLY MEAN RAINFALL IN NEIAL 6ac)

Average STATION LOCATION Elevation Jan. Feb Mar. Apr. Mav lun. Jh Aug. Sept Oct Nov. Dec Annual (ma)

Dadeldhura Lat 29'18' 1,837 68.0 58.7 70.4 39.3 54.3 170.3 410.2 326.7 107.3 nO.4 8.8 39.0 1,496.4 Long 80 35'

Pusma Camp Lat 28 53' 950 17.7 38.7 44.6 14.9 30.2 158.4 466.6 373.3 215.0 45.2 1.7 5.9 1,412.2 Long 81051,

Sallyan Let 28023' 1,666 39.3 36.3 39.1 15.0 38.3 209.1 266.4 300.6 75.8 72.3 0.4 45.3 1,192.8 Long 82010'

Dailekh Lat 28'51' 1,304 24.2 24.4 36.6 42.1 53.7 212.1 434.4 509.9 178.4 44.9 8.2 10.2 1,540.1 Long 81043'

JQmosom Let 280473 2.800 38.6 34.6 33.3 18.7 4.3 6.7 54.2 41.6 28.6 12.6 2.0 3 0 270.2 Long 83043'

Butwal Lat 27 42' 263 17.4 19.9 14.4 23.8 58.2 450.6 680.2 903.4 279.8 53.2 13.8 5.7 2,520 4

Khudi Bazar Lat 28018' 823 17.3 43.7 42.8 103.8 92.1 519.7 1098.6 815.9 356.3 52.5 26.4 0 3,200.3

Pokhara Lat 28 11' 833 36.2 33.3 47.0 88.9 217.3 622.3 842.9 906.8 507.4 170 4 10.8 14.0 3,497.3 Long 84000, 0 Gorkhe Lat 28000' 1,061 33.8 6.0 24.6 53.5 113.8 269.9 439.9 484 1 172.9 56.1 24.8 9.4 1,638.9 Long 84037'

Timure Let 28517' 1,676 27.4 30.2 56.7 28.7 32.2 125.8 260.4 263.5 138.9 41 6 4.0 5.9 1,015.3 iLong 8523'

Kakani Lat 27048' 2,121 16.5 23.5 49.5 53.7 144.8 350.4 638 6 935.2 517 5 83.8 15.2 1 8 2,830 0 Long 85015,

Chautara Lat 27 47' 1,515 17.3 26.6 30.0 100.7 60.6 364.5 489.6 550.6 276.8 65 0 15 7 3.1 2,133.6 Long 850431

Kathmandu Let 27042' 1,288 22.6 23.1 27.3 60.1 72.8 220.7 332.6 342.4 119.2 26.0 13 0 2.1 1,301.9 Long 85020'

Okhaldunga Let 270198 2,121 4.7 7.0 27.3 83.9 129.4 374.8 552.6 433.1 214.0 99.7 13 2 0 7 1.907.2 Long 86031'

Ehojpur Let 27011' 1,667 22.3 15.9 22.4 54.1 120.0 217.7 266.4 246.7 174.0 37.8 13.0 2.0 1,192 2 Long 87003'

Chainpur Let 27 17' 1,329 18.5 14.1 20.5 67.6 156.7 251.9 301.9 302.7 177.7 46.8 32.4 1 3 1,392 1 Long 870201

Wallung-Chung Lat 27041' 3,048 12.5 30.0 107.6 61.2 122.1 266.1 294.4 369.8 276.7 59.8 37.8 6.7 1,644 5 Cola Long 87 47'

Taplethok Let 27429' 1,372 31.7 25.1 65.6 131.0 167.7 422.2 548.6 547.5 409.4 72.1 19.8 7.4 2,488.2 Long 87 47'

Taplejung Let 27 21' 1,768 25.3 19.8 56.5 105 3 214.9 409.5 411.5 442.3 244.8 55.3 23 7 4.1 2,013 0 t Long 860401

Barakshetra Let 26521' 146 26.7 11.2 16.8 82.0 138.0 335.2 786.9 632.8 509.5 94.0 14.5 3.3 2,650 9 Long 87010,

Source: Climatological Records of Nepal (1966) Table 2: IDNTHLYRU1NOFF OF NEPALESE RIVERS (in m3/sec)

A. Runoff nf the M.jor Rivers (m (eec) Drainage kr" No~~~~~~~~~~~~~~~~~~~~~~~nthIy River Station -LISAU Jan. Feb. ?Ir. Apr. May Jun, Jul. Aug. Spt. Oct. Nov. Dec. Aveage Total

1 Krnmll Cbisapani 42,890 356.0 320.0 331.0 410.0 569.0 1,205.0 2,825.0 4,403.0 2,843.0 1,030.0 573.0 416.0 1,273.0 15,281.0

2 Babai Bargadaha 3,000 15.3 13.7 11.8 8.9 7.2 17.1 191.0 104.0 148.0 50.6 23.3 19.6 50.9 610.5

3 Bangaga hs-gachia 347 .9 .6 1.0 .5 .3 21.9 29.5 76.2 63.2 2.1 1.1 .9 16.5 198.2

4 Western Bapti Jaikundi 5,150 27.9 21.3 19.2 13.0 8.9 56.1 206.0 307.0 228.0 94.0 58.1 28.5 89.0 1,068.0

5 Tinanu lhola Butmal 554 4.5 2.9 2.4 2.0 2.4 6.3 48.6 131.0 34.5 18.2 8.2 5.5 22.2 266.5

6 astern Hapti 1,557 23.1 19.2 16.6 15.2 15.3 40.4 205.0 377.0 264.0 88.1 45.5 28.6 94.8 1,138.0

7 Gadaki Darayangarh 31,100 347.o 319.0 284.0 400.0 595.0 1,424.0 3,428.0 4,750.0 3,294.0 1,497.0 935.0 635.0 1,518.0 18,218.o

8 BagmatU Eaaiyo 2,720 15.1 11.6 14.3 17.8 19.8 138.0 560.0 559.0 328.0 75.6 40.5 20.4 150.0 1,800.1

9 Sept Kosi Sank Babi 59,400 408.0 358.0 363.0 123.0 675.0 1,937.0 3,428.0 4,588.0 3,300.0 1,695.0 869.0 556.o 1,549.9 .18,600.o

10 Farka Mai Cbepti 1,150 31.8 8.8 7.1 6.5 10.3 27.6 146.0 158.0 106.0 36.0 21.9 14.3 46.2 554.3 Total 147,868 1,299.6 1,075.1 1.050.4 1,296.9 1,901.2 4,873.4 11,287.1 15,453.2 10,608.7 4,586.6 2,575.6 1,724.8 4,810.5 57,734.6

B. Runoff of the Eaetern Rapti Valley

Drainage Ar~e Name of R. Location Jan. Feb. Mar. r. N Jun. Jl. An. Sep. Ot. lov. Dec. Annual

Rapti R. Lat 27028'00" 579 7.687 6.596 6.057 5.244 5.736 15.25 73-93 109.9 75.61 29.61 14.56 8.926 30.14 Long 84°53'10"

MAnhari Lat 270J3'00" 427 5.277 4.192 3.612 3.647 3.341 10.01 40.51 71.10 42.16 18.05 10.42 7.100 18.41 Xo1la Long 84 48110"

Lothar R. Lat 27og5'40,, 169 2.018 1.670 1.152 1.018 1.138 4.741 25.42 39.35 28.32 8.940 4.127 2.532 10.13 Long 84 43'00'

MIagari Lat 27037'20" 118 2.917 2.150 1.618 1.373 1.286 1.762 8.891 53.21 26.24 6.642 4.540 3.072 9.546 Khola Long 8403,000.

Kair Let 27ro'40" 79.7 1.072 1.170 1.234 1.064 1.462 3.466 12.55 20.93 16.08 6.883 3.420 1.469 5.933 Mhola Lang 84 f3'40" Borhi tat 27o35,40o 184 4.076 3.412 2.884 2.832 2.328 5.191 43.85 82.28 76.03 17.94 8.384 5.530 21.3 &Apti Long 84030120"

Total 1,557 23.05 19.19 16.56 15.18 15.29 40.42 205.2 376.8 264.4 88.07 45.45 28.63 95.46

Source: Surface Water Records of Nepal, DIHM, 1965, 66, 67, 68 and 69; average station records 6 to 9. ANx 6 Page 46

Table 3 : MAJOR LEVEDA AREAS IN INNER TERAI AND HILL DISTRICTS

NAME MAJOR RIVERS DISTRICTS APPROX. ELEVATION AREA (ft.) (F000 ac) ('000 ha)

A. INNE TERAI

1. Trijuga Watershed Trijuga; Kali Khola Udayapur 500 53.15 21.52 2. Kamla Watershed Kamla Sindhuli, Udayapur 550 - 1,500 15.19 6.15 3. Marin Khola Watershed Marin Khola Makwanpur,Sindhuli 1,000 5.36 2.17 4. Bagnati Watershed Bagmati Sindhuli, Makwanpur 1,000 15.55 6.30 5. Makwanpur Valleys Kurra Khola; Bake Makwanpur 900 - 1,500 11.12 4.50 Khola 6. Chitwan Valley Naryana; E. Rapti Chitwan, Makwanpur 500 - 1,500 161.39 65.34 7. W. Rapti Watershed W. Rapti Dang Deokhuri 750 - 1,500 26.20 10.61 8. Dang Valley Babai, Hapur, Janar, Dang Deokhuri 3,000 121. 42.87 Kala Kholas Sub-total 1411.15 166.4

S. HILLS

1. Dhulikel Valley Punyamati; Jhiku Khola Kavre Palanchok 4,000 3.91 1.58 2. Kathmandu Valley Bagmati, Bangmati, Kathmandu, Bhaktapur, Bishumati Lalitpur 4,500 61.38 24.85 3. Nuwakot Valleys Trisuli; Kalpha, Nuwakot 2,000 - 4,500 9.89 4.00 Mahesh, Tadi and Likhu Kholas 4. Dhading Valleys Burhi Gandaki; Ankho Dhading 1,700 - 2,700 5.16 2.09 and Thaple Kholas 5. Marsyandi-Lower Marsyandi; Trisuli, Gorkha, Tanahu 1,000 - 3,000 14.85 6.01 Trisuli Watersheds Chepe Khola 6. Lower Kali Gandaki Kali Gandaki Syanja, Tanahu, palpa 1,000 20.81 8.43 Watershed 7. Pokhara & Adjacent Madi, Bar, Vijayapur P&khara, Lamjung 1,000 - 3,000 33.5B 13.60 Valleys & Hapan Kholas 8. 3inai Khola Water- Binai Khola Palpa 800 9.89 4.00 shed 9. Tansing Valleys Choher, Maghre, Suka- Palpa 1,700 - 3,500 5.46 2.21 ger & Jhumsa Kholas 10. Upper Kali Ganddki Kali Gandaki Gulmi, Bajlung, Parb&t 2,500 - 4,000 7.21 2.92 Syanja 11. Baglung-Mayangdi Thulo, Dude and May- Bagluzg, Myagdi 3,200 - 4,000 6.39 2.59 Valleys angdi Kholas 12. Barigad Watershed Barigad Gulmi 3,500 - 4,500 11.74 4.75 13. Piuthan Valleys Mari and Jhimruk Kholas Piuthan, Rolpa 2,000 - 3,500 5.97 ?.142 14. Sallyan Valleys Nabung, Sibang, Puma, Sallyan 3,500 - 5,000 7.52 3.04 Thulogar & Lawan Kholas 15. Jajarkot Valleys Bheri Jajarkot 2,500 3.30 1.34 16. Surkhet Valleys Bheri; Nikas, Jhupra & Surkhet 1,500 - 2,500 30.31 12.27 Chinchu Kholas 17. Babai Nadi Water- Babai Nadi; Ambasa Nala Surkhet 1,000 - 2,000 10.09 4.09 shed 18. Dailekh Valleys Sot, Paduka & Nabhi Dailekh 3,000 - 4,000 3.71 1.50 Kholas 19. Bheri-Karnali Bheri; Karnali; Ghuttu Surkhet 1,500 - 2,500 24.62 9i97 Watershed and Khokli Kholas 20. Seti Watershed Seti; Sunapari Achaam, Doti 2,500 - 4,000 4.53 1.83 21. Spring Watershed Spring Dandeldhura 5,000 1.24 0.51

Sub-total 281.56 114.00

Total 692.71D 280.-46

_ Land up to 10% gradient.

Source: Mission in collaboration with DINH, October 1973. ANNEX 6 pa7eTT

Table AREAS IRRIGATED BY 1970

Net Area Project (Dis+rict. riRted (ha) 1. Irrigated area prior to 1st Five-Year Plan (1956-1961)

(a) Chandra Canal (Saptari) 13,000 (b) Juddka Canal (Rauthat) 810 (c) Jagdish Pur Reservoir (Taulihawa) 400 (d) Pardi Dam (Pokhara) 490 14,700 2. Achievement during 1st Five-Year Plan (1956-1961)

(a) Tika Bhairab (Lalitpur) 1,6zo (b) Mahadev Khola (Bhaktapur) 940 (c) Jhaj (Rauthat) 4,300 (d) Sirsis, Dudhaura (Bara) 1,350 (e) Tilawe (Parsa) 4,300 (f) Phewatal (Kaski) 320 (g) Vijayapur (Kaski) 1,890 (h) Gokarna (Kathmandu) 320 (i) Other small schemes 2,160 17,200 3. Achievement during 2nd Three-Year Plan '1962-1965)

(a) Tinao (Rupandehi) 14,100 (b) Hardinath (Dhanusha) 1,940 (c) Dunduwa (Banke) 1,940 (d) Manuemara (Rauthat) 1,940 (e) Kotkhu (Lalitpur) 810 (f) Godavari (Lalitpur) 810 (g) Pashupati (Kathmandu) 3L0 (h) Bosan (Kathmandu) 620 (i) Renewal of old canals 4,000 7P,500 4. Achievement during 3rd Five-Year Plan (1965-1970)

(a) Khageri (Chitwan) 6,000 (b) Tokha (Kathmandu) 390- (c) Sangepateni (Tanahu) 500 (d) Sisaghat (Lanjung) 350 (e) Dedhgaontar 350 (f) Minor irrigation projects 36 820

Total 102,710 ha Farmers' Irrigation 155,400 hal/ 1970 Total 258,110 ha

1/ Source: Palace Task Force for Agriculture Scurc'e: DI", ANNEX 6 Page 48 Table 5 : AREAS IRRIGATED BY 1973 AND 1974 AND AREAS BEING DEVELOPED FOR IRRIGATION

Net Area for Development (ha) Target for Fourth Five-Year Plan (1970-1975) a Sharda (Mahakali) 25,000 (b) Chitwan (Chitwan) 12,000 (c) Banganga (Kapilbastu) 8,000 (d) Tubewell (Sagarmatha, Janakpur, Narayani and Lumbini) 15,000 (e) Minor Irrigation 21,932 (f) Patharaiya (Kailali) 2,000 (g) Rapti (Banke) 3,000 (h) Chapakot (Syangja) 2,000 (i) Churajaharitar (Rukum) 250 (j) Chatra Field Canal (Morang and Sunsari) 56,500 (k) Gandak East Canal (Bara, Parsa and Rauthat) 28,200 (1) Gandak West Canal (Nawalparasi) 9,700 183,632

Net Area BeinglNet Area Irrigated Developed |By 1973 By June 1974 ------(hectares) ------Revised Area being Developed 1/ (1972-1974) 248,014- (a) Kankai (Jhapa)(Phase 1) 5,000 (b) Chatra (Morang and Sunsari) 67,000 28,000 39,000 (c) Kosi W4est Canal (Incl. renovation of Chanclra Canal of 13,000lha - oaptari) 9,000 (new) (d) Kamla I stage (Dhanusha, Siraha) 22,600 (e) Bagmati I stage (Sarlahi) 26,000 (f) Chitwan (Chitwan) 12,000 (g) Gandak East Canal Intensive Irriga-tion (Bara, Parsa) 32,700 (h) Chapakot Tar (Syangja) 2,000 2,000 (i) Nepal Gandak West Canal (Nawalparasi Rupandehi) 29,000 (j) Banganga (Kapilvastu) 6,000 (k) Chaurjaharitar (,Rukwn) 250 250 (1) Patharaiya (Kailali) 2,000 2,000 (m) Sharda (Mahakali) 25,000 (n) Minor Irrigation Sche-mes (Various Districts) 5,924 2,180 3,744 (o) Tubewells (Various Districts) 3 540 2,540 24B,o14 30,180 49,5345 Total irrigated area by 1973: 288,290 1/ Total irrigated area by 1974: 337,8241./ Tinao and Dundwa are both non-functional comprising 14,100 + 1,940 = 16,040 (ha) The 1973 irrigated area is therefore 272,250 The 1974 irrigated area is therefore 321,784 Carryver Net Area be.ng developed 168,300 2/ by .197Th: ANNEX 6

heet of 3

Table 6: HMG MINOR IRRIGATION PROJECTS COMPLETMD BY 1973

District/ Command Name of Project Anchat Area TA(Acres)

Sukati Khola Kailali 700 Kailali Khola t 1,400 Gurgi Bandh if 11,500 Khareiti Pumping Set Seti 50 Pahalwan Pur Pumping Set "i 50 Golargapkka and Tilaka Pumping Set it50 Doti Khola Dadeldhura h00 Kukare Gande Darchola 350 Aagare Gande 9aitadi 500 Rauteli Khola Kanchanpur 1,800 Pureinatal Banke 6oo Guruwatal It hoo Baitahani Lift Irrigation " 200 Manpura Tapara Bardia 100 Ramrewapur Kul.o " 1,000 Chapara Kulo 200 Gularia Kulo " 200 Badheiya Tal " 2,000 Chargedah Dang 150 Bhotedah VT 100 Chand Pur "o00 Bela 500 Raksechaur "10 Malware KulJo 100 Jalora, Bharat Pur Pumping Irrigation Chitwan 400 Chamei Khola "500 Grhate Khola Salyan 50 Sharda Khola " 100 Hageri Khola Rolpa 100 Kanchani Bandh Kapilvastu 500 Bhutaha " 4,o00 Sagar Tal 100 Dharmapania Tal " 50 Ladthahawa Bandh 100 Marthi 2,000 Jamuwar 1,500 Jagdish Pur 2,4oo Tel Nala Escape Rupandahi 500 Bahghela Bandh 1,000 Muzauli Boring it 150 Potaha Reservoir Nawaliarasi 50 Adheri Ilam 200 Lohendra Morang 300 Subtotal 7,-0 ANNEX 6 Page -50 Sheet 2 of 3

District/ Command Name of Project Anchat Area (Acres) 3d,050 Darlokana Morang 1,100 Chandhela Barchna "I 1,000 Banjhagara Tunnel Project it 1,200 Sigia Datta Kachcha Flood Control and Irriga- tion Project and Chandhela Pararia, Garura Kachcha Dam Project It 500 Singaue Khola Bhojpur 250 Gagan Irrigation Siraha 1,150 Rampur and Rajokhari Pokari Remodelling Project " 200 Bahnram Khola and Launiadah 1,500 Chepetar Gorkha 200 Gaindakot Tanahu 50 Bhadhesi Lamjung 250 Sirsia Canal of Jhim River Sarlahi 12,000 Halkhori Branch Canal Mahottari 1,000 Tilgarah Canal. 100 Makugya Canal Rautahat 2,500 Dumaria Nahar " 1,000 Jalia Bridge cum Regulator 500 Chhatanna Branch Canal 500 Kharaiadaha Regulator and Spillway " 800 Bangari River Bara 300 Thalhi River " 1,200 Pusaha River " 6,000 Tinwa " 5,000 Gadwal " 1,600 Ernati River " 320 Chamari and Oria Canal Parsa 1,200 Pathleya Minor Irrigation " 200 Gangal Distributary " 250 Aryanatal Irrigation Chitwan 500 Upper Kerungo "I 200 Lower Kerungo " 75 Pungi Khola Irrigation " 150 Adhari Khola Nuwakot 80 Dhumgedhara Raj Kulo Bhatkapur 1,000 Lamsetar Kulo " 150 Manohra Kulo " 100 Kutudhal Raj Kulo "I 1,000 Chakkhu Khola Kulo " 500 Katunje Kulo " 500 Ghatte Kulo it 500 Pharping Dhungedhara Raj Kulo Kathmandu 150 Balaju Raj Kulo it 125 Indraini Phanchayta Kulo "00 oubtotal 85,450 ANNEX 6 Page 51 Sheet 3 of 3

District/ Commancl Name of Project Anchat Area (Acres)

Tahachal Raj Kulo Kathmandu 300 Layaku Kulo 25° Pharping Power House "30 Kamdu Kulo Lalitpur 195 Lele Kulo U 62 Ekudha Kulo it 300 Aphal Kulo it 625 Sanagaon Kulo " 1,625 !'Iakkhu Kulo " 125 Kammeswar Kulo 187 Lubhu Kulo 1 5 'Potal 90,279 A if'm or 16, 111 lI.>.t -

ANNEX 6 Appendix 1 Page 1

AN ASSESSMENT OF METEOROLOGICAL AND HYDROLOGICAL INVESTIGATIONS I/

Meteorology

1. There are about 200 rainfall stations in the country of which 150 were established by the Indian Meteorological Department in the late forties and early fifties. The records for these Indian stations run from 1955, but the data area are sent directly to New Delhi and are only made available to Nepal after a delay of about two years.

2. The Nepal Meteorological Service was established in 1965 and since then about 170 rainfall stations have been established. Many of these are adjacent to the Indian stations most of which have been duplicated by now.

3. Six synoptic weather stations have been established as well as complete aeronautical weather stations at the airfields at Kathmandu and Biratnagar. Other stations record temperature, sunshine hours, evaporation, soil temperatures and wind speed and direction.

4. Data are published in "The Climatological Records of Nepal", issued annually by the Department of Hydrology and Meteorology of the Ministry of Water and Power. The 1970 records were issued in 1973. Monthly isohytal maps for the whole country have been prepared.

5. While the meteorological records span comparatively short periods of time, the main centers of agricultural development are included and the coverage is increasing. Technical assistance is being provided by the World Meteorological Organization (WMO) and should be increased as proposed by the senior WM1O advisor.

6. The main weaknesses of the Meteorological Service in Nepal are as follows:

(a) The service has not enough qualified, trained and experienced meteorological and telecommunication staff. Training of meteorological per- sonnel in different fields of specialization is urgently needed.

(b) The network of climatological, agrometeorological and synoptic stations needs further expansion specially in the western and hill areas. The supervision of the network has to be improved and consolidated. A radiosonde station for measurement of temperature, humidity and wind in the upper air should be established near Kathmandu Airport.

I/ An assessment of Soil Investigations is given in Annex 1. ANNEX 6 Appendix 1 Page 2

(c) There are no workshop facilities and no instrument specialists in the Meteorological Service.

(d) The increasing amount of climatological data needs better facilities for more efficient data processing and storage.

(e) The Telecommunication Section has to be strengthened considerably to improve the reliability of collection and transmission of meteorological data. The existing facilities for repair of telecommunication equipment should be improved.

(f) The present organizational structure for the Meteorological Service as a small unit within the Department of Irrigation, Hydrology and Meteorology makes the administration of the service extremely unwieldy. As the only meteorological authority in the country, as the meteorological agency to serve all sectors of development and economic activities in Nepal and as the meteorological organization to represent Nepal internationally, the Meteorological Service has to be given a more independent administrative and organizational status.

Surface Water Hydrology

7. The network of river gauging stations was established between 1961 and 1968 with the assistance of the USGS. About 100 stations were installed, some 20 of them with automatic water level recorders. The USGS support pro- gram was suspended in 1968 and activities have since been confined to data collection. The Hydrological Section of DIHM is responsible for the operation and maintenance of the gauging stations, the collection and processing of data and publishing the results. However, the Director of the Section and one other engineer are the only trained hydrologists and the quantity and quality of output are severely affected by the lack of trained staff.

8. The river flow data are published in "Surface Water Records of Nepal" issued by the Ministry of Water and Power. The first issue dated February 1967 is "The Compilation of Surface Water Records of Nepal through December 31, 1965," and was prepared in cooperation with USAID. Supplement No. 1, is for 1966; Supplement No. 2 for 1967 and Supplement No. 3 for 1968. In total, six Supplements have now been published for 1966-71. The records cover stations on the main stems and principal tributaries of the basins of the Karnali River, West Rapti River, Harayani River, Bagmati River, Sapti Kosi and Kankai Mai. Also included are some discharge measurements made at partial- record gauging stations in these basins and discharge measurements made at miscellaneous sites during the low flow season.

9. It is understood that the accuracy of the records has declined since 1968, and that no analyses have yet been made of the relationship between the discharges at major gauging stations and the discharges of lower order tribu- taries. Rainfull-river runoff correlation studies are also not being made, and the detailed water resources picture remains therefore unclear. ANNEX 6 Appendix 1 Page 3

10. If the land resources of Nepal are to be exploited to the full, the surface water resources must be assessed with accuracy, particularly for the months just prior to and following the monsoon. There is an urgent need for technical assistance, scientific equipment, and additional training in river hydrology.

Groundwater Hydrology -/

11. The subsurface conditions of large areas of the Central and Eastern Terai have been investigated by DIHM/FAO/Nippon Koei (NK) and inten- sive groundwater investigations are currently underway in the Western Terai by DIHM/USGS/USAID 2/. The latter investigation includes an important train- ing on the component and establishment of a permanent Groundwater Section in DIEM, staffed with Nepalese personnel trained on the project and overseas, to carry out continuing groundwater investigations throughout Nepal and hydrologic monitoring required for groundwater development and management.

12. The areas that have been or are being investigated include 3/:

(a) in the Central and Eastern Zones, the Terai areas of the Narayani and Janakpur Zones and part of the Sagarmatha Zone. No investigation work has been done or is currently planned for the Terai areas of the Koshi and Mechi Zones;

1/ HMG/USGS/USAID, Evaluation of Groundwater Investigation in the Western Terai, Nepal, mimeographed report, Kathmandu, 10 p., 1973. 2/ Both investigations are of good quality and have yielded important results. 3/ Much of the available information and data are with the HMG Departments and their consultants. Nippon Koei (UK) Co., Ltd., with FAO as the Executing Agency on behalf of UNDP, has submitted the following reports on groundwater (a) Report on the General Reconnaissance Groundwater Survey, March 1968 (not available in Washington); (b) Report on Geophysical Investigations for Sun Kosi Terai Project, December 1969 (not available in Washington); (c) Feasibility Report on a Combined Surface and Groundwater Project in the Birganj Area with Annexes, August 1971; (d) Report on the Groundwater Investigation in the Sun Kosi Terai Project, October, 1971 (not available in Washington). DIHM/USGS/USAID have prepared an interim report, "Groundwater Resources Investigations in Lumbini Zone, Western Terai, Nepal", 200 pages, by G. C. Tippetts and W. Ogilbee of USGS and C.K. Sharma and Staff of DIHM (Nepal), 1973. ANNEX 6 Appendix 1 Page 4

(b) in the Western and Far Western Zones, the Terai areas of the Lumbini, Rapti and Beri Zones. Field investigations in the Lumbini and Rapti Zones have largely been completed and investigations are underway in the Terai areas of the Seti and Mahakali Zones;

(c) the groundwater potentials of Kathmandu Valley are being evaluated by HMG/UNDP/Binnie & Partners on behalf of the Water Supply Department of the Ministry of Water and Power.

DIHM/USGS intend to investigate the groundwater potentials of the Dang and Chitwan Valleys upon completion of their work in the Western Terai.

13. The present DIHM/USAID Groundwater Investigation Project in the Western Terai is based on recommendations contained in a report by Messrs. Swarzenski and Babcock. 1/ They proposed a phased program of groundwater investigations first in the Bhairawa area (Lumbini Zone), and then in the Nepalganj and Dhanghari areas of the Western Terai. The basic elements of their proposal included: (a) exploratory drilling or about 180 test holes together with appropriate hydrologic analysis and interpretation of the data obtained from drilling; (b) construction of about 32 complete tube- wells to determine the hydraulic characteristics of the alluvial aquifers; (c) assignment of two groundwater hydrologists from the U.S. Geological Survey (USGS) and one well-drilling specialist from USAID, as advisors to the project; (d) training of a Nepalese staff of geologists, engineers, and well-drilling personnel in the field and office fundamentals of groundwater investigations and in the maintenance of drilling equipment; and (e) most important, estab- lishment of a permanent Groundwater Section in DTHM staffed with Nepalese personnel trained on the project, to carry out continuing groundwater inves- tigations throughout Nepal and hydrologic monitoring required for ground water development and management.

14. The investigation program covers four major areas:

(a) The Lumbini Terai comprising 4,000 sq kilometers of gently sloping cultivated land and dry jungle lying between the Churia Hills on the North and the Indian border on the South;

(b) The Terai of the Bheri and Rapti Zones around Nepalganj;

(c) The Terai of the Mahakali and Seti Zones; and

(d) The Dang and Chitwan Valleys.

1/ Swarzenski, W.V. and Babcock, H.M., Groundwater Investigations Program for the Western Terai: U.S. Geological Survey Open-File Report, 57 pages, 12 figures, June 1968. ANNEX 6 Appendix 1 Page 5

15. A report on the Lumbini Zone has been completed. 1/ Initial field studies in the area around Nepalganj have been completed, and field wfork in the Mahakali and Seti Terai will be taken up this year (1973/74). A water quality laboratory was established in DIHM at Kathmandu, as part of project activities, in the spring of 1971. Since project initiation, 253 water sam- ples have been collected in the field and analyzed in this laboratory.

16. During operations in the Lumbini Zone drilling was carried out on a grid with centers approximately 6 miles apart on east-west lines and 3 to 4 miles apart on north-south lines.

17. As of the end of the 1971-72 field season all exploratory drilling for a total of 41,715 feet had been completed in the Lumbini Zone. In several activity categories, i.e., the drilling of test holes and test wells, actual accomplishments exceeded project goals by as much as 20 to 25 percent. The technical phase of the Groundwater Investigations Project, thus far in its history, has met and in some cases exceeded project goals.

18. The principal objective of the USAID/DIHM Groundwater Investigations Project has been the establishment of a permanent Groundwater Section in DIHM, staffed with Nepalese personnel trained on the project, to carry out continu- ing groundwater investigations throughout Nepal and the hydrologic monitoring required for a national program of groundwater development and management. Following completion of the current investigations in the Western Terai in the next one and one-half years, there will still be a need to assess and manage the groundwater resources of the Eastern Terai (except certain areas around Birganj and Janakpur already investigated by FAO/NK), the east and west Rapti Valleys, and Dang, Chitwan, Pokhara and Surkhet Valleys -- indeed almost any accessible area in Nepal. Given these facts and the clear progress made to date towards the establishment of a professionally competent ground- water investigations organization, the mission agrees with DIHM that a perma- nent Groundwater Section should be formally established and that the USGS should be requested to continue its support for several years.

19. Although water utilization is outside the scope of the current USAID/DIHM project, it is of concern to Nepal as it moves into the next stage of development, and as such is related to the present investigation program.

1/ USGS/DIHM, Ground Water Resources Investigations in Lumbini Zone, Western Terai, Nepal, 200 pages, by G.C. Tibbitts and W. Ogilbee of USGS and C.K. Sharma and staff of DIHM (Nepal). ANNEX 6 Appendix 1 Page 6

20. There is a need for an extensive hydrologic monitoring and research program with external assistance. This is necessary to ensure the most economic and beneficial development of Nepal's most important basic resource -- water. Solutions must be found to the problems arising from water develop- ment. Such questions as: What changes will occur in the soil and in the quality of surface and ground waters as a result of irrigation? How much water can be withdrawn from a particular groundwater basin without depleting the supply? Will land subsidence occur in a particular area as a result of developing artesian aquifers? What is the useful life of a production well? Would surface water or groundwater development or a combination of both be most beneficial in a given area? What types of crops are best suited for the quality of water available for irrigation? There are only a few samples of the many questions which must be answered as water development proceeds.

Requirements for Technical Assistance

21. Continued technical assistance will be required for several years for soils, meteorological and surface- and ground-water hydrological investi- gations. Additional scientific equipment and additional training are also needed. Institutions in Nepal are being created by aid donor agencies by means of rapid and strong inputs. These inputs are then withdrawn just as rapidly, leaving the newly created agency floundering, e.g. the surface water hydrology section. The problems created by this pattern are especially criti- cal in land and water resources agencies, where technical applications are complex and sophisticated, and where two or three years of inputs are usually insufficient to accomplish the goals which HMG and the donor agency have in mind. Sustained efforts over a longer period are required. The USGS should be requested to resume its technical support in surface water hydrology and to continue its assistance in groundwater hydrology well beyond the present contract period ending mid-1975. Assistance in meteorology, should be expand- ed as proposed by the senior WMO advisor. Support in soil surveys should be expanded greatly by FAO, so that current land resources evaluations can be completed and land soil surveys for proposed irrigation projects can be conducted by 1MG staff. Proposals for continued technical assistance are available with HMG and the aid donors for all programs except for soil surveys. Two programs should be prepared for surveying the soil and land resources as indicated in para 4 of this note and implemented at an early date. ANNEX 6 Appendix 2 Page 1

SELECTED PROJECTS IN THE CURRENT IRRIGATION PROGRAM

The more important projects listed in Tables 3 and 4 of this Annex are discussed below:

1. The Birganj project is being financed by IDA 1/. The project will complete the construction of a canal distributary system to irrigate 28,700 ha with water supplied from a barrage on the Gandak River on the India-Nepal border and a main canal constructed by the Government of India (GOI), and a tubewell irrigation scheme to irrigate a net area of 2,700 ha in an adjoining area. It includes drainage, on-farm development, service roads, agricultural extension, research and cooperative services to provide inputs and credits to farmers providing an integrated approach to the agricul- tural development of the project area. In addition it will also provide for the preparation of feasibility studies for a small pumping scheme and a surface irrigation project. The project will be executed by the Narayani Zone Irrigation Development Board (NZIBD) recently established as an autono- mous government agency, having jurisdiction over an area encompassing five administrative districts. The staff of NZIBD will be trained by a consultant team in the planning, design, construction, operation, maintenance and management of both the surface and groundwater irrigation systems as well as in agricultural development. Since NZIDB is a new agency, drawing its key staff from several ministries, its success in implementing and managing the project depends on strong support from HMGN as well as on the assistance and training of NZIDB staff by the consultants.

2. The Kankai Project in the extreme east of the Terai is reported to have a gross commanded area of 51,000 ha. A feasibility study for the ADB was completed by Nippon Koei, Ltd. In 1971 H.M.G. has signed a loan agreement with the Asian Development Bank for Stage I of the project (5,000 ha net) which will consist of diversion from the Kankai river; irrigation and drainage networks; demonstration of irrigation practices and irrigated agriculture under a project authority for management and 0 & M assisted by consultants. Pre-qualification tenders have already been invited. This project provides for year-round irrigation.

3. T Citajroect in the Chitwan valley of the Inner Terai of 12,000 ha net will also be developed by HMG with an ADB loan. The loan conditions for this project are similar to those for the Kankai Project.

1/ IDA, Report No. PA 146a, March 1973. ANNEX 6 Appendix 2 Page 2

4. The Chatra Canal Project (96,000 ha gross and 67,000 ha net) lies on the left bank of the Sapt Kosi on the Nepal/India border. It consists of a head regulator, a main canal and distributaries. This is an Indian-aided project for which the G.O.I. has undertaken to finance and construct all works down to 5 cusec turnouts. Expenditures to date on the main-works is reported to be Rs 18 crores (Nepal currency), about US$18 million. GOI has allocated Rs 3.5 crores in this financial year for this project. The Chatra canal is designed for 1,600 cusecs and 1973 - diversions have been 900 cusecs. The offtake is some 10 miles to the north of the existing barr- age near the Indo-Nepal border. The headworks which must include silt ejec- tors, have not yet been completed and a dredger is maintaining the rover channel at the diversion point. HMG has currently budgeted Rs 7.5 million for the minor and field channels.

5. The main canal immediately downstream of the offtake is 90 feet deep and there are still some seepage problems to be solved. Other stretches of the main canal are also subject to seepage hazards bank failures. Although completed many of the main canal structures require extensive repairs to make them to operational standard.

6. It is clear that significant financial and technical assistance will be required to make the project fully functional when the works are completed to GOI standards. This large project will be a logical choice for interna- tional assistance for a project to rehabilitate some of the major works, to provide drainage, farm roads, other rural infrastructure, farm credits, on- farm development, agricultural extension etc.

7. The Mahakali (Sharda) project in the Terai of the westernmost Mahakali Zone is another project to which HMG is committed. There exists a 53-year old Indo-Nepal agreement which promises Nepal 450 to 1,000 cusecs for paddy irri- gation -- the actual volume to depend on water availability. However, Nepal also needs an agreement as to the amount available in the dry season to enable multiple cropping.

8. The West Kosi Canal Project, totalling 22,000 ha (net), includes the 50-year old Chandra canal project of 13,000 ha. In the latter, yields were about 2 tons of paddy per ha before irrigation; upon completion of the project the irrigated crop yields were 3 tons/ha for 10 years. Since then yields have declined rapidly and are now only 0.5 tons/ha while in adjacent non-irrigated areas yields have remained 2 tons/ha to this date. (NK, August 1970 Page 26). Soil rehabilitation will be difficult and costly, and requires technical assistance.

9. The Bagmati and Kamla projects belong to the category or projects requiring surface storage for irrigation, hydropower and flood control. These multipurpose projects are discussed in Chapter D, section "Available Planning Studies". ANNEX 6 Appendix 3 Page 1

ASSESSMENT OF AVAILABLE PLANNING STUDIES

I. Pre-feasibility studies for irrigation development were carried out for an area of 540,000 ha in the Central and Eastern Terai by FAO/Nippon Kloei. A number of major projects for both surface and ground water were identified as technically feasible including the Kamla and Bagmati irrigation projects. A final report was published by FAO/NK 1/ in 1972 in which eight projects with a net irrigable area of 310,000 ha were identified for part of che Central and Eastern Terai including a first evaluation of their relative 'priorities.

2. A perspective plan for irrigation development 2/ for the whole country was published in 1970 by DIHM with the assistance of NK. The Elec- tricity Department of the Ministry of Water and Power published a perspective plan for power development 3/ in August 1970 with the assistance of NK. Large- scale irrigation projects can be undertaken in the vast tracts of the Terai plain.

3. For the Terai FAO/NK and HMG/NK have considered tubewells only for areas which are difficult to irrigate by canal systems due to topographic or surface water supply limitations. In addition, the introduction of well irri- gation in these areas is deferred to the years 1990 and beyond in these reports. The advantages of wells, i.e., year round water supply, quick construction, quick payoff and early farmers' training in perennial irrigation have not been considered in developing the irrigation program. The use of small-capacity low-lift pumps has also been ignored. The reports referred to above contain useful information, data and development principles. The irrigation reports emphasize correctly year-round irrigation, on-farm development, need for detailed distribution systems for and within 30 to 40 hectare blocks, agricul- tural credits, inputs and extension, establishment of pilot projects and expe- rimental farms, etc. Shortcomings are:

1. Lack of proposals for stimulating private initiatives and exclusive emphasis on government actions.

2. Emphasis on large-scale canal and surface storage projects. Twelve projects are proposed by HMG/NK for an area of more than one million hectares in the Terai and the Inner

1/ FAO!Nippon Koei Co., Ltd. Final Report on the Development of Irrigation in the Central and Eastern Terai Plain, Nepal, 1972. 2/ 1HMG/Nippon Koei Co., Ltd., Master Plan of Irrigation Development in Nepal, August 1970. 3/ HMG/Nippon Koei Co., Ltd., Master Plan for Power Development and Supply, May 1970. ANNEX 6 Appendix 3 Page 2

Terai (the Dang and Chitwan Valleys). Irrigation develop- ment is proposed on a block-by-block basis for this one- million hectare area and minor projects for the Hill Valleys and tars. Phasing of implementation is proposed for the very large units but the program lacks flexibility, especially in the initial phase of irrigation development.

3. Deforestation is implied but is not accounted for in either project phasing or the economic analysis. Some irrigation schemes include extensive areas requiring deforestation; e.g., the Mahakali project has an existing cultivated area of 10,000 ha and the proposed commanded area is 55,000 ha, for the Chitwan project the figures are 20,000 and 24,000 ha, etc. 1/

4. Use of groundwater is limited to areas where surface water alternatives are impossible or difficult. Very costly tubewells are proposed which are to be built, owned and operated by HMG 2/. It is suggested to delay their construction until after hydro-electric power is generated in Nepal for these wells rather than buying some power for this purpose from India (see section on electric power policies of Nepal).

5. Despite the high infiltration rates observed 3/, high runoff values of 50% or more are assumed, leading to theoretically high irrigation requirements and low rainfall recharge (see Addendum). No soil moisture balance studies are made and the presence of bunds around paddy fields is ignored in the studies. The resulting farm irrigation efficiency and monsoon re- charge are both very low. The implied practice of monsoon irrigation in months with rainfall exceeding evapotrans- piration by two or four times, will cause high nutrient losses and soil deterioration as has already occurred in the 50-year old Chandra canal command.

1/ HMG/NK, August 1970, page 63.

2/ FAO/NK, August 1971, Annex III.

3/ FAO/NK, September 1970 and June 1972 (Sections on infiltration rates); see also Chapter D, Section "Need for Improved Water Management" Annex 1. ANNEX 6 Appendix 3 Page 3

6. Irrigation and power benefits in India are not accounted for in the economic analyses even though these are very substantial in the case of the Bagmati, Kamla and the Sun Kosi High Dam projects. No quantitative values are assigned to either water or power as export commodities to India.

7. The economic analyses do not include shadow pricing and do not reflect the true costs and benefits of the projects to the nation.

8. The maximum rate of implementation is held at less than 20,000 ha annually for irrigation for the period 1970- 2000 because of constraints manpower, financing and operation and maintenance. Limitations certainly exist now but their continued existence beyond the next seven to ten years is doubtful.

9. It is not clear how the gross area of 540,000 ha in the Central and Eastern Terai has been reduced to a net irri- gable area of only 310,000 ha 1/. Some soils are deleted on the basis of low water retention capacities while reported figures indicate acceptable values. Reported cation exchange capacities (CEC) and base saturation percentages (BSP) of soils appear incorrect; the relation- ship between CEC and the clay fraction varies widely even though the humus contents are low and the clay mineral analyses show little variation and the relationship between pH and BSP is opposite to normal (e.g. BSP values of over 100 percent for acid soils). 2/ Reported laboratory data appear of little value for irrigability determinations.

1jf FAO/NK, Final Report, 1972.

2/ FAO/NK, September 1970 and June 1972.

ANNEX 6 Appendix 3 Addendum Page 1

RAINFALL RECHARGE IN BIRGANJ PROJECT, BUTWAL AND BHAIRAWA

1. FAO/NK 1/ has calculated the average aerial rainfall recharge for the wet season of the 1970 high rainfall year, for the Parnanipur station in the Birganj tubewell area using an assumed surface runoff of 50 percent and calculates the rainfall recharge to be 2.4 million cubic meters (MCM) per 1,000 ha for the Siraha rainfall station.

2. The assumed 50% surface runoff cannot be supported by either the rainfall intensity or observed infiltration rates. Moreover, for a tubewell project it is of interest to determine first the average annual groundwater recharge from the average rainfall in the wet season and subsequently to ana- lyze the long-term effect of possible over- and under-pumping for a succes- sion of years with varying rainfalls. The 1970 monsoon rainfall was 45 percent higher than the 18-year average rainfall.

3. Terminal infiltration rates (after 24 to 40 hours of continued testing) for Birganj project soils are given by FAO/NK 2/ (pp. 30-32) and vary from 140 to 30 mm per day, while one soil type (sandy topsoil on sandy sub- soil) has a final infiltration rate of 500 mm per day.

4. Field bunds of, say, 9 inches or some 22 cm create a substantial basin for rainfall retention on the farmers field. An infiltration rate of 3 cm per day means that -- with continuous ponding -- the potential deep percolation losses over the four-month wet season would be 3.5 meters of water unless the subsoil would become saturated thus inhibiting or reject- ing further downward percolation. The combination of field bunds and infil- tration will prevent significant runoff from paddy fields. Bangladesh has a similar rainfall distribution and a daily soil moisture balance study has shown 3/ that hardly any runoff will occur there with infiltration rates of 0.01 and 0.02 ft per day or 0.3 and 0.6 cm per day, i.e., ten times less than those observed for the Terai clay soils. It is also clear that, with tubewell irrigation, continuously ponded paddy fields will lead to high pump- ing costs to cope with excessive groundwater recirculation. Ponded paddy fields would probably prove to be undesirable and costly in tubewell areas in the Terai.

1/ FAO/Nippon Koei Co., Ltd., August 1971 (Annex V). 2/ FAO/Nippon Koei Co., Ltd., June 1972. 3/ IBRD/IDA, Land and Water Resources Study, Bangladesh, Technical Report No. 20 - Overall Water Resources Potential and Technical Report No. 21 - The Groundwater Potential, Vol. VII, Report No. PS-13, December 1972. ANNEX 6 Appendix 3 Addendum Page 2

5. To check the calculated recharge, FAO/NK 1/ used observed water table rises during the wet season to calculate probable recharge rates. An effective porosity of only 10 percent 1/ was used for the predominantly sandy or silty or loamy subsoils 2/ while a value of 15 percent would appear more appropriate. The latter means that more water can be stored in the subsoil per unit depth.

6. The water balance for the average wet season is calculated for the Sirha, Butwal and Bhairawa rainfall stations as follows:

Siraha Butwal Bhairawa (millimeters of water)

June - September precipitation 1,150 2,264 1,038 Less interception and storm runoff (15 percent) 173 340 156

977 1,924 882 Less June - September evaporation 590 441 441

Average potential rainfall recharge 387 1,483 441

7. These infiltration depths provide an average potential recharge of 3.9, 15 and 4.4 MCM per 1,000 ha for Siraha, Butwal and Bhairawa, respec- tively. It follows that the average wet-season rainfall recharge for Siraha is 65 percent more than estimated by FAO/NK/1970 for the high rainfall year. The significant lateral recharge from the Bhabar zone along the Hills and rivers and other sources have been ignored in the above calculations. The calculated rainfall recharge cannot enter the artesian aquifer layers in the Butwal-Bhairawa area. These artesian layers are presently recharged later- ally from the high rainfall zone in and along the Churia Hills which consti- tutes the northern boundary of the Lumbini Terai, particularly the Bhabar zone; this lateral recharge has not yet been analyzed. The total recharge situation is currently under study by DIHM/USGS.

1/ FAO/NK. August 1971, Annex V.

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ANNEX 7 Page (i)

NEPAL

AGRICULTURAL SECTOR SURVEY

AGRICULTURAL CREDIT AND COOPERATIVES

NumwrerP

SUMMARY AND CONCLUSIONS ...... i - xv

OVERVIEW OF THE PRESENT AGRICULTURAL CREDIT SITUATION IN NEPAL ...... 1 - 3

The Role of Institutional Credit .. . 4 - 6

CREDIT INSTITUTIONS, COOPERATIVES AND THEIR PROGRAMS ...... 7 - 62

Cooperative Credit Societies and the Cooperative Bank ...... 7 Land Reform Credit Program . , .. . 8- 15 Loan Interception . .9 - 11 Compulsory Savings Scheme ...... 12 - 15 Institutional Credit Programs Under Land Reform .... 16 -- 21 Ward and Village Committees ...... 16 - 17 Land Reform Savings Corporation (LRSC) 18 - 21 The Agricultural Development Bank of Nepal (ADBN) 22 - 41 Introduction ...... 22 - 25 Lending Policies and Procedures ...... 26 - 30 Program Emphasis ...... 31 Staff Organization and Training ...... 32 - 35 Resources ...... 36 -38 Loan Performance ...... 39 -41 The Nepal Rastra Bank (NRB) ...... 42 -4i Commercial Banks ...... 46 -47 Cooperatives ...... 48 - 57 Coordination Among Government Agencies ...... 58 - 62 ANNEX 7 Page (ii)

Paragraph Number

III. PLANS AND PROSPECTS ...... 63 - 82

Credit Requirements and Issues for the Future 63 - 66 Fourth Five Year Plan Targets and Achievements 67 - 68 Future Availability of Financial Resources 69 - 71 Role of Village Committees . .72 Future Emphasis of ADBN. 73 - 82

Table 1 - Farm Borrowings by Loan Volume and Farm Families, 1969/70 Table 2 - Institutional and Private Agricultural Credit by Purpose, 1969/70 Table 3 - Cooperative Bank - Cumulative Resources and Loan Disbursements, FY Ending 1964-1967 Table 4 - Annual Loans made by the ADB to Cooperatives and Individuals 1963/64 - 1972/73 Table 5 - Total Compulsory Savings Collected Table 6 - Loans Advanced and Recovered by Ward/Village Committees Table 7 - Cumulative Loans Advanced and Recovered by Ward/Village Committee, By Regions, 1964/65 - 1970/71 Table 8 - Compulsory Savings Deposited in Land Reform Savings Corporation, and Loans Disbursed and Recovered Table 9 - Loans Disbursed by LRSC for Various Purposes Table 10 - ADBN Interest Rate Structure and Rastra Bank Refinance Rates in the Agricultural Sector Table 11 - ADB Summarized Balance Sheets at July 15 Table 12 - ADB Summarized Actual and Forecast Profit and Loss Accounts (Years Ended/Ending July 15) Table 13 - Relevant Ratios from Aden Accounts Table 14 - ADB Status of Loan (Cumulative by Type of Borrower) Table 15 - ADB Loan Delinquencies by Type and Length Table 16 - ADB Loan Disbursement by Term and Sector Table 17 - ADB Loan Disbursement by Purpose Table 18 - Interest Rate Structure of Commercial Banks Table 19 - NRB - Annual Refinance to ADB and Land Reform Savings Corporation 1970/71 - 1972/73

Figure 1: Organization of ADBN in Kathmandu ANNEX 7 Page i

AGRICULTURAL CREDIT AND COOPERATIVES

SUMMARY AND CONCLUSIONS

i. Institutional credit for Agriculture in Nepal has a history of only ten years. Besides conventional banking and cooperative credit under the Agricultural Development Bank of Nepal (ADBN), institutional credit, includes lending for agriculture under the Land Reform Program by (i) ward and village committees and the (ii) Land Reform Savings Corporation (LRSC) 1/. All these institutions supplied 21% of all agricultural credit, and reached 18% of all farms in 1969/70. The rest was mainly provided by moneylenders, friends and relatives. Institutional agencies, however, provided financing for 91% of farm purchases of fertilizers, improved seeds, and agricultural chemicals and all the financing for heavy machinery purchase.

ii. The Agricultural Development Bank (ADBN) was established in October 1967, taking over the assets and liabilities of the Cooperative Bank, primarily to diversify lending. Under a broader mandate, ADBN's lending to individuals quickly outstripped its lending to cooperatives, and since 1968/69, lending to cooperatives has comprised less than half of its loans, as shown below:

ADBN Annual Loans to: 67/68 68/69 69/70 70/71 71/72 72/73 ------Rs million ------Cooperatives 3.6 4.6 5.1 2.2 4.1 14.5 Individuals and Others - 3.5 8.6 17.0 19.3 21.1 Cooperatives as % of Total 100 57 37 12 18 41

However, with the implementation of the Cooperative Revitalization Program 2/ in 1971/72, the share of credit to cooperatives has againi increased. Forty- five percent of all loans have been for agricultural production (short term loans), 34 percent for farm improvement (including agri-businesses) and irrigation, and 19 percent for marketing and agro-industries. Recovery rates from 1967/68 - 1972/73 averaged about 85% of demand 3/.

iii. 1 Recognizing the importance of an alternative source of credit, other than the moneylender (who was often the landlord), the 1964 Lands Act initiated a system of agricultural credit which had the following com- ponents:

I 1/ LRSC was merged into ADBN in July 1973.

2/ Cooperatives run by ADBN appointed managers.

3/ Repayments and interest falling due during the year plus overdues from previous years. ANNEX 7 Page ii

(a) the "interception" of outstanding agricultural loans, assessment of usury practices and reduction of "excessive" 1/ loan repayments;

(b) a compulsory savings scheme to mobilize resources from the agricultural sector for lending to small farmers and financing of storage, marketing and agro-industries.

iv. Except for some interest rate reduction in a few Hill areas, the success of loan interception was dismal. Only 476,000 debtors requested the Land Reform office for debt determination. Of these, 68% did not try to get their debts scaled down, reflecting the pressures from conventional sources of credit.

v. Under the Compulsory Savings Scheme, landlords and tenants were required to deposit annually, a fixed portion of their farm produce as a loan to government. The deposit, in cash or kind, was made with the Ward Committee, 2/ and was assessed at roughly 7 percent of cereal crops and at about 9 percent for cash crops (collected in cash except for jute and sugar- cane which were collected in kind). Repayment was to be made after five years with 5% annual interest. In addition to collecting the savings, the Ward Committee was responsible for the storage of the savings collected in kind, for the supply and recovery of short-term credit (for production or consumption) charged at 10 percent. The lending record is shown below:

Loans Advanced by Ward 64/65 66/67 68/69 69/70 70/71 71/72 73/74 and Village Committees ------Rs million ------

In Cash 0.5 4.7 1.7 1.5 1.6 1.1 0.9 In Kind (estimated value) 7.2 48.0 13.5 9.8 5.2 5.6 1.8 Total Value 7.7 52.7 15.2 11.3 6.8 6.7 2.7

Information on repayment rate varies from 46% - 87% for ward and village committees. 3/ vi. Despite teething troubles, especially related to the collection of payments in kind (changed to total cash collections in 1968), drought in 1967/68 and administrative cumbersomeness, Rs 121 million were collected from

1/ Generally those greater than 10% interest per annum.

2/ Each of the 3,800 village Panchayats is divided into 9 Wards. Each of the 33,300 Ward Committees has 3 members. A Ward has a population of roughly 300.

3/ The actual rate will be known when the audit of the ward and village committees (see below) are completed. ANNEX 7 Page iii

1964 to July 1969. Collection has been suspended since then and a program of consolidation and auditing was initiated for two reasons:

(a) The collected savings were thought to be generally sufficient to meet farmers' demand for commercial credit (under existing technology and supporting infrastructure).

(b) Streamlining of the administrative structure and a closer monitoring of the savings was required.

vii. LRSC was formed in 1967 to (i) provide wider use of savings (particularly for the centralized purchase of inputs through AIC and financing agro-industries) and (ii) increase lending to certain village committee which are short of funds for input loans. Because of overlapping functions LSRC was merged into ADBN in July 1973.

viii. Except for the continued expansion of guided cooperatives, HMG has not developed a definitive policy on the future roles of each of these sources of institutional credit and the reactivation of the compulsory savings scheme. Future demand for institutional credit will be multiples of the present capacity. The primary question is, how can the credit system be more respon- sive to the needs of the substantial segment of small farmers who are mar- ginally self-sufficient, but can be moved into a higher economic status with improved technology and its associated credit needs?

ix. A credit survey by the Nepal Rastra Bank (NRB) showed that of the lending to "small" farmers (those with less than 4 bighas or 2.7 ha) in 1969/70, only 15% were from institutional sources, and that 71% of this (or 11% of total "small" farmer credit) was from the ward and village committees and none was from ADBN. The ward and village committees therefore did have a useful role to play in assisting credit needs of small farmers. The record since then (para v) show that annual disbursements of loans by the ward and village committees have declined drastically to a value of only R 2.7 million by 1972/73. ADBN's lending to guided cooperatives ("small" and "medium" sized farmers cultivating less than 6.7 ha) have increased to R 14 million (para ii) primarily through the absorption of successful village committees.

x. ADBN's guided cooperatives program should indeed be supported. Changes 'in emphasis to further assist the small farmer are already underway with:

(a) reduction of security requirements to a pledge on the standing crop;

(b) consideration is being given to restricting the eligibility for cooperative loans to farmers with less than 2.7 ha; and ANNEX 7 Page iv

(c) nine out of ten branch offices to be established by 1977/78 will be located in the Hills.

Firm directives should also be given to ADBN branch offices to improve their performance on the volumes of loans and on the number of farmers reached (particularly in the less than 4 bigha category).

xi. The village committees should also continue to play a role in the provision of institutional credit since about 90% of the country is yet to be reached by guided cooperatives. Besides, village committees comprise the future source of guided cooperatives. A minimum package program working through the village committees and government agency representatives (see general report) may be a feasible alternative to supply production inputs (a necessary complement to credit provision) more efficiently.

xii. Future constraints (financial and implementation) in the expansion of guided cooperatives and guided village committees will have to be tackled. ADBN should continue to operate on a self-financing basis. As it expands to achieve the targeted 300 guided cooperatives and 150 guided village committees in its first 10 years of operation, its already high administrative costs (at 6.8% of the loan portfolio), due largely to its cooperative manage- ment activities, will be proportionately higher. Interest rate for production loans increases to 12% or 14% (for short term loans) may therefore be necessary and should be considered. 1/ It will also enable ADBN to better attract deposits from the rural sector, and compared to the present rates charged by moneylenders (25-50%), should not defeat the purpose of institu- tional credit. Farmers are less concerned about marginal increments in the rate of interest charged, than the adequacy, timeliness and ease of avail- ability of loans.

xiii. With AIA"n Tew.1- ,i-nt Bank assistance, ADBN is one of the most effective government agencies in Nepal. Before the Cooperative Revitaliza- tion Program, it tripled lending in three years and was able to make personnel adjustments with little difficulty. The recent absorption of LRSC staff into ADBN, should further strengthen its capacity, especially at the central office and main branch levels. An important gap will, however, exist at the guided cooperative and guided village committee level where the supply of managers, JTAs and field supervisors is inadequate. We recommend the adoption of a scheme whereby (a) cooperative managers also assume responsibility for preparation of farm plans and (b) ADBN district loan officers (with fewer JTAs) will act as farm plan auditors for a number of cooperatives and guided village committees. This scheme would have the additional effect of con- serving JTA requirements for agricultural extension work. xiv. The reactivation of the compulsory savings scheme depends on the results of audits of the ward and village committees, which is 85% complete.

1/ The whole interest rate structure needs to be rationalized in terms of the opportunity cost for various uses. ANNEX 7 Page v

These audits can help resolve the following basic issues: (a) the extent to which village committees can be self-financing (e.g. what are the actual administrative costs of the program); (b) the extent to which the pool of disbursed loanable funds (estimated at R 80 million) actually exists; (c) the absorptive capacity of small farmer clientele; and (d) the need for LRSC, now merged with ADBN, to continue its assistance of village committees. xv. A thorough analysis, of the audit and the assessment of these issues will have to be undertaken (possibly by a working committee consist- ing of representatives from the planning commission; Ministries of Land Reform, Home and Panchayats Finance, or Agriculture; ADBN and NRB), before a decision on the reactivation of the Compulsory Savings Scheme can be made. Considera- tion should also be given to the possibility of increasing interest rates paid on compulsory savings, otherwise it would in effect be an agricultural tax. ADBN should continue to at least use some of its former LRSC staff for this activity since it is to its own interest that it strengthens these "potential guided cooperatives." The prospects for expanding assistance to them with the Land Reform Department acting as "lending intermediaries" (since the latter has a very comprehensive staff network in non-ADBN areas), should be actively pursued. ANNEX 7 Page 1

NEPAL

AGRICULTURAL SECTOR SURVEY

AGRICULTURAL CREDIT AND COOPERATIVES

I. OVERVIEW OF THE PRESENT AGRICULTURAL CREDIT SITUATION IN NEPAL

1. Since July 16, 1973, there has been just one official rural credit institution in Nepal--The Agricultural Development Bank of Nepal (ADBN). This single agency emerged from a consolidation of the "old" ADBN (the 1967 successor to the Cooperative Bank) with the Land Reform Savings Corporation (LRSC) created in 1966. The Agricultural Development Bank will continue its own basic lending program under which it made production credit available through a growing network of multi-purpose cooperatives and direct loans to individuals and institutions for major agricultural development purposes. It will assume the lending program of LRSC which also made loans direct to individuals and institutions but made credit available at the local level 1/ through a vast system of Ward and Village Committees under a program established by the Land Reform Program of 1964.

2. The merger of these two agencies brings under one head the various lending programs that have been supplying about 75% of all institutional credit to agriculture. Commercial banks and small cooperative societies account for the remaining 25%.

3. This merger was one of a number of actions recommended by the Agri- cultural Survey Board, a unit commissioned by the Nepal Rastra Bank (The Central Bank of Nepal) to survey agricultural credit in Nepal, interpret the results and recommend improvements in the nation's rural credit structure, The Board's report was released officially in 1972 2/ and the results, whik i provide a good overview of Nepal's credit situation are given below.

The Role of Institutional Credit

4. Institutional credit agencies play a minor role in supplying credit, 21% 3/ of agricultural credit, reaching only 18% of all farmers in 1969/70 (Table 1). Larger farmers benefited more from institutional credit, small

1/ Local level: The area of actual agricultural activities including the cooperative, Ward, Village level and the neighborhood of the individual farmers themselves, to distinguish from the district, regional or central level. 2/ Agricultural Credit Survey, Nepal, Nepal Rastra Bank, 4 volumes, 1972. The results however apply to 1969/70. 3/ A 1972 study by the Department of Land Reform (see Zaman, Evaluation of Land Reform, Kathmandu, 1973) reported 22.4% of credit from sample households came from institutions. ANNEX 7 Page 2

farmers were supplied with only 9% of their credit needs by institutions, reaching 15% of small farmers. The Ward and Village Committees (created by the Land Reform Program) were the most important source of institutional credit to the small farmer. Moneylenders and friends/relatives were the most effec- tive in extending credit to 46% and 33% of all small farmers.

5. Institutional agencies, nevertheless, provided 91% of the total financing for fertilizer, agricultural chemicals and improved seeds, and all the financing for heavy machinery purchase. Private sources accounted for 77% of the financing for livestock purchases, 60% of other medium-term credit, 86% of the credit for the purchase of land, 74% for the repayment of old debts and slightly over 85% of the credit for consumption purposes (Table 2).

6. The average borrowing ranged from Rs 245 (30% gross farm income) for small households (less than 2.7 ha) to Rs 1,123 (32% of gross farm income) for large households. On a regional basis, average borrowing per farm household was Rs 383 in the Hills while it was Rs 504 in the Terai. On the other hand, the outstanding debt was higher in the Hills (Rs 938) than in the Terai (Rs 604). In the Hills, more than 90 percent of the total loan was obtained from the village moneylenders, friends and relatives, while in the Terai 51 percent of the loans were institutional. Interest rates were annual equiv- alents of 25 to 50 percent for private credit and 9 to 10 percent for institu- tional sources.

II. CREDIT INSTITUTIONS, COOPERATIVES AND THEIR PROGRAMS

Cooperative Credit Societies and Cooperative Banks

7. Institutional agricultural credit in Nepal started in 1953 with the creation of the Department of Cooperatives, to form cooperative credit societies as a means of easing farmers' indebtedness to private money lenders. Despite the Cooperative Societies Act in 1959. The movement remained insignificant during the early 1960's despite an amendment to and the creation, in 1962, of the Cooperative Development Fund to finance the establishment and operation of cooperatives, little progress was made. In 1963 another act established the Cooperative Banks, thus providing the vehicle to extend credit to the few cooperatives then in existence. Re- gistered cooperative societies consequently mushroomed to 1,400 in the late 1960's, but only a small fraction of them were actually functioning. After a slow start while the collection of loans was being improced, lending in 1965/66 tripled that of the previous two years (Tables 3 and 4). In 1967 the Cooperative Bank was transformed into the Agricultural Development Bank and lending to cooperatives reached Rs 5 million in 1970. However these ANNEX 7 Page 3

cooperative credit societies manage to reach only 3% of small farmers 1/ by 1969/70 2/ and covered less than 1% of their credit needs.

The Land Reform Credit Program

8. The first effort on a major scale to develop an agricultural credit system for every section of the country grew out of the Lands Act in 1964 which represented the core of the Land Reform Program. The credit and cooperatives component of the Program consisted of:

(a) the interception 3/ of certain outstanding agricultural loans and focusing on assisting smaller farmers in production, marketing, consumption and small scale agro-industries;

(b) a compulsory savings system; and

(c) an institutional credit program.

The Land Reform Program was carried out at the local level by Ward Committees 4/ and at the district level by the Land Reform Office.

Loan Interception

9. The loan interception provisions were enacted to assist farmers impossibly indebted to the local moneylender or a landlord. The steps involved were to (a) determine outstanding debts, (b) adjust for excessive debts by scaling down outstanding debts, (c) intercept the repayment of adjusted agricultural debts, and (d) release "qualified" land from further mortgage.

10. The outstanding debt was determined by the District Land Reform Office of the Land Reform Ministry on the basis of debtors' and creditors' state- ments filed with the Land Reform Office. Upon request from a debtor, the Land Reform Office would review information submitted by him and his creditors to determine if he was being, or had been charged, usurous rates of interest on loans outstanding. Such excessive charges (defined by the Land Reform Office as over 10% per annum) would be applied to the unpaid principle of the loan thus adjusting (reducing) the outstanding balance. If excessive interest

1/ Farms with 4 bigha (2.7 ha) or less. 2/ See Table 1. 3/ Prevention of repayments lent at usurious rates. 4/ The Wards (about 9 in each village panchayat) were designated as minimum units for collecting compulsory savings. Each Ward Committees consists of three members. ANNEX 7 Page 4

payments equalled the outstanding principal balance, the loan was cancelled and any land mortgage securing the cancelled loan was released. When agri- cultural loans were adjusted, the Land Reform Office collected (or intercepted) the payments on the adjusted loan from the debtor and remitted them to the lender. This remittance could be made by the Land Reform Office when received or used for relending to farmers earning 5% interest for the creditor over a 5-year period. /a Total Debt Scaled Down, Agricultural- Credit Intercepted and Mortgaged Land Released between 1964 and 1965

Area of Total /b Amount of % of Mortgaged Total Agr. Amount Agr. Debt- Agr. Debt Agr. Debt Land Debt Debt Scaled down Scaled down Intercepted Intercepted Released ------(Rs Million) …--- (x) (Rs Million) (ha)

197 20 44 56.4 8.7 43.6 7,329.3

/a M.A. Zaman (FAO/HMG), Evaluation of Land Reform in Nepal, Ministry of Land Reform, 1973, P 40.

/b A survey conducted as part of this FAO/HMG Evaluation shows a debt reduction of 39.4% for those households reporting having applied for debt adjustment.

11. The success of interception was dismal. Although 467,000 debtors (about 30% of farm families) who borrowed from 156,00 creditors, used the Interception Program, agricultural debt intercepted (R 20 million) represented only R 43 per debtor. The FAO/HMG survey shows that of the households report- ing debts, some 68% did not try to get their loans officially scaled down. This debt intercepting program was extremely sensitive and for the most part unenforceable. The borrowers who had the right to report any ill treatment by lenders because of excessive interest charges or other abuses failed to do so in any substantial numbers. The credit survey report suggested that there was a reduction of interest rates charged by the moneylenders in the Hills. Except in some other localized areas, the overall impact on the private moneylender has been minimal.

Compulsory Savings Scheme

12. Under the compulsory savings scheme, both landowners, tenants and owner cultivators were compelled to deposit with Ward Committees, a fixed amount (in cash or kind) of their annual production at the following rate: ANNEX 7 Page 5

Food Crops Cash Crops Kg/ha Approx. Value (X of cash value of) (Rs ha) (main annual crop )

Tenants 28 34 5 Landlords 56 67 10 Owner-cultivators 84 100 7.5

These savings should be deposited within 15 days after harvest, and are treated as loans 1/ to government to be repaid to the farmer at the end of five years along with 5% interest. The savings collected by the Ward Committees were extended at 10% interest for both production and consumption uses. Loans were to be repaid after crop harvest.

13. The compulsory savings scheme has had a mixed success. The program got off to a good start (Table 5). Initiated in only 16 districts the first year collections amounted to Rs 22.6 million. The second year the program operated in 25 more districts and collections climbed to Rs 60.8 million. Operating in all 75 districts of Nepal in the third year, collections fell to Rs 20.4 million as a result of administrative problems and the reduction of required savings. 2/ The administrative arrangements in the 36,000 ward committees with 108,000 officials were cumbersome. Many committee members were not qualified to administer the operation. At the start of the program, for example, records were hardly kept of collections and disbursements. The situation, was somewhat improved with the appointment of savings inspectors who assisted the Panchayats in establishing and maintaining records. Problems were encounted with storage of collections in kind, even though some 16,000 godowns were built by cooperative efforts for the ward committees. Savings in kind were however stopped in 1968/69 and collection was restricted to only cash. By the end of 1969, the volume of savings was generally suf- ficient to meet the demand for commercial credit under existing irrigation, transport, and marketing infrastructure. In addition, because of cumbersome administration which was hard to monitor, collection of compulsory savings (except for arrears) was suspended in 1969/70, and a program of consolidation and auditing was initiated. The auditing process is now 80-85% complete. Some preliminary results show that the overall mismanagement has not been large and, in general, the farmers have not been exploited.

14. The FAO/HMG survey by LRD, for example, 3/ found that 95% of a sample of 2,841 households deposited compulsory savings and that 99% of these received either certificates or receipts for the deposits. The amount of misutilization of commodities and funds (from 1964/65-1970/71) were less than 1 percent of the total collections of Rs 122 million, and 40 percent of the misutilization were later recovered. 4/ Sixty-three percent of those

1/ Savings in kind are valued at the price in which they are re-sold by the Ward and Village Committees. It has been found to have averaged about Rs 25/maund (R 0.67/kg) for all crops (mainly food grain). 2/ To Rs 22/ha. 3/ Zaman, op. cit., p. 105. 4/ Zaman, Ibid., p. 118. ANNEX 7

interviewed in the FAO/HMG survey favored revival of the compulsory scheme and said that the scheme would "save" them from private moneylenders; Only 22.3%Z however, thought that the scheme was helpful in modernizing tIiir farms by enabling them to obtain production inputs through AMC. Those Who opposed the revival of the scheme mainly voiced misgivings about its management and the personal hardship of being required to contribute to a hew scheme. The Nepal Rastra Bank (NRS) Credit Survey 1/ found that ih 1969/70, 87 percent of 3,021 respondents were satisfied with the scheme and the credit program resulting from it. The survey also found that 74 percent of the 266 committees interviewed felt that (a) the compulsory savings programi adfi its associated credit scheme reduced the importance of moneylenders; (b) tenants w'iir the most important beneficiaries since they had hitherto not had a source' of institutional credit.

15. The compulsory savings scheme appears to have had a more favorabie impact on the Hills where 86%0 of households interviewed favored the revival of the scheme. The reduction of the dependence on moneyl'enders was alsd more effective in the Hills. This differential success among the regions is not very surprising since the Hill area is largely the small farm area and its relative inaccessibility has meant a monopsony situation with respect to the supply of credit to farmers by moneylenders.

Institutional Credit Programs Under Land Reform

16. Ward and Village Committees. The loan operations of the Land Reform Program were first carried out at the Ward Committee level. In'1969/70, Village Committees were set up to replace the cumbersome Ward Committees. These Village Committees consist of 11 members, on'e from each o'f the nine Wards plus two additional at-large members (usually the chairman atnd- vice chairman of the village panchayat). Ward/Village Committees make' se'a'sonal loans to farmers in cash or in kind for both producti'on and consumpt-io'n at 10% interest 2/. From 1964-65 and 1972-73, they advanced the equivalent of R 166.4 million in loans throughout the country (Table 6). For 19604f65 - 1970/71 the FAO/HMG study found that seventy' two percent £f lToans were- given in the Terai (Table 7) where the Land Reform, Program- was-most acti've. Da'ta'' on collection rate is somewhat conflicting with ranges' from 8,7% (Tab,le 6)' to 46% (Table 7). Despite the apparent concentfAti'6n o6f lending to the larger farm region (Terai), the NRS Survey in 1970', however,_showed that credit from Ward/Village Committees, on an individual' rather than a lown' volume basis, accounted for over 70% of insti-tuti'onal c'reidlt or 1167%of. total 1/ Nepal Rastra Bank, Agricultural Credit Survey, 1972, Volume' IEI, p.. 351. 2/ The 5% margin between the borrowing cost (5Z)' and interest charged (10%) by the ward and village committees is broken dbwn, as' followsi - -1'12 as service payment to the committee,. 1/2% for secretarial and sun-dry support and 2%; to be deposited in a credit/emergency fund (mainly to offset bad debts). The ward and vi-llage. coimmiittee aiidl,ts should reveal the extent of actual administrative and collection costs.. In the early stages, collection costs must have been high, wi'th poor collection rates (Tables 6 and 7). The ward and village committees have only recently begun to repay the 5% interest on compulsory' savings in a few districts. ANNEX 7 Page 7 credit (Table 1) to the small farmer (defined as one cultivating less than 4 bigha or 2.7 ha).

17. In volume terms, the large farmers received 9.3% of their total loans (while the small farmers received only 6.6% of theirs) from the Ward and Village Committees.

18. Land Reform Savings Corporation. Early in the operations of the compulsory savings and credit programs at the Ward Committee level it became apparent that some areas were collecting more than they could lend while others could lend more than they were collecting. In addition, much of the farmers' production inputs had to be imported. In order to give the program more flexibility at the local level and achieve the centralization needed to finance imports and agro-industries, the Land Reform Savings Corporation (LRSC) was established in 1966. The objectives of the LRSC were to:

(a) Coordinate and supervise the collection of savings countrywide;

(b) Finance farmers' procurement of agricultural inputs; and

(c) Finance and invest in agro-trade and agro-industries.

19. To carry out the objectives of the LRSC it was first necessary to convert to cash some of the compulsory savings that had been collected in kind. First, a committee was created to set Lhe price of the products received as savings. The disposal and management of the sales were the responsibility of the District Land Reform Office (DLRO), which allocated appropriate amounts for use at the Ward and Village level and deposited any excess with the LRSC. Cummulative deposits from 1966/67 - 1971/72 totalled Rs 42.8 (Table 8). LRSC granted short-term loans to the Ward and Vil'lage Committees to provide funds to the farmers for the procurement of fertilizers, seeds, small tools, pesticides, etc. The Ward and Village Committees subwittel applications through the District Land Reform Office (DLRO) supported by recommendation by the District Agricultural Officer and his Junior Technical Assistants. After the loans were approved, the DLRO issued coupons on the Agricultural Supply Corporation (ASC), the predecessor to the present 'i- cultural Marketing Corporation, to supply the required inputs to the respec- tive Ward and Village Committees for distribution among the borrowing farmers. The ASC cashed in the coupons with the LRSC upon delivery of the inputs to the farmer. This was, in effect, a supervised loan program and, pending the establishment of guided cooperatives in the wards and villages, will continue to be the primary source of credit to the farmers in many areas.

20. The LRSC also granted loans to individuals for agricultural develop- ment and production, for financing agro-trade and agro-industries including rice mills, the procurement of tractors and pumpsets, poultry farming and warehousing. LRSC also granted short-term loans direct to the institutions ANNEX 7 Page 8

serving agriculture such as ASC, FMC, and later AMC. Loans were granted to this latter group mostly to procure agricultural inputs and foodstuffs (Table 9).

21. The recovery rate on loan disbursed (taken cumulatively from 1966/67 - 1971/72) was only about 56%. Insufficient information was however given to the mission to examine the recovery record by types of loan.

The Agricultural Development Bank of Nepal, ADBN

Introduction

22. The Agricultural Development Bank of Nepal, ADBN, was established on October 29, 1967, and took over the assets and liabilities of the Agri- cultural Cooperative Bank that had been operating since 1963. The new Bank had wider lending authority and ten times the authorized capital of the Cooperative Bank. The Cooperative Bank was authorized only to lend to cooperatives, but ADBN can loan directly to individuals.

23. ADBN is an autonomous and corporate body with an authorized capital of Rs 50 million with HMG as majority shareholder. Its Board of Directors consists of a chairman-cum-general manager (appointed by HMG for four-years) and eleven members. One member is designated by each of the following institutions: The Nepal Rastra Bank, the Nepal Bank, Ltd., the Rastra Banijya Bank (the latter two commercial banks) and Kishan Sangathan (farmers' organization). HMG names two members from among the shareholders of the Bank, one from the cooperative societies, and four at large.

24. The ADBN is authorized by the Act to: 1/

(a) to provide short, medium and long term credit to individual farmers, cooperatives, and corporate bodies engaged in agricultural development;

(b) to provide loans directly to farmers for the purchase of fertilizers, insecticides, farm machinery, irrigation pumps, etc., required for agricultural production;

(c) to invest in small scale industries engaged in processing farm products and manufacturing goods required in agriculture; and

(d) to provide banking facilities in those areas where commercial banks are not established.

25. With the merger of the Land Reform Savings Corporation into ADBN in July 1973, an amendment to the Act authorized ADBN to carry out the following former LRSC activities:

1/ Agricultural Development Bank Act. ANNEX 7 Page 9

(a) provide production and marketing loans through Ward and Village Committees;

(b) be a depository for compulsory savings collected by HMG and make payment of interest on the amount deposited; and

(c) provide loans to the tillers for the purchase of land.

Lending Policies and Procedures

26. ADBN specifies standard terms and conditions for different types of loans (Table 10), the most important being short-term cereal production loans (up to 18 months). They are almost all based on standard per hectare farm plans, worked out by the branch for the particular area and crop and approved by the head office. Up to 50% of a farmer's expected crop proceeds (net of rent), valued at the previous season's average prices, may be borrowed; the interest rate is 10% per annum. The loan is repayable within 30 days of harvest and is secured by the crop. Production loans are made, mostly in kind, by issuing vouchers against the Agricultural Marketing Corporation (or its authorized dealers) for inputs, such as seed, fertilizer, pesticide, and small farm tools and equipment. Cash loans are by installments against payment of such specified items, such as, irrigation charges and transplanting expenses. Borrowers must be members of a recognized cooperative (usually ADBN managed) and the loan is made through the cooperative, which is charged 7% annual interest. The maximum loans are based on standard farm plans for crop and area (not exceeding 6.7 ha).

27. ADBN, through cooperatives which it manages, will also advance up to 25% of the estimated value of the crop in the field, and will make this up to 60% of the actual value of crop delivered, if producers wish to store the crop at co-operative warehouses to sell later in the harvesting season at a higher price. These percentages are inclusive of, not in addition to, any production loan a borrower may have for the same crop. Security for these marketing loans is the crop, plus a bond from the borrowing cooperative and plus a farm mortgage for loans to individual farmers. Interest is 10% to the farmer, 7% to the cooperative; and repayment is within 120 days, extended to 180 days if justified. Loans are also made to approved dealers and ADBN-managed cooperatives for purchase and stocking of inputs, up to 80% value, repayable within 30 days of input sale at an annual interest of 10% for dealers, and 7% for cooperatives, secured by a lien on inputs plus cooperative bond or a dealer mortgage.

28. Another important category is bullock loans to cooperatives or to farmers with at least 1.3 ha in the Terai (less in the Hills). Repayment is over three years at 10% for individuals, 6% for cooperatives; security is a cooperative bond or farm mortgage. Standard rates of interest for ADBN short, medium and long term credit are shown in Table 10. These rates are fixed by NRB which allows higher rates for short term lending because of the higher cost per loan of recording and supervising the general smaller short term loans, and the greater risk they may entail. ANNEX 7 Page 10

29. ADBN allows a rebate of 0.5% for early repayment, by at least one month, of medium and long term instalments. Penalties are charged for delinquent instalments; for short term loans, 2% per annum for the first month; 3.5% for the next five months and 5% thereafter. For medium and long term loans, 2% per annum for the first three months; 3.5% for three months and 5% thereafter.

30. For direct loans to individuals, prospective borrowers must purchase one share of ADBN stock at Rs 100 for loans of Rs 2,001 to Rs 10,000, and another share for each additional Rs 10,000. Cooperatives are required to purchase only one Rs 100/share in ADBN while cooperative members are required to pay Rs 50 for shares in their cooperative, before becoming eligible for loans.

Program Emphasis

31. It is the responsibility of ADBN to tailor its lending operations to support HMG's agricultural development plans. The priorities for assisting production of cereals and cash crop 1/ are:

(a) Cereal

Loans for the purchase of agricultural inputs, labor expenses, bullocks, tractors, pumpsets, tubewells and power tillers will be available to farmers. ADBN branches will make individual and cooperative loans. The cooperatives will provide credit, inputs, technical and marketing services to small and medium farmers. In the Hills, focus will primarily be on food deficit areas and that have suitable agro-climatic conditions, relatively developed infrastructure and supporting services. Supporting programs for increasing cereals and cash crop production will include:

(i) Farm Mechanization and Irrigation to provide loans for tractors and pumpsets to support cereal and cash crop production;

(ii) Marketing and Warehousing Program. Loans made to cooperatives for storage facilities and marketing activities and to individuals for on-the-farm storage.

(b) Cash Crops

(i) Horticulture, Livestock Poultry and Fisheries. Loans primarily to small farmers in Hills and Valley Districts where reasonable developed infrastructure and supporting services are available.

1/ ADBN, Agricultural Development Program and Budget, 1973-74. These priorities are not listed in order of importance. ANNEX 7 Page 11

(ii) Tea Estates. An ongoing program of medium to long-term financing of tea expansion and improvement in far eastern Nepal.

(iii) Cardamum and Ginger. Loans for cardamum in Ilam District and ginger in the Gandaki Project are being made on a selective basis in feasible areas. Mostly small and medium farmers are being assisted under the program.

(c) Land Purchase by Tenant Farmers. This function previously part of the LRSC program will now be the responsibility of the ADBN. The Bank Act has been amended to authorize the ADBN to provide this type of financing. There is no evidence that it ever got really started under LRSC and it is likely to be quite sometime before ADBN operates extensively in this area.

(d) Financing of Agriculture Graduates for Mechanized Custom Service Unit. An experimental program that will provide credit to agricultural graduates to purchase and operate custom machinery services for land preparation, seeding, threshing, and transportation on contract basis at reasonable rates to be fixed by the Bank. It is designed primarily to provide small farmers the use of equipment that will enable them to improve their farming operations. The services will be located at or near cooperatives.

(e) Supervised Credit through Area Project Approach. Continuation of a program launched in 1972/73. Farmers living in the project area receive production and marketing credit through their cooperatives tied with medium-term loans for dairy, poultry, piggery and small agro-processing plants made through the district offices of the ADBN.

(f) Cooperative Revitalization Program (detailed in para 48) consists of the formation of guided cooperatives (those with managers appointed by ADBN) to serve as the primary source of credit to the small and medium-size 1/ farmers. One of the major aims of this program is to upgrade Village Committees by converting them to guided Village Committees with supervisors appointed by ADBN and paid for under government subsidy until they become self-reliant.

Staff Organization and Training

32. ADBN has a central office and 44 district field offices. The organi- zation of the central office is shown in Chart I. District offices are

1/ Those with less than 10 bighas (6.7 ha). ANN[X 7 Page 12

designated as branch offices and sub-branch or agent offices under the branch offices (see map 11050, General Report).

33. Until the Bank initiated the Cooperative Revitalization Program it had no representative in residence below the district level. It is now represented by bank-appointed managers or supervisors at the guided coopera- tive and guided Village Committee level (see para 46). In 1972/73, 40 (31%) of the existing 130 guided cooperatives and guided Village Committees were located in the Hills (of which 13 were in Kathmandu Valley) and 90 (69%) in the Terai. Branch, sub-branch and agent office personnel are responsible for making loans, disbursement and collection of loan funds, checking and verification of operations and general program supervision. this is done by visits to the cooperatives and to individual borrowers from the district office level. ADBN is also expected to assist the LRD with the non-guided Ward and Village Committee credit programs (see para 16).

34. Prior to the merger with LRSC, the ADBN staff totaled 451, with 349 stationed in the district offices. Planned requirements for the new combined program for 1973/74 total 632 (475 to be located in the districts) with LRSC staff accounting for most of this increase. 1/ During the 1973/74 fiscal year, the Bank will b-e assuming responsibility for a nu'mber of the 434 Village Committees expected to come under the guided Village Committee program. The managers and supervisors for the guided programs are selected and trained by the Bank, with the assistance of the Department of Cooperatives, but the personnel are not designated as Bank personnel. The -Bank 'currently pays about 40 percent of their salaries with the other 60 percent .coming as ra,subsidy from HMG. The cooperatives and Village Committees are 'expected to develop their financial capacity and assume full responsibility for ihese personnel costs in five years.

35. Technical assistance has been successfully provided by the Asian Development Bank in program development and training. ADBN has expanded its training program for its district -and central office staff to better prepare them to handle the expanding *lending operations of the Bank.. Seminars and refresher courses will be held for those already on the jdb and new personnel will be given pre-service training before assignment and on-the-job training and supervision while on the job. Funds have ailso been provided for the training of selected personnel in India for loan processing and project appraisal.

Resources

36. ADBN is well supported by government financially, and through rediscount faci-li-ties by NRB. Balance sheets and profit and loss accounts for the last five years are shown in Tabl'es 11 and 12. An analysis of the 1972/73 accounts shows that of assets totalling NR 82.3'M (US$7.8 !), the loan portfolio represented 70%, receivables 16% and other assets 14%. These were financed by share capital and reserves (5'8%)., borrowing (27%), deposits

I/ ADBN appointed managers for guided cooperatives are not Included i-n the above. ANNEX 7 Page 13

(6%) and other sources (9%). The Asian Development Bank has lent US$2.4 million in 1970/71 and has just approved a loan of US$3 million. 1/ An encouraging feature is the increase in deposits from NR 3.7 million in 1968/69 to NR 5.8 million in 1972/73. ADBN is not required to pay dividends and retains all surpluses. It is required to place a minimum 20% of its net profit in a Reserve Fund.

37. ADBN usually covers its expenses but does not earn much on its equity capital (Table 13). ADBN is subsidized to the extent that its capital earns little return. The debt/equity ratio has been reasonable but will rise sharply with the takeover of the LRSC portfolio and the consequent extra debt financing under special low cost and guarantee arrangements with government.

38. Administration cost is high (6.8% of loan portfolio in 1972/73), largely because of cooperative management costs, which ADBN bears. A more normal percentage would be 3-3.5% (e.g. agricultural development banks in Uttar Pradesh and Bihar).

Loan Performance

39. ADBN's first year was restricted to continuing loans to cooperatives (as was done by its predecessor, the Cooperative Bank). After an initial decline in disbursements (Table 4), loans to cooperative credit societies increased to a maximum of Rs 5.1 million in 1969/70. After that, in 1970/71, loans to cooperatives were halved and loans to individuals more than doubled, from Rs 8.6 million to Rs 17.0 million. However, the Cooperative Revitali- zation Program, first implemented in 1971/72, brought an upswing in coop- erative loans to Rs 4.1 million in 1971/72 and a further tripling to Rs 144.8 million in 1972/73. Loans to individuals in the meantime levelled off to an annual increase of only 14 percent, reaching Rs 21.2 million in 1972/73. Since small and medium-sized farmers are served by cooperatives, an initial trend towards increasing share to large farmers (through individual loans) appears to have been reversed since 1970/71 (Table 4). With the assumption of the LRSC lending program in 1973/74 (which included loans to Ward and Village Committees), 2/ ADBN lending to and through cooperative societies and Ward and Village Committees combined (tentatively estimated at Rs 107.7 million) exceeds the direct lending to individuals.

1/ Comprising of lending for storage facilities (including cold storage), importation of tractors (for Terai) and power tillers (for the Hills). An additional US$140,000 will be spent on technical assistance to improve ADBN's implementation capacity. 2/ ADBN lends to guided cooperatives and guided village committees. LRSC's production loans are primarily to individuals through "non- guided" Ward and Village committees. ANNEX 7 Page 14

40. The annual recovery rate on loans by ADBN improved from its first year's performance of 80.3 percent of demand 1/ to 88.9 percent in 1969/70 when cooperative lending peaked (see Table 14w. Since then as loans to indi- viduals overshadowed cooperative lending and total loans disbursed nearly quadrupled, the annual recovery rate has dropped to 79 percent. Cooperatives tend to, be more delinquent with longer term loans (2 years or more) while individuals were particularly delinquent with the very short term loans of less than 90 days (see Table 15). A large proportion of the present loan delinquency is due to carryovers from the Cooperative Bank and ADBN lending prior to the Cooperatives Revitalization Program.

41. From 1969/70 to 1972/73, short-term loans increased the fastest (Table 16) as a result of the acceleration of agricultural production loans (Table 17). Long-term loans declined substantially since 1970/71 (Table 16) because lending for resettlement ceased and loans for tea expansion declined (Table 17). Medium-term loans gradually increased primarily because of farm mechanization loans (for importing tractors and pumpsets).

The Nepal Rastra Bank (NRB)

42. NRB controls credit under a general regulation of 1966 by:

(a) fixing rates of interest for particular purposes;

(b) providing rediscount facilities, up to certain limits, at rates related to development priorities;

(c) requiring banks to lend not more than prescribed propor- tions of amounts for various purposes (e.g. 60% for imports, or a "margin" of 40%).

43. Although ADBN lending rates (para 26 and Table 10) and commercial bank rates (Table 18) are approximately in line for comparable categories, such a wide variation in lending rates between 6.5% (for export bill credit) and 13% (for non-domestic hire purchase) needs to be rationalized. 2/

44. An important role of the NRB has been to greatly increase the financial support to ADBN and LRSC. As of July 15, 1973, NRB had paid up equity shares totaling Rs 5 million in the ADBN for refinancing (double that the previous year). NRB's annual refinancing of ADBN more than tripled from RsI3 million in 1970/71 to Rs 10.4 million in 1972/73 (Table 18),

1/ Demand: repayments and interest falling due during the year, plus overdues (and interest from previous years). 2/ For example, in short term credit to individuals, it is not clear why there should be a 1-1/2% interest rate differential between credit to farmers compared with credit to dealers for fertilizers, pesticides and seeds. ANNEX 7 Page 15 resulting primarily from increases for production loans, irrigation and tea investments. NRB refinanced food marketing loans through 1971/72 and warehouse construction in 1972/73 through LRSC (Table 18). NRB rediscount rates are given in Table 10. An Agricultural Credit Survey, undertaken by a specially created Survey Board, was started in 1969 and took three years to complete. Recommendations were made by the Board throughout this period and many were implemented before the survey report was published in 1972. Ninety different recommendations were made for improving the agricultural credit system in Nepal. Thirteen of these dealt with the role of the Nepal Rastra Bank in the new system.

45. One of the first recommendations to be implemented was the setting up of an Agricultural Credit Department (ACD) in the Rastra Bank. This Department makes recommendations to the Rastra Bank and HMG regarding agri- cultural credit policies and allocation of resources for agricultural credit and in general helps coordinate agricultural credit policies with other agencies and institutions of the Government. Both the Director and Deputy Director of this Department are experienced agricultural credit specialists. ACD appears to have considerable influence on the shape of the emerging new system, one objective being to increase the importance of institutional credit in agriculture.

Commercial Banks

46. There are two commercial banks in Nepal. The Nepal Bank Limited is the larger (with 62 branches), and the Rastriya Vanijya Bank has 35 branches. HMG provides financial assistance to these Banks through (i) compensation for any loss incurred by branches established under the Compensatory Finance Scheme, and (ii) interest free loans to new branches opened under the Development Banking Scheme. These two schemes are aimed at encouraging com- mercial banks to open branches in some of the more isolated agricultural and less profitable areas. They have resulted in the creation of a banking network covering most of the nation. The number of branches increased from 82 in FY 1971/72 to 97 by the end of FY 1972/73. 1/

47. The Rastra Credit Survey conducted interviews 2/ with 32 branches of the commercial banks. Twenty-nine branches were found to have extended loans against agricultural products during the year of the survey and 23 branches extended credit against gold and silver for agricultural purposes. Of 1,544 commercial bank borrowers reported to have received "agricultural credit" 3/

1/ Nepal Rastra Bank Quarterly Report, Mid April, 1973. 2/ Nepal Rastra Bank, Agricultural Credit Survey, 1972, Vol. II, pp. 512-515. 3/ In practice, borrowers lending on gold/silver as security have flexibility in the use of their borrowed funds. ANNEX 7 Page 16

56 percent were traders, 31 percent mill-owners and 13 percent were "indi- viduals" (mainly commercial farmers in the Terai). The only beneficiaries of commercial bank loans in the Hills were traders. Commercial banks made no impact on small farmers in 1970. Commercial banks indicated 1/ that they would open branches (and supply credit) in areas where present agricultural credit institutions are absent, only if subsidized to do so. 2/ The Credit Survey Board suggested that commercial banks should lend to marketing institutions for warehouse construction and that they should grant loans to farmers against the warehouse receipts. These recommendations have not been implemented.

Cooperatives

48. Because of the limited success with cooperatives in the past, due primarily to poor management, HMG started the Cooperative Revitalization Program in 1971. The primary objective of the program was to implement a system that will provide credit, technical assistance, agricultural inputs, and marketing and storage facilities for the farmers under good management. To provide good management, ADBN started to form guided cooperatives and guided Village Committees by assigning managers and Field Supervisors (or Assistant Field Supervisors) to actively work with selected Village Com- mittees. ADBN and HMG are subsidizing the salaries of the Managers and Field Supervisors.

49. The program, limited to the 28 districts of the Intensive Agri- cultural Development Program (Map 11050, General Report), grew from an initial 130 guided cooperatives to 147 by 1972/73. A Cooperative Revitalization Section in ADBN's central office operates the program under the direction of the General Manager.

50. Guided Cooperatives have the following functions: 3/

(a) To provide timely loans to members for seed, fertilizer, pesticides, bullocks, small agricultural implements and hired labor costs;

(b) To sell agricultural inputs as above;

(c) To make necessary arrangement for marketing of agricultural produce of members; and

(d) If appropriate, to operate a small consumer goods store.

1/ Mission interviews with the general manager.

2/ In these areas they would act as agents for ADBN.

3/ Agricultural Development Bank, Cooperative Manual, June, 1973. ANNEX 7 Page 17

51. Technical and other support to be provided guided cooperatives includes:

(a) the assignment of a JTA to each cooperative society to help prepare farm plans for farmer members and to provide technical guidance at the farm level;

(b) the Agricultural Marketing Corporation will provide the agricultural inputs to its members and at the same time have an income from commissions on sales; and

(c) financial support from the Government for warehouse construction.

The Department of Cooperatives (Ministry of Land Reform), handles the inspection and auditing services for the cooperatives and in collaboration with ADBN and conducts training programs for cooperative personnel and members of the advisory committees. Cooperative Advisors/Auditors are stationed at the district level and provide direct supervision to the cooperatives in their area.

52. The Ministry of Land Reform has a training center in Kathmandu and holds regular training courses for new cooperative personnel including managers, auditors and supervisors, and gives refresher courses as well. There is generally close coordination between Cooperative Department personnel and ADBN at the central and district level.

53. Each guided cooperative has a nine-member advisory committee selected by the society members. The advisory committee meets at least once a month to review the program and progress of the cooperative society. The Committee advises the manager, assists in formulation of programs and budgets, assesses the credit requirements of cooperative members, and recommends loans.

54. Lending terms and policies for guided cooperatives are covered in paras 26 - 28. Cooperative loan procedures start with the JTA helping the cooperative member prepare an individual farm plan. The plan is supposed to detail his farming operations including plans for using improved practices, his income and expense, and repayment ability. The applicant complCes .-I loan application form (equivalent to a promissory note) and provides the documentation required to show right of possession of the property being farmed. If the Cooperative Manager considers the application complete and the loan sound, he presents it to the cooperative advisory committee for review. All such applications passed by the advisory coimmittee are summarized as to amount and purpose and forwarded to the appropriate District Office of ABDN. The Loan Officer of the Bank will review the summnary information submitted by the cooperative and make field checks on the farm of at least 10 percent of the applicants listed to make a detailed analysis of the information submitted. If the loan officer is satisfied with his spot check, he approves the loan in total to the cooperative either in cash or ANNEX 7 Page 18

in kind, as appropriate. For production inputs, ABDN will issue coupons to the cooperative for delivery to the borrowing member who exchanges the coupons for the approved inputs from AMC, a Cooperative Union or AMC dealers. In some instances, disbursement will be on the installment plan with the secondiand subsequent releases, if any, being contingent upon fulfilling obligations up to that point.

55. The success of the Cooperative Revitalization Scheme is evident from the reversal of the declining trend of cooperatives' share of total loans (vis-a-vis private loans) disbursed annually by ADBN (Table 4). The program also enabled cooperatives to achieve a better repayment record than that of individual loans (Table 14). 1/ Some cooperatives started with low membership, but substantially increased their membership in the second year as shown below.

First and Second Years' Operations of 68 Guided Cooperatives-

FY 1971/72 FY 1972/73

Number of members 13,388 17,651 Total Volume of Business Rs 17,476,564 Rs 33,304,438 Net Profit Rs 451,590 Rs 1,019,179 Profit as % of Volume 2.5% 3.1% Business per Member Rs 1,300 Rs 1,900

/a 130 cooperatives were in the program by the end of 1971/72 and 147 by the end of 1972/73.

Source: Agricultural Development Bank, September 1973.

56. The amount of business done through the cooperatives also increased substantially during the second year of operations as shown above. Profit per unit volume increased from 2.5% to 3.1% and individual loan volume increased by 46%.

57. A number of factors favor the success of the guided cooperative system. The managers assigned to the cooperatives are college graduates (although not necessarily from agricultural colleges). Many have some practical cooperative experience. As a group they appear to be eager, dedicated and accepted in the neighborhood where assigned. The cooperatives are given priority by AMC in procuring the appropriate agricultural inputs and a 2 percent commission advantage over other dealers. The conventional coop- erative Board of Directors has been replaced by an Advisory Board to the manager. The manager and the ADBN staff set cooperative policy (within the legal authority of the Cooperative Act). This reduces the opportunity for a big farmer (or political) take over of cooperative policies and operations, one of the criticisms of earlier cooperative programs.

1/ All but eight of the 130 guided cooperatives increased their gross business (many as much as 300-400%) by the second year of operations. ANNEX 7 Page 19

Coordination Among Government Agencies

58. The success of credit provision and the cooperative system depends on its coordination with other government agencies or departments. The extension service provides specific technical assistance through assignment of JTAs to prepare farm plans (para 53). AMC delivers inputs to cooperatives through its branch offices or through agents and is supposed to assist in marketing. Specialized agencies like the Jute Board provide both production and marketing services. Weaknesses in any of these vital links will affect the effectiveness of ADBN's role in making guided cooperatives effective.

59. One particular weakness is the cumbersome method by which input and credit requirements are assessed for production loans which results in untimely and often insufficient arrivals of inputs.

60. The source of production loans for a cooperative member is ADBN (through his cooperative), while individuals apply directly or through his village committee to LRSC. In either case, a prerequisite is the certification of a farm plan by a JTA which is basically an estimation of his input requirements. At the guided cooperatives level, this certification in practice 1/ comprises of the farmer telling the JTA how much land he intends to plant under a particular crop; the JTA automatically calculates his input requirements by referring to a table of recommended fertilizer rates. For individual loans directly or through village committees, since on the average, a JTA covers about 2 - 5 villages (each with an average of 2,000 farm households), the frequent practice is for the District Land Reform Officer (or sometimes other cooperatives' officials) to fill the farm plans for the JTAs to sign.

61. After the farm plan is certified by the JTAs, the assessments of requirements 2/ are passed through the offices of the District Agricul- tural Development Officer (DADO), District Land Reform Officer (DLRO), ADBN Branch (or LRSC representative) for review before submitting to the AMC sales office. Such a protracted process involving 5 government agencies often results in requirements arriving late to the AMC office and the consequent delay in delivery. 3/ This process is also of little use since AMC usually adjusts the estimates downwards4/ in order not to be stranded with leftover stocks.

1/ C. Y. Lee, Marketing of Fertilizers in Nepal. 2/ Depending on whether the application is through the cooperatives or village committees (individual loans). 3/ Other constraints facing AMC shortages of supply due to slow handling of imports in Calcutta; difficulties of internal support; lack of storage facilities; (limited branches and staff) are also responsible for untimely delivery. 4/ In numerous cases, AMC dealers overadjust, causing shortages at delivery time. ANNEX 7 Page 20

62. We suggest that AMC or its dealers should participate in the process of assessing input requirements with either the JTAs or ADBN loan supervisors at the guided cooperatives or village committee level. A revision of the farm plan format should be made by ADBN in consultation with AMC and the Departments of Agriculture and Land Reform. With both AMC (through its dealers 1/ or branches) and ADBN (through its JTAs or loan supervisors) simultaneously agreeing on the input requirements, loan processing and orders for inputs can proceed immediately. Priority deliveries for farmers who deposit a token amount (say 10% of value) for their inputs at least one season ahead would ensure less shortfall of requirements.

III. PLANS AND PROSPECTS

Credit Requirements and Issues for the Future

63. Estimates of credit requirements for the decade ending in 1981/82 have been worked out by the Nepal Rastra Bank survey. The cumulative gross disbursement of medium-and long-term loans in the next 10 years stands in the neighborhood of Rs 770 million. Of this, not more than 25 percent is expected to be recovered within that period and outstanding loans would amount to about Rs 580 million by the end of 1981/82. With regard to short- term credit, by the fiscal year 1981/82, the lending institutions will have to disburse annually Rs 350 millicn. Such a high credit need is probably unrealistic. It assumes that all farmers to whom institutional credit is made available will apply for the optimum amount of credit required to maximize production. It assumes further that improved technology will be employed on 33 percent of the total cropped area by 1981/82. Irrespective of the precise figure, it will undoubtedly be multiples of the present (1971/72) annual institutional credit disbursement of Rs 67.5 million 2/. 64. The relevant questions are:

(a) how can the institutions increase their lending activities to keep up with potential needs (both in value and beneficiaries)?

(b) what should be HMG's strategy regarding the future roles and emphases of ADBN and the Land Reform Program in the provision of institutional credit?

65. As a greater proportion of the more accessible (and larger) farmer's needs are supplied, larger proportions of demand for credit will come from

1/ In numerous cases, AMC dealers overadjust, causing shortages at delivery time. -2/ Comprising of Rs 6.5 M from village committees, Rs 37.4 M from LRSC and Rs 23.4 M from ADBN. ANNEX 7 Page 2 sources which will be more difficult to service, but which cannot be ignored. A substantial segment of the smaller farmers who are marginally self-sufficient, can be moved into a higher economic status with improved technology and its accompanying credit needs. At present they are mainly dependant on informal sources of credit (particularly moneylenders) at exhorbitant interest rates. The extent to which present institutional lending agencies can reach these farmers, and the needs to modify present lending policies are important.

66. This section focusses on these questions and attempts to draw on lessons of the past in making a realistic assessment of the future roles of these credit agencies.

Fourth Five-Year Plan Targets and Achievements for Agricultural Credit

67. Despite rather ambitious targets, ADBN managed to exceed its first three years' loan targets, set under the Fourth Five Year Plan, as shown below. The inability of LRSC to achieve its target, mainly reflects overly optimistic assessments of lending possibilities.

Cumulative 70/71 71/72 72/73 70/71-72/73 73/74 74/75 … (Rs------Million) ------

ADBN

Targets 12.5 20.0 30.0 62.5 45.0 65.0 Achievements 19.2 23.4 35.9 78.5

LRSC

Targets 34.4 46.4 58.2 139.0 73.1 90.5 Achievements 20.6 37.4 40.0 98.0

/a Estimate.

68. ADBN also exceeded its targets for accumulation of funds. By 1972/73, ADBN was targeted to receive Rs 64,000 M from different sources (as shown below) and achieved Rs 123,400 M. ANNEX 7 Page 22

Target Achievement (1970/71-72/73) (1970/71-72/73) Share Capital - HMG 5,000 38,738 Others 5,820 6,096

Deposits 2,950 5,052

Borrowings from Financial Institutions 29,297 21,601

Loan Repayments 20,933 51,903

Total 64?000 123,390

Future Availability of Financial Resources

69. A larger credit demand implies that additonal resources will have to come from the following sources:

(a) sizeable increase in the share capital by government, Rastra Bank, commercial banks and borrowers;

(b) mobilization of rural savings through deposits primarily through ADBN;

(c) subscription of long-term debentures by the Provident Fund Corporation, Insurance Companies, Commercial Banks and other borrowings;

(d) reactivation of the compulsory savings scheme; and

(e) accumulated reserves and foreign loans and grants.

70. From the first three years experience in the Fourth Plan (para 67), ADBN still has to rely heavily on the share capital provided by government. Despite its good record, ADBN should continue to operate on a self-financing basis. Otherwise losses which occur because of pricing of services which do not take into account the real cost of borrowing money (and do not make provision for likely defaults in repayment), could result in a heavy drain on public resources. Higher interest rates may well be required to attract deposits in the rural sector. Furthermore, primarily because of its cooperative management activities, administrative cost (at 6.8% of the loan portfolio) are relatively high (para 37). As the guided cooperative program grows, costs will increase further. An interest rate of more than 10 percent for short term loans need not defeat the purpose of institutional credit. Rates charged by moneylenders are so high (25-50%) that even if the rate of interest charged by the credit institutions were to be raised to 12 - 14 percent, the gap between the two rates would still be significant. Further- ANNEX 7 Page 23

more, farmers are less concerned with the rate of interest charged than with the adequacy, timeliness and easy availability of the short-term loans.

71. Whether the compulsory savings scheme should be reactivated as a source of credit funds, depends primarily on the results of the audit of ward and village committees presently being completed by the Department of Land Reform (para 13). One of the primary reasons for the suspension of compulsory savings was that the volume collected was considered generally sufficient to meet the demand for commercial credit under existing levels of technology and infrastructure support (para 13). If the audit verifies this, it implies that the absorptive capacity of credit by farmers is in fact the real constraint and efforts to improve their absorptive capacity should be the primary focus. If the collection of compulsory savings were self-financing (which is unlikely), the pool of loanable funds, estimated to be about Rs 80 M 1/ at the end of 1971/72, equal to ADBN's cumulative loan record from 1970/71 - 1972/73), may indeed be sufficient for lending to farmers 2/. The audit should reveal how much is in fact available for future lending.

Role of Village Committees

72. The village committees should continue their roles as institutional lenders to farmers. They have been the only institutions which have made significant progress in reaching the small farmer (para 16) and they are the "raw materials" of future guided cooperatives. The village committee audits should enable a thorough assessment of the present situation of repayments, actual administrative costs and the necessary ingredients to make lending through village committees more successful 3/.

Future Emphases of ADBN

73. ADBN intends to expand its Cooperative Revitalization Program to ultimately encompass 500 to 600 cooperatives, serving the whole of Nepal. The target for the first ten years (ending 1981) is about 300 cooperatives and 150 guided village committees operating in all major producing areas. The present number of guided village committees would be reduced by consolidation and transformation into cooperatives. The rate of expansion of this program will be dependant on (a) the acceptance by the farmers; (b) the rate at which future village committees can be readied for conversion to guided coopera- tives; (c) the implementation capacity of ADBN.

1/ Total savings (both cash and kind) collected cumulatively valued at Rs 123.55 M by 1972 and total amounts deposited into LRSC in the same period were Rs 42.82 M (see Tables 5 and 8). 2/ Only Rs 4.2 million have so far been repayed in the form of interest. This amDunt and remaining repayments will have to be deducted from it. 3/ An improved system of assisting village committees through the Land Reform Department is given in para 80. ANNEX 7 Page 24

74. The acceptance by farmers is evident by the success of the guided cooperatives themselves. A sample of 68 cooperatives (para 53) showed an increase of 32% in membership in its second year. The rate at which future village' committees can be converted to either guided village committees or cooperatives will undoubtedly be slower since the most progressive groups have already been converted.

75. ADBN is one of the most effective government agencies in Nepal. Before the Revitalization Program, its training program and timely staff expansion enabled ADBN to handle a tripling of lending in three years. About 100 of its staff have overseas training in credit, including cooper- ative credit. With the merger, 201 employees (reasonably experienced in agricultural credit), were transferred from LRSC to ADBN. Since the opera- tions of the two agencies were different and agency loyalties tend to persist, the adjustment process is proceeding, albeit with some teething problems. The merger of LRSC into ADBN undoubtedly implies a potentially poorer per- formance with LRSC's poorer repayment record of about 56% (from 1966/67 - 1971/72) compared with ADBN's recovery rate of 84%; and its inability to meet past targets (para 67).

76. No particular difficulty is expected in filling additional staff positions at the central and district level as ADBN has traditionally been a preferred employer. The critical area is at the guided cooperative and guided village committee level where both managers, JTAs and Field Supervisors must be provided. To date ADBN has been able to recruit and train, with the Department of Cooperative's assistance, the required number of qualified cooperative managers. Assistance is however required to increase the capacity of the Training Institute run by the Department of Cooperatives in the Minis- try of Land Reform. Managers and Field Supervisors are not considered career ADBN employees, but their attachment to ADBN and the comparatively good salary has been enough to attract good people for these assignments. Junior Technical Assistants (JTAs) are assigned to the guided cooperative and guided village committees by the Extension Service but remain on the Extension staff (receiving comparatively lower salaries). It is therefore quite surprising that the JTAs have in general provided a useful input in these operations. The assignment of enough JTAs to meet the needs of the expanding ADBN program at the cooperative and village committee level will however place an even 'greater burden on the Extension Service in carrying out its own program 1/.

78. A modification of the existing system to better use ADBN's personnel is required. Since the ultimate success of the credit program depends on how well it is administered, supervised and able to reduce loan processing time to

1/ The Extension Service presently has 692 JTAs on its staff. With 192 guided cooperatives and 434 Village Committees in the credit system, 626 JTAs would be needed to assign one to each guided cooperative and Village Committee. ANNEX 7 Page 25 an acceptable level, adequate contact must be maintained between the district and local levels. This is important not only for the staff working directly with the guided cooperative and guided Village Committees, but also for contacts between the District Office and individual borrowers in the case of direct loans. During the lending season, district loan officers face the difficult requirement of spot-visits to at least 10% of cooperative-loan applicants and all individual-loan applicants. Consideration should be given to increasing the number of assistant loan officers or loan supervisors in the District Office and assigning them to sub-districts, the size depending on the extent of guided cooperatives and guided village committees and the transportation problems involved. They would work with the cooperative manager and village committee supervisors during the period of loan application and perform the functions now performed by the district loan officer in spot-checking cooperative loan applications or servicing direct individual loans. They would report back to the District Office periodically and thus provide the link between the the District Office and the field. Loan officers will then have a primarily supervisory function both for financial as well as from plan auditing. The loan officer should be given loan approval authority 1/ at the cooperative and village committee level which would help speed up loan processing operations considerably.

79. Managers and field supervisors of cooperatives and village committees should be given training in JTA responsibilities 2/ so that in the absence of JTAs (or in rush periods), they would be qualified to complete the farmers' farm plans and loan applications. 3/ The local loan supervisors would be available, on a scheduled basis, to assist in preparing loan applications, and follow-up loan supervisions. It is not suggested that Extension JTAs no longer be used in the ADBN Credit Program but that they should only be attached to the larger cooperatives with large lending programs. Periodic consultation between District Agricultural officers and ADBN Branch Managers on where JTA needs are greatest should be initiated. For the smaller units, a JTA can then be assigned to several cooperatives or village committees

1/ At a minimum the area loan office should be authorized to approve production loans made through the cooperatives to their members.

2/ This would probably entail an extra month or two in the training program.

3/ With efforts to simplify the present farm plan (para 62), the job should be easier. ANNEX 7 Page 26 within his geographic area of responsibility. Fewer JTAs would be required 1/ since ADBN personnel would be qualified to complement the JTAs assigned to the cooperatives and village committees.

80. An added complication in the merger of LRSC and ADBN is the former LRSC activity of lending to the district land reform offices and the Ward/ Village Committees for production loans to farmers. The Bank Act has been amended to authorize ADBN lending to Ward/Village Committees, but there are some 3,000 of them located throughout the country, mostly in areas where ADBN branches are not yet established. ADBN is understandably apprehensive since this new mandate is pushing ADBN into a more unconventional banking activity. It is however an activity which needs to be supported 2/. This activity can still be partially handled by the absorbed LRSC staff. More efforts 'should be made to use the land reform departments as "loan processing intermediaries" since they have the staff 3/ at the local level in the districts where ADBN activities are minimal.

81. ADBN is changing its emphasis to assist the small farmer with:

(a) the reduction of security requirement to just a pledge on the standing crop;

(b) the expansion program in guided cooperatives (para 68) 4/

(c) expanding 90% of its branches from 1973/74 - 1977/78 into the Hills 5/.

These moves, although creditable, will still not have the impact on small farmers that can be gained by the continued support of the former LRSC's activities in lending to the Ward/Village Committees through the Land Reform Department.

1/ As ADBN staff develops the capacity to provide technical assistance in loan making and servicing, the number of JTAs required from the Extension Service could be reduced. It is suggested that only about 150 JTAs with some training in credit as well as extension work be assigned to work with ADBN at the cooperatives and village committees. 2/ Unless the Ward/Village Committee audits (para 13) show that they can be completely self-financing. 3/ Their non-gazetted second class officers (JTA level) number 1,900 (compared with 692 JTAs in the extension serzvice). 4/ Beneficiaries of guided cooperatives lending also includes medium sized- farmers (i.e. those with less than 6.7 ha). However,, "active considera- tion" is being given to restrict the beneficiaries- to farmers with. less- than 2.7 ha. 5/ However, only 10 new branches are expected to be opened during this period. ANNEX 7 Page 27

Program Emphasis Summary

82. The Program emphasis for Agricultural Credit in Nepal may be summarized as:

(a) continuation of ADBN's conventional lending to individuals and organizations for agricultural production, agri-business, marketing and agro-industries (para 31);

(b) expansion of the guided cooperative program with greater emphasis on (i) reaching the small farmers (both in the Terai and Hills) and (ii) more efficient use of district staff (loan officers, loan supervisors, cooperative managers and JTAs);

(c) a thorough analysis (possibly through a joint working committee 1/) of the Ward/Village Committee audits (in 23 districts) to evaluate the need of reaciivating the com- pulsory savings scheme and how village committee lending can be improved; and

(d) support of former LRSC-type lending to village committees (para 80) should be given by ADBN, using the Land Reform Department as a "lending intermediary".

1/ Consisting of the representatives from the National Planning Commission; Ministries of Land Reform, Finance, Agriculture, and Home and Panchayats; ADBN; and Nepal Rastra Bank. ANNEX 7 Page 28

Table 1: FARM BORROWINGS BY LOAN VOLIME AND FARM FAmLES, 1%969/70

% Borrowings % Borro 'ngs From All Farms From SmallLa Farms By Loan By Farm By Loan By Farm Volume Families Volume Families

Institutional 20. 18.1 2:0 15.2 Cooperatives 1.5 3.0 0.8 2.8 Ward/Village Committees 7.8 12.4 6.6 10.7 Agricultural Development Bank 2.3 0.2 - - Land Reform Savings Corporation 6.1 0.1 - - Conmiercial Banks 3.2 2.4 1.6 1.7

Private 79.1 81.9 91.0 84.8 Moneylenders 37.4 43.4 44.0 46.2 Landlords 5.2 2.8 4.1 2.9 Traders 2.9 3.3 2.9 2.8 Friends and Relatives 33.6 32.4 40.0 32.9

100.0 100.0 100.0 100.0

Borrowings/Farm Family Rs 345 Rs 245

/1 Less than 4 bigha (2.7 ha).

Source: Calculated from Rastra Bank, Agricultural Credit Survey, 1972, Vol. IV, pp 151, 154 and 157. ANNEX 7 Page 29

Table 2: INSTITUTIONAL AND PRIVATE AGRICULTURAL CREDIT BY PURPOSE, 1969/70

Sources Purpose of Borrowing Institutional Private ------(Percentage) ------Inputs 90.91 9.C9

Payment of Wages 44.23 55.77

Other Operational Costs 65.72 34.28

Digging and Repair of Wells - -

Purchase of Livestock 22.84 77.16

Investment in Poultry - -

Other Medium-Term 40.18 59.82

Purchase of Land 13.56 86.414

Purchase of Heavy Machineries, Tools, and Transport Equipment 100.0 -

Other Long-Term - -

Agriculture and Consumption 10.68 89.32

Consumption 14.32 85.68

Repayment of old debts 25.71 74.29

"Other" 6.98 93.02

Source: Nepal Rastra Bank. ANNEX 7 Page 30

Table 3: COOPERATIVE BANK - CUMULATIVE RESOURCES AND LOAN DISBURS E}iETS, FY ENDING 1964-1967 (Rs Thousand)

1964 1L965 1966 1967

Resources:

(a) Paid-up capital:

i) From government 2,766 3,928 4,350 4,673 ii) From cooperative societies 115 122 1h7 168

Sub-total 2,881 4,050 4,497 4sh61

(b) Deposits - - 433 1,934

(c) Borrowings - 672 1,810

Total Resources 2,881 4,050 5,602

Loan Disbursements (By Purpose):

(a) Agricultural production/a 434 813 2,618 5',021

(b) Marketing and warehousing-2 204 452 630 1,h38

(c) Resettlement program 100 217 420 820

(d) Consumer's store 70 109 589 986

Total Disbursements 808 1,591 4,257 8,2h7

/1 Includes loan for production of paddy, wheat, and maize, and for bullock, irrigation, animal husbandry, poultry, cottage industries,, etc.

/2 Includes loan for marketing of food products, cash crops and construction of warehouses.

Source: Agricultural Development Bank. Table 4: ANNUAL LOANS MADE BY THE AGRICULTURAL DEVELOPMENT BANK - TO COOPERATIVES AND INDIVIDUALS 1963/64 - 1972/73 (Rs Thousand)

63/64 6h/65 65/66 66/67 67/68 68/69 69/70 70/71 71/72 72/73

Loans

Cooperatives 808 783 2,666 3,990 3,588 4,562 5,078 2,249 4,117 13,971

Individuals and others - - - - - 3,485 8,561 16,961 19,263 22,014

Cooperatives as % of total 100 100 100 100 100 57 37 12 18 39

Yearly Total 808 783 2,666 3,990 3,588 8,047 13,639 19,210 23,380 35,985 Cumulative Total 808 1,591 4,257 8,247 11,825 19,882 33,521 52,731 76,111 112,096

Loan Portfolio year end- 9,194 18,184 31,402 41,286 56,736

Annual Loans as % of year 88 75 61 57 63 end Portfolio

Seasonal Loans as % of Total 35 35 46 61

/1 The Cooperative Bank prior to 67/68. 72 Table 11

Source: The Agricultural Development Bank, September 1973C ANNEX 7 Page 32

Table 5: TOTAL COMPULSORY SAVINGS COLLECTED

Fiscal Year Cash Kind Total Value/- (1000 Rs) ('000 Maunds) ('000 Rs)

1964/65 1,036 865 22,665

1965/66 5,578 2,209 60,807

1966/67 2,030 735 20,402

1967/68 735 294 8,075

1968/69 5,633 131 8,896

1969/70 184 9 405

1970/71 324 4 415

1971/72 869 1 882

1972/73 1,005 n.s. 1,008

Total 17,394 4,248 123,555

/1 Collection in kind is valued at R 25/maund.

Source: Department of Land Reform, September 1973.

Note - n.s. - less than 500 maunds. Table 6: LOANS ADVANCED AND RECOVERED BY WARD/VILLAGE COMMITTEES

Loans Advanced Loans Recovered Cash Kind Total /1 Cash Kind Total /1 Fiscal Year '000 Rs ('000 maunds)( OQOitons ('00 R000R0s) ('000 maunds)(00mtons) ('OOO Rs)

1964/65 509 288 10.75 7,709 noso/2 n.s. nos, n.s.

1965/66 3,678 1,336 49.86 37,078 1,414 604 22.54 16,514 1966/67 4,695 1,919 71.62 52,670 2,568 1,874 69.94 49,418 1967/68 2,109 966 36.05 26,259 1,832 1,100 41.05 29,332 1968/69 1,654 542 20.23 15,204 1,299 788 29.41 20,999

1969/70 1,469 395 14.74 11,344 1,098 282 10.52 8,148

1970/71 1,638 207 7.73 6,813 2,256 391 14.59 12,031

1971/72 1,082 223 8.32 6,657 1,386 257 26.80 7,811

1972/73 893 71 2.65 2,668 2,211 186 6.94 6,861

Total 17,727 5,947 221.94 166,402 12,064 5,482 204.59 151,114

/1 Loans in kind are valued at Rs 25/maund. v_ n.s. = less than 500 rupees or mtons.

Source: Department of Land Reform, September 1973. ANNEX 7 Page 34

Table 7: CUMULATIVE LOANS ADVANCED AND RBCOVERED BY WARD/VILLAGE CONNITTEES, BY REGIONS, 1964/65 - 1970/71

Loans Advanced Recovery Region Amount Distribution Rate (Rs Million) M T%Y

Kathmandu 1.71 1 81

Eastern Terai 64.45 51h

Western Terai 26.40 21 39

Eastern Hills 7.1U 6 87

lWestern Hills 25.98 21 5

All Regions 125.65 100 46

Source: Derived from Zaman, Evaluation of Land Reform, p. 116. ANNEX 7 Page 35

Table 8: CCMXPULSORY SAVINGS DEPOSITED IN LAND REFORM SAVINGS CORPORATION, AND LOANS DISBURSED AND RECOVERED

(Rs '000)

Amount Amount Amount Year Deposited Disbursed Recovered

1966/67 13,861 8,961 1967/68 2,749 7,576 8,085

1968/69 5,577 5,003 5,746 1969/70 7,014 8,433 3,702 1970/71 7,728 20,571 15,290

1971/72 5,793 37,436 16,599

Total 66/67-71/72 42,822 87,980 49,422

Source: Land Reform Savings Corporation (ADBN) October 1973. Table 9: LOA14S DlSBURSED BY LRSO VA1IvU-tS FiruRrOSES (Rs '000)

Purpose- 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72

1. Institutional - 8,961 7,054 3,930 2,000 8,817 22,536

2. Ward/Tillage Committee - 433 895 919 1,845 4,749 (Production Loan) Wheat - 181 409 224 1,108 1,095 Maize - 73 - 117 47 488 Paddy - 179 486 578 690 2,734 Others - - - - - 432

3. Cooperative Loan - - - 836 1,160

Short Term - - - - 827 1,148 Medium Term - - - - 9 12

4. Individual - 89 128 1,147 2,853 1,084

Agro-Industry - 50 23 88 1,182 23 Agro-Imiplements - 39 105 1,059 1,666 78o Others - - - - 5 281

5. District Loan - - 50 200 378 5s795

6. Other Investments - - - 4,167 5,842 2,112

Total 8,961 7s576 5,003 8 433 20,571 37,h36

/1 To institutions like ASC, FMC and later AMC mainly for the purchase of agricultural inputs and foodstuff.

Source: Agricultural Development Bank, September, 1973. ANNEX 7 Page 37

Table 10: ADBN INTEREST RATE STRUCTURE AND RASTRA BANK REFINANCE RATES TN THE AGRICULTURAL SECTOR ADBN Max NRB Lending Refinance Rate Rate

1. Short Term Credit (UP to 1.5 years):

(a) To Institutions (for all purposes) 7 3

(b) To individuals 10 6

(i) Fertilizers, Pesticides and Improved Seeds 10 6 (ii) Agricultitral Marketing 9½ 5½ (iii) Working Capital for Agro- industries 8 4i (iv) Dealers in Chemical Ferti- lizers, Pesticides, Improved Seeds and Agricultural Implements 7½ *5

2. Medium Term Credit-(Up to 5 years):

(a) To Institutions 6 2½ (b) To Individuals

(i) Cotton and Other Priority Cash Crops * 2! (ii) Tea, Herbs, Horticulture, Minor irrigation, Poultry, Animal Husbandry and Fishery, Processing Industries, and Agricultural Implements and Accessories and Spares 7½ 3 (iii) Other Purposes (including Tractors) 9 5½ (iv) Barn House O 2

3. Long Term Credit (Over 5 years):

(a) To Institutions ½ 2 (b) To Individuals

(i) Warehousing, Tea and Fruit 3 Plantation and Processing (ii) Other Purposes 6 4 Source: Nepal Rastra Bank, Quarterly SvonoTnCc Bulletin Table 11.: AGRICUILTURAJ DEVELOPMENT BANK SUMMARIZED BALANCE SHEhTS AT JULY 15. (thousand Nepalese rupees)

- ctual ------1968/69 - 969Z70 1970/71 1971/? _1972/73

L2,.IIITI:;S

Deposits 4,587 5,'92 S,3 4,773 5,052 Sundry Creditoras IrepayL!ents 296 7r8 906 1,592 6,369

:rployee & Gtner bSus - _ 380 51' 799

Forroied Punds _2,192 3.130 7.9i4 7.4a7_ 22,257

Subtotal 7,075 9,250 14,613 14,367 34,177

b7ahareholders' thriis

Share Capaldt 12,523 17,623 22,660 33,O03 4L, 34

,eserv,es

General (Includrng P &L a/c) 1,751 1,69? 1,813 1,861 1,964

Interest '.uspense - - 235 334 434

lad 'ebts - - 100 ,00 550

1rno it &LosB Jtccount (Incorporated in General Reserve) (38) (-69) (52) (48) 10(3

Subtotal 14,274 19,311 25,008 39,588 47.782

floAL 21,349 28,561 39,621 49,955 82,259

A.SOThS

Cash or Equivalent 1,420 2,3.3 2,755 2,272 6,414

Inveatrents 9,360 6,o92 2,402 2,492 2,664

Sundry lleStors & .dvances 573 803 2,767 2,118 13,498

Loan Fortfolic 9,134 12,124 31,02 41,2Sf 52,737

Loan to 'aployees 32 137 316 Sl *')

Fixed Assets (Depreciated) 590 9t 87^ 1,01 .

Other Assets 120 8? 107 161 27

TOTAL 21,349 £3,s%1 ' ,621 43.299 82,259 --I Table 12: AGRICULTURAL DEVELOPMENT BANK SUMMARIZED PROFIT AND LOSS ACCOUNTS (YEARS ENEDA/NDING JULY 15)

(thousand Nepalese rupees)

1968/69 1969/70 1970/71 1971/72 1972/73

INCOME

Interest Received 886 1,521 2,258 2,775 4,011

Other Income 28 10 21 126 665

TOTAL: 914 1,531 2,279 2,901 4,676

EXPENDITURE

Salaries & Allowances 487 807 1,015 1,376 2,106

Other EXpenses 311 558 644 919 1,767

Subtotal: 798 1,365 1,659 2,295 3,873

Interest Paid 78 235 400 358 450

Reserves & Provisions - - 100 200 250

Net Profit (Loss) 38 (69) 120 46 103

TOTAL: 914 1,531 2,279 2,901 4,676

January 15J 1974 ANNEX 7 Page 40 Table 13 : RELEVANT RATIOS FROM ADEN ACCOTNTS

68/69 62/m7 70/71 71/7? 7?/73

Gross Revenue % of Assets ),.3 5.)i 5.8 5.8 5.7

Net Profit % of Average Total Assets ------less than 1 -----

% of Averppe Capital & Reserves ------less than 1%------

Debt/Equity Ratio °.5 o.5 o.6 o.l, 0.7

Interest Income % Portfoliol )t.8 6.3 6.7 6.3 6.8

Tnterest Cost f Borrowings 3.6 7.5 5.0 h.8 ?.0

Administration % Loan Portfolio/2 8.7 7.3 5.3 .6 .8

/1 Including investments

/2 Excluding investments ANNEX 7 Page 41

Table 1 ! AGRICULTURAL DEVELOPMENT BANK STATUS OF LOAN (CUIULATIVE) BY TYPE OF BORROWER (Rs '000)

1963-64 64-65 65-66 66-67 67-68 68-69 69-70 70-71 71-72 72-73

Total Loan Disbursement 808 1,591 4,257 8,247 11,835 19,882 33,521 52,731 76,111 111,735

Cooperatives 808 1,591 4,257 8,2147 11,835 16,397 21,075 23,724 2Ž7,611 42,310 Individuals - - - - 1,1485 8,520 22,533 36,761 59,916 Corporate Bodies - - - - - 2,000 3,526 6,474 9,509 9,509

Total Loan Due 22 480 1,902 4,536 8,789 13,032 17,2131 24jh5 142,204 66,910

Cooperatives 22 1480 1,902 4,536 8,789 13,032 15,768 18,972 22,257 31,089 Individuals ------973 4,873 15,176 31,050 Corporate Bodies ------500 500 4,771 4,777

Total Loan Collections 22 438 1,602 3,6,43 7,073 10,687 15,331 21,374 34,870 55,054

Cooperatives 22 438 1,602 3,643 7,073 10,601 13,M17 16,497 18,799 27,039 Individuals - - - - - 86 914 4,377 11,300 23,244 Corporate Bodies ------500 500 4,771 4,777

Total Loan Overdue - 42 300 893 1,716 2,345 1,910 2,971 7,434 11,856

Cooperatives - 42 300 893 1,716 2,345 1,851 2,475 3,586 4,050 Individuals ------59 496 3,031 7,806 Corporate Bodies ------

Overdue Loan as % of Total Due Loan - 8.8% 15.8% 19.7% 19.5, 17.9% 11.1% 12.2% 18. 0 17.8%

Cooperatives - 8.8 15.8 19.7 19.5 17.9 11.7 13.1 16.2 13.8 Individuals ------6.1 10.2 25.4 25.2 Corporate Bodies - - _- -

Source: Agricultural Development Bank. ANNEX 7 Page 42

Table 15: AGRICULTURAL DEVELOPMENT BANK LOAN DELINQUENCIES BY TYPE AND LENGTH (Rs '000)

FY 1971/72 FY 1972/73 Individual Coop. Total Individual Coop. Total Up to 90 days 1,454 140 1,594 2,671 545 3,216

90 to 180 days 590 1,190 1,780 1,919 305 2,224 180 to 270 days 700 19 719 969 32 1,001

270 days to 1 year 271 186 457 438 22 460 1 to 1-1/4 years 357 109 466 388 24 412 1-1/4 to 1-1/2 years 183 246 429 570 8 578

1-1/2 to 1-3/4 years 88 14 102 167 12 179

1--3/4 years to 2 years 140 30 170 140 22 162 Above 2 years 65 1,652 1,717 544 3,080 3,624 3,848 3,586 7,434 7,806 4,050 11,856

Delinquence of Total Loan Outstanding (%) 18.0 21.C

Sciurce: Agricultural Development Bank, September 1973. ANNEX 7 Page 4

able 16: AGRICULTURAL DEVELOPMENT BANK LOAN DISBURSE;MENT BY TERM AND SECTOR

(Rs '000)

Fiscal Years 196Q/70 1970/71 1971/72 19T2/13 jf tOOOTmf(Rs ( (Rs'OOO) (%)(RsO00) (% A. By Term

Short Term ,7h9 35 6,7h7 35 10,649 46 22,081 61

Medium Term 7,638 56 9,707 51 11,761 5o 13,174 37

Long Term 1,252 9 2,756 14 970 4 730 2

Total 13,639 100 19,210 100 23,380 100 35,985 100

B. By Sector

Cooperative 5,978 ) 2,249 11 4L,117 18 13,971 39

Individual 7,3035 52 14,013 73 16,228 69 22,ol4 61

Corporate Bodies 1,526 h 2,948 16 3z0U 13 - -

Total 13,639 100 19,210 100 23,380 100 35,985100

Source: Agricultural Development Bank, September, 1973. ANNEX] 7 Page 44

Table 17: AGRICULTURAL DEVLOPnENT BANK LOAN DISBURSEME2= BY PURPOSE (Rs t 000)

Fiscal Years PFurpose 1969/70 1970/71 1 97)17 2 1972173 N)

Agri-ProductionP 3,019 4.,958 11X236 20,936 45 Farm Mechanization and Irrigation 4,148 6,2,82 5,951 9,965 28

Agri-Business 1,656 2,266 2,047 2,007 6

Horticulture 23 233 175 172 n.s.

Tea - 2,239 900 364 n.s.

Agro-Industry, Marketing and Warehousing 1,573 3,232 3,071 2,551. 19

Resettlement 3,220 - - -

Total 13,639 19,210 23,380 35,985 100

/1 Mainly Seasonal Loans

Source:_ Agricultural Development Bank, September, 1973. ANNEX 7 Page 45

Table 18: INTEREST RATE STRUCTURE OF CQMKERCIA BANKS

Percent per annum

1. Export bill credit 6.5

2. Credit to agricultural marketing corporation "

1. Agricultural development requisites 7.5

2. Development requisites

3. Priority industries

1. Advance against export bills for collection 8.0

2. Machinery and parts of other industries t (other than priority industries)

1. Exportable floods and Pre-export credit 9.0

2. Jute manufactures "

3. Essential consummables (other than textiles) "

h. Hire purchase on Domestic Products i

1. Raw Jute M

2. jold and Silver "

1. Food grains and oil seeds 10.0

2. Advance against bills for collection

3. Textiles (Coarse and mediunm only)

4. Overdrafts for priority industries

5. Hire purchase on foreign products: (Industrial machineries and public transport vehicles as truck, bus etc.,

1. Ovurdr.ft 12.0

2.2 9vnthetic textile and st:ninlea' steel utensil industries

1. Hire purchase:- Other goods except domestic 13.0 products, industrial machinery and public transport vehicles

2. Others ANNEX 7 Page 46

Table 19.: NEPAL RASTRA BANK - ANNUAL REFINANCE TO AGRICULTURAL DEVELOPMENT BANK AND LAND REFORM SAVINGS CORPORATION 1970/71 - 1972/73 (Rs Thousand)

1970/71 1971/72 1972/73 ADEN LRSC ADEN LRSC ADEN LRSC

Short Term

Production Loan - - 1,600 - 4s,000 471/2 Food PIarketing - - - 10,000 - 10,000 Purchase of Chemical Inputs/3 - - - 2,500 -

Medium Term

Irrigation - _ 1,000 - 3,577 Construction of Barns - - 1,250 - 1,110 Tractors and Pumpsets 2,050 - - - Tea Cultivation 1,000 - - - Food Industry Private, Ltd. - - - 1,300 -

Long Ter

Tea Cultivation - - 900 - 1,000 Construction of Ware- houses - - - - 622 2,700

Total 3,050 - 4,750 13,800 10,409 13,171

/1 Food and Cash Crops.

/2 Sugar,cane Cultivation.

/3 Fertilizers and Pesticides.

Source: Nepal Rastra Bank, Refinancing Report, July 1973. Figure 1: AGRICULTURAL DEVELOPMENT BANK OF NEPAL HEAD OFFICE ORGANIZATION

| BOARD OF |DIRIECTORS J

lCHAIRMAN AND| GENRA GENERALG ER A

ADAIR OFFICE|

MANAGER

SAVIUNGS TRADMINISTRATION INSPEC-R TUTIONAL AT& ~~~~~~~DIVISION _DIVISION DIVIINOv15IONDVSION & POETDIlls

sUE-SECTlON SECTIONTAE

SECTION L~ SECTIO~~OAN

SLB-SECTIN} | i LOANETINRCOVERYNLP" EU,ENI PLRSANNIN

~~~~~~~FICtN ANDCIALLCL4REIGJDURE R VSO1 SATITIC

ID-REGIONod ~,k -85

SECTION MATION SECTIONUNiTREECTION T R ANNEX 8 Page i

NEPAL

AGRICULTURAL SECTOR SURVEY

STATISTICAL ANNEX

Tables GDP AND BASIC SOCIO-ECONOMIC STATISTICS Page

1. Summary on Basic Socio-Economic Statistics, by Regions 1 2. Total Agriculture and Non-Agriculture GDP at Current and Constant Prices, 1964/65-1970/71 2 3. GDP by Industrial Origin at Current Market Prices, 1964/65-1970/71 3 4. Derivation of Agricultural GDP by Subsectors, 1968/69 4-5 5. Literacy Rate of Farm Households, by Region, 1968/69 6

FISCAL DATA AND FOREIGN ASSISTANCE IN AGRICULTURE

6. Budgeted Expenditure for Agriculture and Related Ministries, 7 1969/70-1971/72 7. Estimated Development Expenditure, 1971/72-1973/74 8 8. Government Revenues, 1967/68-1972/73 9 9. Cumulative Amount of International Assistance to Nepalese 10 Agriculture, 1951-70 10. Consolidated Subsector Breakdown of International Agricultural 11 Assistance, 1951-70 11. Foreign Assistance by Major Agricultural Subsectors 12

AREA, PRODUCTION AND YIELDS

12. Area and Production for Foodgrains and Cash Crops, Total Nepal, 13 1964/65-1972/73 13. Area, Production and Yield of Major Foodgrains, by Regions, 14 Av. 1967-Av.1972 14. Area, Production and Yield of Paddy, by Regions, 1965/66-1972/73 15 15. Area, Production and Yield of Maize, by Regions, 1965/66-1972/73 16 16. Area, Production and Yield of Wheat, by Regions, 1965/66-1972/73 17 17. Livestock Population, 1966/67-1969/70 18 18. Livestock Production, 1965/66-1969/70 19

INPUT USE

19. Value of Domestic Agricultural Input Sales, 1965/66-1972/73 20 20. Area under Improved Seeds, for Paddy, Maize and Wheat, by Regions, 21 1965/66-1971/72 21. Area under Improved Seeds for Potatoes, by Regions, 1967/68-1971/72 22 22. Total use of Improved Seed 23 23. Distribution of Improved Seeds by AMC, 1967/68-1972/73 24 24. Procurement of Improved Seeds, Major Foodgrains and Jute by AMC, 25 1968/69-1972/73 ANNEX 8 Page ii

Page 25. Imports of Chemical Fertilizers, 1968/69-1972/73 26 26. Consumption of Chemical Fertilizer by Nutrients 27 27. Distribution of Chemical Fertilizers, by Type, 1968/69-1972/73 28 28. Distribution of Chemical Fertilizers, by Crop and Regions, 29 1971/72 29. Distribution of Chemical Fertilizers, by Crop and Regions, 30 1970/71

DEIAND/SUPPLY ESTIMATES AND PROJECTIONS

30. Food Grain Surplus - Deficit and Population by Districts, 1970/71 31-33 31. Food Balance Sheet and Per Capita Consumption, 1970 34 32. Projected Per Capita and Total Food Demands, 1975, 1980, 1985 35 33- Foodgrain Production Trends, 1970-1981 36 34. Foodgrain Surplus/Deficit, 1970-1981 37

TRADE

35. Overseas Exports, 1966/67-1970/71 38 36. Overseas Imports, 1967/68-1970/71 39 37. Value of Agricultural Trade with India, by Commodities, 1966/67 40

PRICES

38. Consumer Price Index for Kathmandu 41 39. Average (National) Retail Prices for Food Grains and Potato, 42 1964/65-1970/71 40. Average (National) Retail Prices for Selected Cash Crops, 43 1964/65-1970/71 41. Average (National) Retail Prices for Livestock Products, 1964/65- 44 1970/71 42. Food Grain Price Differentials Between Terai and Hills 45 43. Fertilizer Retail Prices, 1969/70-1972/73 46

FARM SIZE, COSTS, RETURNS AND INCOME

44. Distribution of Farm Households by Size Groups, by Hills and Terai, 47 1968/69 45. Distribution of Farm Households by Size Groups, Kathmandu and 48 Other Hills 46. Per Hectare Cost and Returns from Crop Production, Selected 9 Districts, 1968-1969 47. Per Hectare Returns- to Family Labor, by Crops, Selected Districts, 50 1968/69 48. Per Farm Cost and Returns from Crop Production, Selected Districts, 51 1968/69 49. Rates of Return to Costs, Labor and Capital, Selected Districts, 52 1968/69 50. Net Farm Incomes Per Holding by Farm Size, Selected Districts and 53 Regions, 1968-69 ANNEX 8 Page iii

Page 51. Average Income of Farm Families, Small Size Group, Selected 54 Districts, 1969/70 52. Average Income of Farm Families, Medium Size Groups, Selected 55 Districts, 1969/70 53. Average Income of Farm Families, Large Size Groups, Selected 56 Districts, 1969/70 54. Farm Size Distribution and Incomes, Hills and Terai, 1968/69 57 55. Farm Size Distribution and Incomes, Kathniandu, 1968/69 58

MISCELLANEOUS

56. Conversion Tables - Land Measurements 59 57. Conversion Tables - Weight Measurements 60 Table i: BASIC SOCIo ECONOMIC STATISTICS

Hills ','erai- Total Year Units Kathmandsl Valley Other TotalI Nepal Souirce of Data

Area And Production

1. Total land area 1971 '000 km2 0.9 101.4 102.3 39 2 141.5 Derived from FMS 2. Total land area (7) (0.6) (71.7) (72.3) (27.7) (100%) 3. Total population 1971 '000 905 5,882 6,787 4,770 11.557 CBS,- 1971 Popiul.,tio, C-nsos 4. Total population (71)2 (7.8) (50.9) (58.7) (41.2) (1007/.) 5. Population density 1971 Nos/km 100.5 58.0 66.3 121.7 81 7 Computed from rows (3) dnd (1) 6. Total population 1961 '000 460 5,532 5,992 3,421 9,413 CBS, 1961 Populatiom Census 7. Annual Population Growth 1961-1971 (7.) 7.0 0.6 1.2 3.3 2.0 Computed from rows (3) and (6)

8. Average Yields Av 70/71- t3i2 2.33 2.50 1.74 1.85 Table 13 Paddy 72/73 m tons/ha 3.323 2.0 17 1.5Tbe1 Maize ~~~~~~~~~~1.76 ~~~~~1.78 ~~~~~1.72 ~~~~~~~1.921.75 Vhea, 1.22 1.03 1.03 0.94 0.99

Population Pressure on Cultivated Land

9. Cultivated Area 1971 M ha 0.05 0.67 0.72 1.60 2.32 Annex I 10. Cultivated Area (7) (2.1) (28.9) (31.0) (69.0) (100) 11. Rural population 1971 '000 65.5 5,854 6,509 4,585 11,094 Computed from CBS, 1971 Pol1ul.ltion (.enss iv Rural population as 1 of total 1971 (7.) 72.4 99.5 95.9 96.1 96.0 Computed from rows (U ) and (3) 13. Rural population density per cultivated area 1971-72 Nos/ha 13.1 8.7 9.0 2.9 4.8 Computed from rows (9) and (11)

Farm Size

14. Average farm size 1968-69 ha 0.6 0.4 0.5 3.0 2.2 Tables 44 and 45 15. Percentage of holdings less than I bigha (0.67 ha) 1968-69 (71) 46 82 79 24 n .a. Tanles 44 nd 45 16. Share of cultivate area by the lowest 40% of smallest farmers 1968-69 (71) 13 12 12 8 n.a. Tables 44 and 45

Social And Agricultural Services

17. Average agricultural wage 1968-69 Rs/day 4.0 3.2 3.4 4.1 3.5 Computed from fAPD, Farm Management Study 18. Literacy rate 1968-69 (%) 21 15 16 17 16 Ta,ble 5 19. Hospital beds 1970-71 Nos. 1,000 426 1,426 600 2,026 CEDA, New Dimension in Nepals Development, 20. Hospital beds (.) (49.3) (21.0) (70.4) (29.6) (100) 1973 and Fourth Five Year Plum 21. Population per hosiptal bed 1970-71 Nos. 905 13,807 4,759 7,950 5,704 22. Distribution of extension workers 1972-73 Noa. 46 .75 421 347 768 Agric-l ii,r.lI Markel 1mg Corpor.it on 23. - do - (-/) (5.9) (48.8) (54.8) (45.2) (100) 14. Fertilizer distribution major foodgrains 1970- 71 000 m tols 13.3 1.3 14.6 10.J 24.9 Table 29 25. - do - (7.) (53.4) 5.2) (58.6) (41.4) -(100) 26. Distribution per cropped ha 1970 71 kg/ha 149 3 26 8 14 Table 29 27. Improved varieties %of total area under: Av.1969/70- (7.) Paddy 19711/2 " 41 1 9 1 6 lable 20 Maize . 8 1 2 5 3 Wheat ' 61 10 23 57 41 28. Institutional credit as 7. of total 1969 i'' (/.) n.a s a 10 51 21 Nepil R-stra Bank, Agric-l tural Credit S-,rvev 29. ADBN gross budgeted expenditure 1972 7; Ris 11 7 5.2 16 9 t7.2 84 1 ADBN, Programs and Budget for 1973/74 30. - do - (71) (13.9) (6 1) (20.0) (80.0) (100)

/1 Includes Inner Terai. C.. /2 PM8 - EAPD, Farm Management Study in Sele ted Regions of Nepal, 1968/69. /3 CBS 5 Central Bureau of Statistics. Table 2: TOTAL AGRICULTURE AND NON-AGRICULTURE GDP AT CURRENT AND CONSTANT PRICES, 1964/65-1970/71 (In Million Rs)

At Current Market Price At 1964/65 Price Share of Year Agriculture Non-agriculture Total Agriculture Non-Agiculture Total Agcultue 1964/65 3,654 1,948 5,602 3,654 1,9h8 5,602 65

1965/66 4,794 2,113 6,907 4,o82 1,912 5,99h 68

1966/67 4,292 2,123 6,115 3,914 1,992 5,906 66

1967/68 4,883 2,291 7,174 3,935 2,008 5,943 67

1968/69 5,357 2,629 7,986 4,053 2,155 6,208 65

1969/70 5,927 2,869 8,796 4,193 2,193 6,386 66

1970/71 6,oho 3,037 9,077 4,219 2,163 6,382 67

1971/72 7,094 3,458 10,552 n.a. n.a. n.a.

Av. Annual Growth (1964/65-1970/71) 7.5% 6.5% 7.2% 2.4% 1.8% 2.2%

Source: Central Bureau of S--itistics,4 i'atbmandu, 1973.

ICO ANNEX 8 Page 3

Table 3: GROSS DOMESTIC PRODUCT OF NEPAL AT CURRENT MARKET PRICE

(Million Rs)

Sector 1964/65 1965166 1966/67 1967/68 1968/69 1969/70 1970/71

Agriculture 3,654 4,794 4,292 4,883 5,357 5,927 6,040

Mining 1 2 1 1 5 4 1

Manufacturing 83 98 104 137 212 195 215

Construction 123 108 118 134 144 192 213

Transport and Cormunications 91 93 102 120 141 192 234

Cottage Industry 365 479 429 488 536 593 604

Financial Institutions 69 80 82 87 106 128 139

Ownership of Dwelling 654 669 683 698 714 729 745

Public Adrin. and Defense 82 101 143 154 166 199 215

Electricity 4 5 8 10 16 18 20

Wholesale and Retail Trade 306 301 249 243 354 363 372

Services 170 177 204 219 235 256 279

Total 5,602 6,907 6,45 7,174 7,986 8,796 9,077

Source: Central Bureau of Statistics, Kathmandu. ANNEX 8 Page Li Sheet 1 of 2

Table 4: DERIVATION OF AGRICULTURAL GDP BY SUBSECTORS, 1968/69 (CURJ. 7 P.ICE3)

Gross Value Net Value C'omnodiUtv Production Price of ?roduction of Production ('OOOm ton) (s/m ton (Rs. millionn (Rs. millionr 'oodgrain.s and Straw 3,B2?.I

Paddy: Total Area Surveyed 2,321.6 1,278.5 2,968.2 2,3665.0 Regions Not Covered 44.5 3,012.7 Wheat: Total Area Surveyed 227.0 1,532.7 348.0 278.0 Regions Not Covered 1.7 349.7 Maize: Total Area Surveyed 899.6 1,182.2 1,063.4 853.9 Regions Not Covered 10.6 1,071.2

Millet: Regjons Accounted 110.7 1,072.9 118.8 95.7

Barley: Reg-ons Accounted 28.7 1,140.0 32.7 26.4

Straw: P?addy 150.6 Nheat 52.5

Cther Food Crops 5149.7

Miscellaneous Food Crops 180.9 180.9 Pulses 17.0 2,341.3 39.8 32.8 Potato 289.9 1,178.7 341.7 264.8 Other Vegetables 71.2 Canmercial Crops 651.7

Mustard 56.8 2,103.2 119.5 105.1 Other Oilseeds 26.3 Jute 44.o 2,065.2 90.9 80.0 Tobacco 6.3 7,611.4 47.9 24.0 Sugarcane 187.7 150.0 28.2 27.3 Ginger 51.3 Turmeric 10.8 Chilly 17.5 Other Spices 86.4 Fruits 192.0 Miscellaneous 31.0 Comme-~cial Crops Table 4 (cont.) sheet 2 of 2

Gross 'Value Net Value Ca.modity Production Price of ProducLion of Production (OOOm ton) (Rs/m ton) (Rs tillicVn (Rs million) Live s+ock 1,350.7

Meat for Consumption: 44.9 5,154.9 232.7 Buffalo 18.7 2,773.5 51.9 Sheep 2.6 5,894.6 15.3 Goat 2.7 5,S94.6 15.9 Pig 4.0 3,914.5 15.7 Poultry 16.9 7,297.5 134.0

Milk 563.5 1,531.8 (pQr 863.2 000 litres) Milk Products 91.5

Eggs (million eggs) 280.9 0.39 109.6 (per egg) Hides and 5kins 3.2 Bangs 69.3 Itoney and Wax 2.0 Wool 23.6 Pig Bristle 5-2

Value of Livestock Products 1,399.0

Net Value of Agricultural and Livestock Produots 6,374.2 Fishery Products 23.3 Forestry Products 18.1 A

Deducting Value of Fertilizer and Plant Protection Material -10.0

Total Agricultural GD?P 6,405.6 L2 Total GDP 9,326 k

/1 Equivalent to only the value of royalties collected by HMG. A more realistic estimate is probably about Rs 300M.

/2 Figures not to exactly match Table 3.

Source: CBS, Nepal, quoted by Teraji Sakiyama, Evaluation of the Third Plan Agricultural Performance, EAPD, MFA, Kathmandu, Nepal. Table 5: LITIEFACMf RATE PER FARM HOTPSEHOLD

T h e H lls1 S

District/Region Strata (ha) Below 0.10 0.10-0.20 0.20-0.41 0.41-0.61 0.61-0.81 0.91-1.02 Above 1.02 Weighted Average IMlan __ 0.13 0.14 0.19 0.21 0.21 0.26 0.37 0.23 Kahrepalanchok -- 0.11 0.12 o.14 0.19 0.20 0.22 0.35 0.16 Dhadinp __ o.o6 0.10 0.12 0.13 0.10 0.21 0.2h 0.12

Syang4a -- 0.18 0.20 0.27 0.26 0.0L 0.2h 0.1l1 0.20 Sallyan -- 0.08 0.07 0.06 0.09 0.10 n.15 0.19 0.08 Chitwan B -- -- 0.02 0.06 0.35 0.05 0.14 0.19 0.1h Mills Av. excl. Kathmandu 0.09 0.11 0.14 0.21 0.13 0.20 0.29 0.15

Va+1,-and1 "alley -- 0.13 0.18 0.17 n.1R 0.16 0.55 0.27 0.21

Total Hlls Av. _ 0.10 0.12 0.14 0.20 0.13 0.25 0.29 0.16

T h e T erat

Stratr ___a_ Relow 0.67 0.47_1. , s f-; A.7 4.7710.1- 1T.3T1W33 Abov

T#rai A e-a-'^ 0.10 O.1h 0.*' (X2) o.?? .23 0.27 0,32 0.17

/ eS Cvipleeavera-Fe

Somirce: C-ipilted °ro- EAPD, Far uAaa-mollnt S1rIve,- IQfSP-A°, pp.12?1 srr 12n ANNEX 8 Page 7

Table 6: BUDGETED EXPENDI'ITRE FOR AGRICULTURE AND RELATED MINISTRIES

1969/70 - 1971/72

(Rs 000)

1969/70 1970/71 1971/72

Regular Devel't Total Regular Devel't Total Regular Devel't Total

M. of Food & Agriculture* 1089 51330 52419 5796 51-463 57259 4771 59231 64001

M. of Land Reform 283 18658 18941 6991 11595 18586 5741 11062 16803

Secretariat 124 - 124 158 - 158 144 - 144

Land Reform & Administration - 10665 10665 5825 4805 10630 4378 3682 8060

Cadastral Survey 159 7993 8152 1008 6790 7798 1219 7380 8599

M. of Forest 5319 11986 17405 4108 12L 19376 4819 18730 23549

Secretariat 79 - 79 77 - 77 81 - 81

Forest Resources Survey - 1000 1000 - 4751 4751 - 4917 4917

Department of Forest 4975 4891 13566 3522 8643 12165 4484 11539 16023

Department of Botany 265 2495 2760 509 1874 2383 254 2274 2528

M. of Transport & Construction 2021 31207 33228 1468 _49584 51052 3941 53729 57670

Secretariat 120 - 120 367 - 367 213 - 213

Dep't of Irriga- tion & Drinking 1901 31207 33108 1101 49584 50685 3728 53729 57457 Water

Total Above (total 8712 113181 121993 18363 127910 146273 19272 1142752 162023 agriculture)

Total HMG 232750 608209 840959 339958 633047 973005 367659 769373 1137432

Budget % Share of Ag. in the total Budget 3.74 18.61 14.51 5.40 20.21 15.03 5.24 18.55 14.25

Source: Ministry of Financew HMG. Expenditure for the Fiscal Year 1971/72 are budget estimates. -ANNBX 8 Page8

Table 7: DEVELOPMENT EXPENDITURE, 1971/72-1973/74

(Rs Million)

1971/72 1972/73 '1 1973/74 Categories Budget Actual Budget Estimate'- Budget

General Administration 4.3 1.9 1.6 1.6 1.4

Economic Administration and Planning 6.5 3.8 4.0 2.8 6.9

Planning 0.5 0.1 1.0 0.4 5.0 Statistics 6.0 3.7 3.0 2.4 1.9

Social Services 1o6.o 75.2 141.3 119.8 178.1

Education 40.0 28.6 62.2 52.5 82.2 Health 34.8 25.3 37.4 28.8 39.4 Drinking Water 9.4 8.5 15.9 14.8 26.5 Panchayat 18.1 10.] 8.1 18.0 18.5 Other Social Services 3.7 2.6 7.7 5.7 11.4

Economic Services 629.1 460.9 704.0 487.8 846.4

Agriculture 64.3 40.6 83.2 55.9 107.3 Irrigation 44.3 44.8 49.7 36.3 107.9 Land Reforms 3.7 2.1 3.2 3.7 3.3 Cadastral Survey 7.4 6.3 8.5 7.2 9.4 Forestry 18.7 13.2 17.9 14.9 21.0 Industry & Mining 83.9 75.2 86.3 47.7 122.7 Communication 10.1 5.3 18.8 11.5 14.2 Post Office n.a ( 3.9) ( 3.4) ( 8.2) ( 3.2) Telecommunication n.a ( 1-4) (15-4) ( 3.2) (11.0) Transportation 349.8 230.0 382.4 274.5 377.2 Roads n.a (165.2) (205.6) (172.5) (247.8) Bridges n.a ( 2.4) (15.5) ( 6.0) (24.6) Aviation n.a (62.3) (161.3) (96.0) (104.8) Electricity 38.7 36.5 41.4 25.5 72.9 Other Economic Services 8.2 7.0 12.6 10.6 10.4

Other 25.8 22.9 6.7 5.7 8.9

Miscellaneous 20.8, 17.5 1.7 1.7 2.9 Contingency 5 5.4 5.0 4.0 6.o

TOTAL 771.7 564.7 857.6 617.7 1,041.7

/1 Revised Estimate.

Source: Ministry of Finance, 1972/73 and 1973/74 Budget Speeches; EAPD, Agricultural Statistics of Nepal, 1972. ANNEX 8 Page 9

Table 8: GOVERNNENT REVENUE, 1967/68 to 1972/73

(Rs 000) Rs .000 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 revised revised actual actual actual estimate estimate estimate

Customs 129,733 170,787 193,512 150,285 190,445 222,020 Excise 21,479 29,818 38,124 49,413 60,100 65,000 Land Revenue 83,295 86,ooo 87,718 88,000 80,000 82,000 Forest 21,816 20,081, 17,727 12,500 16,200 30,000 Tax 44,248 64,500 76,356 86,542 98,996 117,000 Registration 5,105 4,610 15,583 15,846 16,370 17,430 Irrigation and Water Supply 828 1,275 1,085 1,200 1,400 1,700 Communication 4,586 5,950 4,642 4,500 5,200 5,500 Transportation 392 1,310 676 901 1,610 1,850 interest and Dividend 8,450 9,590 18,913 33,400 31,900 41,304 Civil Administration 3,866 3,993 4,833 6,392 13,250 14,050 Miscellaneous 2,181 2,280 4,862 2,715 2,630 3,130

Total 325,979 400,194 464,031 451,694 518,101 600,984

Source: Ministry of Finance, Budget Speeches. ANNEX 8 Page 10

Table 9: CUMULATIVE AMOUNT OF INTER1fiONAL ASSISTANCE TO NEPALESE AGRICULTURE. 1951-7O

------uolp COO ------_

19$1-70 1966-70 1970 Bilateral

India 23,S07 8,616 2,h63

USA 21 , 242 7,133 1,662

Switzerland (sSATA) 1, 1o h11 119

Israel 965 584 1o6

United Kingdom 945 825 253

West Germany o00 800 726

Japan L11 411 300

Australia -- 120 22

Netherland 117 117 23

France 62 62 26

Newzealand 3Z3 7 --

USSLd 36 36 13

Pakistan 20 20 --

Mu.t1tilateral

FAO 5,242 3,oo4 1,01T

WFP 1, 246 1,246 600

ADD 120 120 52

Private Institiuions 2,337 380 78

TOTAL 56 916 2h963 7

Couwce: T. Sakiyana, EAPV, International Assistance to Nepalese Agriculture, EAPD Staff Paper No. 4, August 1971. ANNEX 8 Page 11

Table lOt CONSOLIDATED SUB SECTOR BREAKDOWN OF INTERNATTONAL AGRICULTURAL ASSISTANCE, 1951-70 (US$ 000)

1951-70 1966-70 1970

Plainly crop production /1 5,423 3,275 3,156

Livestock and veterinary service 2,062 898 439

Horticulture 68 252 55

Fisheries 147 107 30

Forestry 2,99h 1,178 320

Agricultural infrastructure/2 (mainly irrigation) 23,689 12,131 2,637

Unallocables/3 16,919 5.860 752

TOTAL 56.470 2h.517 7,L91

/1 Includes agricultural research and education, extension agricultural supplies, agricultural credits, provision of fellawships related to the above.

/2 Includes irrigation (major and minor), agricultural road construction, storage construction, land reform, cooperatives, flood and erosion control, fellowships and training related to these.

/3 Includes flood relief, emergency relief, agricultural administration, agricultural planning, research, statistics, resettlements, integrated rural development, fellowships, seminars and training related to them.

Source: T. Sakiyama, EAPD, International Assistance to Nepalese Agriculture, EAPD Staff Paper No. 4, August 1971. ANNEX 8 Page 12

Table 11: FORZTGN ASSISTANCE BY MAJOR AGRICULTUIL SUBSECTOiRS

----- us$ ooo ------1951-70 1966-70 1970

Mlainly Crop Production

Research 793 572 51o Extenision 346 232 420 Agri. survey for crop production (includlng cadastral survey) 400 356 120 Agricultural supplies 1,1428 1,269 724 Agricultural credit 990 768 207 Fellowships, seminar, training and others 1 ,973 1 ,124 1),3)7

Subtotal 6,369 4,321 3,156

Infrastructure

Major irrigation 21,556 7,185 2,133 Minor irrigation 5,335 4,006 217 Godown construction 213 210 47 Land reform, cooperatives and rural institutions 678 500 150 Flood and erosion control 124 110 60 Fellowships, seminar, training and others 241 120 30

Subtotal 28,689 12,131 2,637

Unallocables

Flood reflief (USA) 1,458 -- -- Title II food grants (USA) 5,600 700 -- Agricultural planning and training (Ford Foundation) 650 165 11 Agricultural economic planning analysis and related survey 482 181 54 Agricultural statistics 27 27 -- Resettlement 1,006 850 195 Integrated rural development and Panchayat 3,087 2,500 -- Fellowships, training, seminar 545 250 31 Others 4,o96 1,187 461

Subtotal 16,919 5,660 752

Source: T. Sakiyama, EAPD, International Assistance to Nepalese Agriculture, EAPD Staff Paper No. 4, August 1971. Table 12: AREA. PRODUCTION AND YIELDS AND GROWTIiRATES FOR MAJOR CROPS, TOTAL NEPAL, 1964/65 - 1973/74

Annual 1964/651967/68 1965166 1968/69 1966/67 1,2/ 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70~ ~ 1970/71~ ~ 1971/72~ 1972/73~ ~ 1973/74~ ~ Average~ ~ 196. Average 1972- Growth1967-1972 Rate

Paddy Area - 1,101 1,111 1,100 1,154 1,172 1,173 1,122 1,204 1,140 1,213 1,122 1.176 0.9 Producton 4/ 2 201 2,241 2,007 2,027 2,178 2,241 2,304 2,358 2,062 2,402 2,115 2,185 0 6 Yield- 2.00 1.99 1.82 1.75 1.86 1.91 2.05 1.95 1.80 1.98 1.88 1.85 -0.3

Maize Area 437 451 450 412 421 433 445 435 438 442 438 439 0.1 Production 854 856 824 735 765 795 833 730 753 793 809 772 -0 9 Yield 1.95 1.90 1.83 1.78 1.81 1.83 1.86 1.67 1.72 1.79 1.84 1 75 -1.0

Wheat Area 100 118 126 192 208 226 228 247 260 270 148 249 10.6 Production 126 147 159 204 233 265 193 225 313 315 170 244 7.4 Yi6ld 1.26 1.25 1.26 1.07 1.13 1.17 .84 .91 1.20 1.17 1.15 0.99 -3.1

Barley Area 24 27 27 23 26 26 27 28 27 28 26 27 0.8 Production 26 28 28 23 22 24 25 25 26 25 26 25 -0.8 Yield 1.08 1.04 1.04 .92 .85 .92 .93 .89 .96 0.89 1.00 0.93 -1.6

Millet Area 96 100 100 102 109 112 115 115 121 124 101 117 3.0 Production 63 120 120 113 121 125 125 130 134 142 118 131 2.1 Yield .66 1.2p 1.20 1.11 1.11 1.12 1.30 1.13 1.11 1.15 1.17 1.12 -0.8

Sugar Cane Area 9 13 10 11 12 13 14 15 15 15 11 15 6 4 Production 126 192 147 169 189 216 236 245 245 250 169 242 7.5 Yield 14.0 14.77 14.70 15.36 15.75 16.62 16.86 16.33 16.33 16.67 15.37 16.51 1.1

Jute Area 32 32 32 47 46 52 55 60 55 33 37 57 9.0 Production 39 39 38 46 43 49 53 59 55 40 41 56 6.5 Yield 1.22 1.22 1.19 .98 .93 ,94 .96 .98 1 00 1.21 1.11 0 98 -2 5

Oilseed Area 108 96 98 97 101 103 106 111 117 114 97 111 2.7 Production 51 51 58 52 54 57 55 57 60 62 54 57 1.1 Yield .47 .53 .59 .54 .53 .55 .52 .51 .51 0.54 0.56 0 51 -1.6

Tobacco Area 8 8 8 9 9 9 9 9 9 10 8 9 2.4 Production n.a. n.a. n.a, n.a. n.a. n.a. n.a. 7 7 8 n.a. 7 n.a. Yield n.a. n.a. n.a. n.a. n.a. n.e. n.e. .8 .8 0_80 n.a. 0.8 n a.

Potato Area 29 42 43 43 43 46 49 51 51 53 43 50 3.0 Production 186 277 300 245 250 263 273 294 294 305 274 287 0.9 Yield 6.41 6.60 9.98 5.70 5.81 5.72 5.57 5.76 5.76 5.75 6 37 5 74 -2 1

1/ Average 1965/66 - 1967/68 2/ Average 1970/71 - 1972/73 3/ Area in '000 hab 4/ Production in '000 m ton 5/ Yields in m ton/ha C Source EAPD, Agricultural Statistics of Nepal, 1972, and FAMSD, MFAI. Table 13: AREA, PRODUCTION, TIELDS, OF MAJOi FOODGRAIIS, BY REGIONS

Annual Rate of Grovth L Crop Year 1967 - 1972 L2 Ending Junle 30 ProductionProductionYisldArea Yield Area Production Yield (000 ha) (000 m Ton)(m Ton/ha) (000 ha) (000 3 Ton)(f Ton/ha) (000 ha) (000 * Ton)(3 Tonba) PA DDY

Eastern Terai 619.9 1,162.4 1.87 640.4 1,120.3 1.74 .6 -.7 -1.5 destern Terai 274.7 397.2 1.45 263.9 470.1 1.65 .6 3.4 2.6 Sub-total o 94.6 1 3,75 926. 1,590.4 .72 .6 .4 - .2

Inner Terai 72.2 141.1 1.95 73.7 150.3 2.03 . 1.3 0.6

Eastern Hills 39.4 109.9 2.79 42.9 96.2 2.24 2.6 -1.7 -4.L Western Hills 3 249 103.2 244.9 2.37 3. 2.d -1.0 Sub-total 12.3 323.6 238 3flI 3 2.33 3 .2 1.0 -2.2

Kathmaodu Valley A 29.6 90.2 3.05 31.9 103.3 3.23 Li 2. a. 1

Total 1,121.7 2,114.5 1.88 1,176.0 2,185.1 1.65 0.9 o.6 -0.3

MAIZE

Eastern Terai 50.1 76.6 1.53 41.9 64.o 1.52 -3.7 -'.S -0.1 destern Terai 60. 91,§ 1.51 58.2 88.5 1.52 _o.8 -0.7 0.1 Sub-total 110.8 SgY4i 1.52 100.1 78. 5 -2.1 -2.1 0

Inner Terai 50.0 97.4 1.95 55.8 114.9 2.05 2.? 3.4 1.0

Eastern Hills 98.0 201.5 2.06 96.7 171.5 1.77 0.3 -2.4 -2.9 Western Hills 152.7 292.6 1.92- 10.7 278.7 1.75 -1.0 1.9 Sub-total f77 45Ii0.2 1.76 .4 -2.D -2.3

fathmandu Valley A 26.2 40.9 1.87 28.3 5 1.92 1.6 2.2 0.5

Total 437.7 808.5 1.84 439.6 772.1 1.75 0.1 -O.i -1.0

WH AT

3astern Terai 28.0 25.8 .92 65.6 62.6 .95 18.6 19.81 .6 festern Terai 23.7 22.3 .94 55.6 51.3 .92 10.6 18.2 -.4 Sub-total 51.7 4d. .79 121.2 113. 797 18.5 18.9 .2

:nner Terai 6.6 6.4 .97 15.6 13.2 .85 18.8 15.6 2.7

.?astern Hills 7.0 7.9 1.13 10.2 12.8 1.25 7.9 10.1 2.2 lWestern Hills 60.1 83.1 1.38 71.1 70-7 .99 3.5 3 - 6.8 Sub-total 67. 91.0 1.36 81.3 °3.5 1.03 3.9 -1.8 - 5.8

Jathmandu Valley /4 22.1 24.8 1.12 27.0 32.9 1.22 4.1 5.a 1.8 116.4 Total 167.5 170.3 1.15 245.1 263.5 .99 10.6 7.4 - 3.1

To'`AL MAJOR FOODGRAINS 1,706.9 3,093.3 1.81 1,860.7 3,200.7 1.72 1.7 0.7 - 1.0

TOT'AL FOODGRATNS 1,834 3,237 1.76 2.005 3,357 1.67 1.7 0.7 - I1

/1 Average 1965/66, 66/67 and 67/68. /2 Average 1970t71, 71/72 and 72/73. /3 Growth rates my mnt add due to rounding of yields. 74 Incluues Nsavre reaachok.

Sowuce: Food and Agricultural merketing Services Dept., MFAI, September 1973. ANNEX 8 Page 15

Table 14: AREvA, PRODUCTION AND YTIELD, 1967/1973

PADDI

1567/68 1968/69 19966/7c

Region A _ F- _Y A P _ A P Y

Eastern Terai 639.7 1,016.3 1.53 642.3 1,134.7 1.77 646.9 1,164.0 1.79 Western Terai 276.2 468.8 1.69 277.3 476.3 1.72 280.0 494.9 1.76 jubtotal 915.9 1,435.1 1.62 919.6 1,611.0 1.75 1,658.9 1.70

Inner Terai 7£.4 152.3 1.94 79.2 163.7 2.07 30.6 163.5 2.09

Eastern Hills 33.1 75.9 2.29 33.7 79.1 2.35 34.3 80.8 2.35 Western Hills 96.7 223.1 2.30 98.£ 230.5 2.33 100.3 235.5 2.3 Subtotal 129.3 299.1 2.30 309-6 2.34 134.5 316.3 2.35

Kathmanda Valley 30.2 90.5 2-99 40.7 94.0 2.31 31.2 97.5 3 1j

TOTAL 1,154.3 2,027.0 1.75 1,172.0 2,17£.3 1.86 1,173.2 2,241.2 1.91

1970/71 1971/72 1972/73

Regicn A P A P Y A P I

Eastern Terai 590.2 1,187.2 2.01 655.7 1,217.5 1.85 615.4 956.2 1.55 Western Terai 281.5 507.0 1.80 296.9 539.4 1.81 273.3 473.3 1.73 Jubtotal 1,694.2 1.94 92. 1,757.0 1.34 1,429.51 .

Inner Terai 81.7 174.1 2.13 80.4 171.5 2.13 80.0 147.8 1.84

Eastern Hills 34.9 85.5 2.44 34.8 83.1 2.38 38.3 77.8 2.03

Western Hills - 102.1 247.3 2.42 104.2 243.8 2.33 101.8 303.6 2.98 Subtotal 137.0 332.8277 139.0 327.9 2.35 140.1 381.4 2.72

Kathmandu ValleI 32.1 103.1 3.21 32.4 103.4 3.19 31.4 103.6 3.29

TOTAL 1,122.5 2,304.2 2.05 1,204.4 2,358.3 1.95 1,140.2 2,062.3 1.80

/1 area ('000 ha). 75 Production ('000 E ton)). ZT Yield (m ton/ha) 7 Includes Kavre Palanchok. Source: FAMSD, IMFAI, Septenber 1973. ANNEX 8 Page 16

Table 15: AREA, PRODUCTION A1.D YIELD, 1967/1973

MAIZE

1967/68 1965/69 _ 196/7C

Region AA y A P Y A P Y

E astern Terai 3v3.2 53.8 1.40 39.7 56.1 1.41 41.4 59.3 1.4.4 Western Terai 55.2 79.5 1.44 56.9 82.6 157.6 35.1 1j7 STbtotal 93.4 133. -1.2 96.6 133.7 1.44 99.0 144.9 1.46

Innar Terai 65.6 125.1 1.90 66.3 127.2 1.92 6'.9 131.4 1.93

E:astern Hills 83.1 148.2 1.73 34.1 161.7 1.92 86.1 166.4 1.93 Western Hiills 143.1 277.9 1.94 146.9 2S48 1.94 151.9 293 .96 Slubtotal 226.2 726.1 133 231.0 74.5 1.93 238.0 464.6 1.95

Xatlimandu Valleyj 26.9 50.8 1.38 27.4 52.2 1.91 28.1 54.0 1.91

TOTAL 412.1 735.4 1.73 421.3 764.6 1.81 432.9 794.9 1.53

1970/71 1971/72 _ 9Q72/73

on A PA P- Y A P I iastern Teral 43.1 64.2 1.43 42.0 61.5 1.46 40.6 64.5 1.58 W4lestern Terai 58.6 33.6 1.51 59 88.5 1.49 55.1 88.9 1.61 Subtotal 101.7 152.8 1.50 101.1 150.0 1.484957- 153.4 1 .O

Inner Terai 63.8 135.3 1.96 57.4 128.0 2.23 69.4 137.2 1.97

Eastern Hills 37.6 172.1 1.96 85.8 124.1 1.44 39.7 163.0 1.81 Western Hills 153.8 316.1 1.92 163.2 274.2 1.68 154.2 246.9 1.60 Subtotal 246.h = 1.93 249.0 3 3 1.60 09.9 =1

Katheandu ValleyA 29.0 57-0 1.96 27. - 1..25. 23.5 52.4 1.83

s'oTAL ~445-Z 833.3 1.86 435.1 730.4 1.67 437.5 753. 1.72

/1 Area. (1000 ha). 75 'rodLiction (1000 n ton). 7T Yield (in ton/ha) fh Includes Kavre Palanichok. o0urce: FARISD, MFAI, September 1973. ANNEX 8 Page 17

Table 1c,: AUEA, PRODUCTION AND YIELD, 1967/1973

WHEAT

i967/68 1968/69 1969/70

.ieaiolA A ___ A P Y A P Y

Eastern Terai 45.6 38.4 0.04 49.9 45.4 o.91 56.4 55.9 0.99 Western Terai 40.8 36.3 0.83 45.9 42-9 p.93 50.9 -2.:, 1.01 Subtotal 74 .7 0 36 98.3 1.03 107.3 107.7 1.00

Inner Terai 12.4 11.7 0.94 12. 13.8 1.08 13.9 16 4 1.18

Eastern Hills 7.9 8.5 1.07 8.0 8.8 1.10 3.4 9.9 1.13 Western Hills 62.2 81.2 1.30 66.5 88.8 1.34 69.3 93.1 1.34 Subtotal 70.1 7. 1?F 771.27577 103.0 1.32

Kathmandu Valley 23.4 27.8 1.18 33.2 1-34 267226.7 37.5 1.40

TOTAL 192.3 203.,9 1.06 2_ 232.9 1.13 225.6 264.6 1.17

1970/71 1971/72 1972/73

____ onA P I A P Y A _ _

Eastern Terai 55.5 37.4 0.,7 62.4 46.6 0.74 79.9 103.9 1.29 Western Terai 5o.9 36.6 0.71 58._7 43.4 0.73 55. 9 72.4 1.29 Subtotal 10 7T74.o 0o.69 121.1 90.0 0.77 135.3 t76 1.29

Irinel' Terai 14.5 12.0 0.82 16.3 13.5 0.52 16.0 24.2 1.51

Eastern Hills 8.7 3.1 0.93 11.9 10.8 1.09 10.0 9.4 0.94 Western Hills 71.3 71.9 1.00 69 7 75.1 1.07 72.4 66.5 0.91 Subtotal 7ThT7 0.99 81.6 35.9 1.05 72. 79 0.92

Kathmanduj Valley A 27.5 27.4 0 99 23.1 35.4 1.26 25.3 36.2 1.42

TOTAL 228.4 193.4 0.84 247.1 224.8 0.91 259.5 312.6 1.20

/1 Area ('000 ha). 7T Production ('000 m ton). B 'Yield.(mton/ha) /4 Includes Kavre Palanchok.

3ource: FAMSD, 1AFAI, September 1973. ANNEX 8 Page 18

Table 17: ESTIMATES OF LIVESTOCK POPULATION, 1966/67-1969/70

1966/67 1967/68 1968/69 1969/70 (000 heads)

Cattle

Cows 3,010 3,074 3,136 3,198

Oxen 2,850 2,911 2,969 3,102

Total 5,860 5,935 6,105 6,226-S

Buffalo

-he-buffaloes 2,802 2,862 2,919 2,977

He-buffaloes 475 485 495 505

Total 3,277 3,347 3,414 3,482

Sheep

Ewes 1,500 1,533 1,567 1,601

Rams 475 485 496 507

Total 1,975 2,012 2,063 2,102

Goats

She-goats 1,650 1,686 1,723 1,761

He-goats 450 460 470

Total 2,100 2,146 2,193 2,241

Pigs 300 307 313 320

Source: EAPD, Agricultural Statistics of Nepal, 1972. ANNEX 8 Page 19

Table 13: ESTIRATES OF LIVESTOCK PRODUCTION, 1965/66-1969/70

1965/66 1966/67 1967/68 1968/69 1969/70 (000 m tons)

Meat

Buffalo 17.5 17.8 18.3 18.7 19.0

Sheep 2.4 2.5 2.6 2.6 2.7

Goat 2.5 2.6 2.6 2.7 2.9

Pig 3.6 3.6 3.9 4.0 4.2

Poultry 15.0 15.6 16.4 16.9 17.5

Total 41.0 42.1 43.8 44.9 46.3

Milk

Buffalo -- -- 375.0 326.0 400.0

Cow -- -- 170.0 173.5 173.0

Others -- -- 4.5 4.5 4.6

Total -- -- 549.5 564.0 5'i2.0

lilk Products

Cheese /1 20.0 30.0 42.0 50.0 55.0

Butter and Ghee 8.0 3.2 8.5 8.7 9.0

/1 In m tons.

Source: EAPD, Agricultural Statistics of Nepal, 1972. ANNEX 8 Page 20

Trable 19: VALUE OF DOMESTIC AGRICULTURAL INPUTS SALES DOMESTIC SALES OF AGRICULTURAL INPUTS (Rupees)

Agricu.Ltural-Inputs Agricultural Plant Pro- Year Fertilizers Seeds Tools & Inputs tection Total Material

19655/66 651,290 - 1,194 - 652,484 19656/67 3,150,491 469,549 23,404 21,058 3,664,502 1967/68 7,904,000 934,335 145,500 86,65o 9,070,485 1968/69 8,978,001 996,823 305,409 92,241 11,272,474 1969/70 14,540,180 947,248 1,145,182 218,398 16,851,008 1970/71 16,847,609 735,865 979,079 204,759 18,767,313

1971/72 n.a n.a. 1,358,195 505,492 1,863,687

1972/73 n.a. n.a. 3,185,661 304,491 3,490,152

Scurce: Agricultural Marketing Corporation, September 1973. Table 2c: ARE,0 UN!Mfll fl HIiOVED SF0DS, Fo8 IjDIY, 1,,IE AdiD 4H!D.AT. I.Y REG1Iolu, g965/66-i971/72

%of %of /1 Total Area /2 Total Area 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1%7 under Paddy 1971- under Paddy

PADDY

Eastern Terai 4,304 7,194 13,194 18,454 26,402 37,129 37,303 8,230 1 33,611 5 Western Terai 496,B40 595992_14 3 1,040 2060 5 1 1.7 Sub-total l i 7790- 9,9 I1F 3,M 33M 5, 7 97 1203 7 W5 Inner Terai 219 554 407 982 1,833 3,374 5,066 393 n.s 3,424 4

Eastern Hills 4 60 281 416 921 1,103 1,256 115 n.s 1,093 1 Western Hills 101 541 1.228 l.OD 194 1.810 226 n. 1 20 1 Sub-totalSub~~~~~-to 31 t 34 a 161 1 828,261 1, 6 1,926 1,B597 341 n.s8229

Kathmazsdu Valley 666 30 6.023 9.939 10.942 12.948 1 52 3.262 10 13.147 41

Total 5,719 13,413 26,111 42,233 50,352 68,285 81,627 15,079 1 66,753 6

X of Total %of Total MAIZE Area Under Maize Area Under Maize

Eastern Terai 6 514 1,095 2,063 2,064 3,877 3,604 538 1 3,362 8 Western Terai - 210 206 1 128 1 601 2 268 4,367 139 2,745 4.s./34 Sub-total 6 7240 1,0 3,19 3 6,14 7,971 6,1fi

Inner Terai - 466 1,030 1,605 3,328 2,305 2,368 499 1 2,667 4

Eastern Hills 4 2 93 424 1,227 1,062 1,274 33 n.s./3 1,188 1 Western Hills - 6 21 1 ,110 1 162 2 0 n.s./342 1,8 1 Sub-total 4114 1,534,3,59 4.s 3,030 .L

Kathmarnlu Valley - 54 453 4J392 _8L 913 5.089 169 _ 2.284 8

Total 10 1,252 2,898 6,769 .11,412 11,587 18,723 1,387 n.s 14,038 3

7. of Total 7. of Total WHE1T Area Under Wheat Area Under Wheat

Eastern Tersi 2,171 3,332 9,290 21,471 33,215 48,818 54,902 4,391 18 45,645 78 Western Terai 2 1184 4,021 9.i2 16.100 2. 2436 1B18 8 20.825 38 Sub-total 2,2 13,311 30,983 379, 0, j22 66;4970

Inner Terai 347 1,067 1,813 IJ,929 3,096 6,301 5,433 1,076 16 4,943 35

Eastern Hills 29 96 341 799 1,777 2,248 1,478 155 22 1,834 17 Western Hills 758707 2 A5 586 l 1 .8F8 12 6148 1 .111 2 59728 Sub-total 0 86 8i57 7, 280

Kathmandu Valley 1.407 4.992 10165 14,041 15925 16077 8,178 5.521 25 16,727 61

Total 4,280 11,378 28,188 54,633 75,151 102,226 110,465 14,074 10 95,946 41

TOTAL MAJOR FOODGRAINS 10,009 26,043 57,197 103,635 136,915 182,098 210,815 30,540 2 176,787

r Average 1965/66, 66/67 arnl 67/68. /2 Average 1969/70, 70/71 ands 71/72. /3 n.s. = less than 0.5%

Source: Food and Agricultural Marketing Services Dept. (FAMSD), KFAI,Kathmandu, September 1973. ANNEX 8

Table 21: AREAS UNDER IMPROVED SEEDS FOR POTATOES, BY REGIONS, 1968/69-1971/72

(Hectares)

1967/68 1968/69 1969/70 1970/71 1971/72

Eastern Hills 21 34 199 229 215

Western Hills 68 164 84 54 llS

Sub-total 89 198 283 283 334

Eastern Terai 310 294 496 592 1420

Inner Terai - 8 84 99 47

Western Terai 2 12 870 228 1955

Sub-total 312 314 1450 919 3422

Kathmandu Valley 274 176 717 447 970

Total 675 688 2450 1649 4726

Source: FAMSD, MFAI, 1973 ANNEX 8 Page 23

Table 22: TOTAL IJSE OF IMPROVED SEED

(o000 m ton)

CroP 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

Paddy 0.2 0.6 1.2 1.9 2.5 3.0

Wheat 0.2 0.7 1.8 3.0 5.3 6.6

Maize 1 0.03 0.05 0.1 0.2 0.2

Potato 0.3 0.1 0.3 0.4 0.4 o.6 TOTAL 0.7 1.4 3.4 5.4 8.4 10.4

/1 Negligible

Source: EAPDq MFAIS, Agricultural Statistics of Nepal, 1972. ANNEX 8 Page 24

Table 23: DISTRIBUTION OF IMPROVED SEEDS BY AGRICULTURE MARKETING CORPORUTION, 1967/68 - 1972/73 (m tons)

Year Wheat Paddy Maize Jute Total

1967/68 508 232 30 - 770

1968/69 426 253 49 - 728

1969/70 410 210 40 2 662

1970/71 326 102 47 8 1483

1971/72 814 265 56 25 1,160

1972/73 1,872 164 50 - 2,086

1973/74 1,366 414 46 - 1,826

Source: Agriculture Marketing Corporation, September 1973. ANNEX 8 Page 25

Table 24: AGRICULTURE MARKETING OORPORATION, IMPROVED SEEDS PROCUREMENT, 1968/69 - 1973/74 (m tons)

1968/69 1969/70 1970/71 1971/72 1972/73 1973/7

Local Collection

Wheat _ 378 199 64 450 n.a.

Paddy - 483 -- 346 n.a.

Maize - 37 47 25 80 n.a.

Jute 4 - - - n.a.

Total 902 246 89 876 n.a. Imported

Wheat 450 - 136 750 1,714 n.a.

Paddy 342 - 5 - - n.a.

Maize 61 - - 22 - n.a.

Jute - - 9 20 - n.a.

Total 853 150 792 1,714_ n.a. Total Procured

Wheat h50 378 335 814 2,164 2,190

Paddy 342 483 5 - 346 356

Maize 61 37 47 47 80 34

Jute - 4 9 20 - -

Total 853 902 396 881 2,590 2,580

Source: Agriculture Marketing Corporation, September 1973. ANNEX 8 Page 26

Table 25: AGRICULTURE MARKETING CORPORATION, IMPORT OF CHEMICAL FERTILIZER, 1968/69 - 1973/74 (m tons)

1968/69 1969/70 1970/71 1971/72 1972/73 1973,74

Ammonium Sulphate 60950 8,500 11,900 12,_52 28,257 13,000

Complex (20:20:0) 3,000 6,500 4,500 6,000 21,917 21,950

Complex (20:20:10) - 1,000 - - 1,000 -

Urea 1,05O 3,000 1,200 4,613 5,000 2,000

Muriate of Potash 500 100 800 1,000 8,000 500

Singlesuper Phosphate 600 - - -

Stera Meal 192 509 - -

Total 12,292 19,609 18,h00 24,o65 64,174 37,450

Source: Agriculture Marketing Corporation, September 1973. ANNEX 8 Page 27

Table 26: SALE (CONSUMPTION) OF CHEMICAL FERTILIZER BY NUTRIENT, 1963/64 - 1973/74 (m tons)

Nutrient Nitrogen Phosphorous Potash Total Year (N) (P2 05) (K2 0)

1963/64 345 9 24 378

1964/65 370 180 42 592

1965/66 342 90 12 444

1966/67 1070 276 104 1454

1967/68 1829 728 167 2733

1968/69 2382 659 185 3199

1969/70 3380 1050 156 4586

1970/71 4111 1081 214 5406

1971/72 5557 1952 462 7968

1972/73 7698 3150 1052 11900

1973/74 9003 3167 918 13088

Source: Agricultural Marketing Corporation, October 1974. ANNEX 8 Page 28

Table 27: AGRICULTURE MARKETING GORPORATION, DISTRIBUTION OF FERTILIZER BY TYPEs 1968/69 - 1973/74

(m tons)

1968/69 1969/70 1970/71 1971/72 1972/73 1973/74

Anionium Sulphate 7,510 10,133 9,929 12,290 17,007 16,857

Complex (20:20:0) 2,667 4,573 4,558 9,203 9,023 12,127 Ure!a 461 5h7 2,125 2,3h9 5,o80 6,51

Complex (15:15:15) - 13 - - - _

Complex (20:20:10) - 255 685 44 -

Muriate of Potash 187 214 242 703 1,177 983

Single ouper Phosphate 248 129 158 155 198 n.a.

Triple oSuper Phosphate 27 11 10 4 3 n.a.

Nitrophoska 306 - - - - n.a.

Stera Meal 192 - - 425 69 n.a.

Bone Meal 9 1 11 67 9 n.a.

Kisan Mal 2 - - 192 12 ii.a.

Total 11,609 15,890 17718 25, 432 325~78 78

Source: Agriculture Marketing Corporation, September 1973. Tabie 20: DISTRIBUTION OF CHE]MICAL FERTILIZERS, BY CROP ANiD REGIONS, 1971/72

Region Paddy Wheat Maize Potato

Eastern Terai 4,784.18 6,L35.91 860.70 631.09 Western. Terai 224~1558 2 24~4.314 329.91 599.0 Sub-total 7,199.76 5,680 . 196 720.99

Inner Terai 533.36 772.39 308.59 86.63

Eastern Hill 63.57 28.17 21.14 7,45 W-estern Hill 905.48 533.23 456.25930 Sub-total 969.03 56.35

Kathniardu Valley 042 941.12 464.27 60,25

Total 9,757.11 L4.96 2,440,56 969.22

Source: Food and Agricultural Marketing Service Dept., FiFAI, Kathnandu, Septem,ber 197,.

\1I Table 29: DISTRIBUTION OF CH=CIAL Fa=TILIZERS, BY CROP kND REGIONS, 1970/71

Region Paddy Wheat Maize Potato

Eastern Terai 2,782.71 4,231.49 242.45 181.22 Western Terai 802.92 1 259.71 51.98 22.43 Sub-total 3,585.63 5,491.20 294.43 203.65 Inner Terai 255.80 497.62 110.18 22.92

Eastern Hill 27.15 26.46 6.64 Western Hill 479.41 434 17 279.38 68.77 Sub-total 460.63 2b6.52 Kathmandu Valley 6,135.69 6,465.13 807.83 19.56

Total 104B83.68 12,914h58 1,h498. 46 314.90

Source: Economic Analysis and Planning Division, MAI, Kathmandu, September 1973.

CD ODO Table 30: FOOD GRAIN SURPLUS - DEFICIT ANO POPULATION 13Y DTSTRICTS, 1970-71

Seed for Dore stic Animals, Edible Requirements Loss, Cereal Edible of Seeds far Waste, Grain Cereal Cereal Cereal Insects, Availa- Estimated Require- Surplus (+) Region Area Production Grairr, etc. bility Population merts Deficit (-8 ('000 ha) ('000 m ton) ('000 m ton) ('000 m ton) ('000 m ton) ('000) ('000 m ton) ('000 m ton) 12 3 I4 5 6 7 8 9

Eastern Terai Jhapa 83.9 153.3 4.5 14.9 82.0 247.7 47.1 34.9 Sunsari 57.2 87.7 3.0 8.5 48.5 223.4 42.4 6.1 Norang 107.9 159.9 4.8 15.5 86.o 301.6 57.3 28.7 Siraha 76.4 117.9 3.8 11.4 63.8 302.3 57.4 6.4 Saptari B0.0 113.3 3.8 11.5 63.1 312.6 59.4 3.7

Sarlahi 48.6 86.9 2.8 8.4 50.3 179.9 3 4 .2 16.1 Mahotari 95.8 123.8 3.9 12.0 68.0 324.9 61.7 6.3 Dhanasha 100.2 120.9 3.9 11.7 67.3 330.6 62.8 4.5 Bara 59.6 123.6 3.8 12.0 69.7 233.4 44.3 25.4 Parsa 44.5 73.2 2.6 7.1 40.6 202.1 38.4 2.2 Rautahat 77.6 137.3 4- 1 78.6 60.8 17.8 Subtotal 831.7 1,297.8 126.3 717.9 2,978.6 565. 152.1

Western Terai KapilvasE7 77.0 132.3 4.6 12.8 75.4 205.2 39.0 36.4 6 Rapendehi 78.0 136.2 4.6 13.1 75.5 243.3 4 .2 29.3 Nawalparasi 42.0 84.2 2.8 8.1 53.3 146.5 27.8 25.5 Banke 41.1 74.3 2.6 7.2 45.1 125.7 23.9 21.2 Bardia 51.7 84.3 2.5 8.2 51.8 101.8 19.3 32.5 Kaila i 51.5 88.4 2.7 8.6 50.9 128.9 24.5 26.4 Kanchanpur 21.4 39.5 1.2 a 24.1 68.9 1111.0 Subtotal 362.7 639.2 17.0 61.8 376.1 1,020.3 193.8 182.3

Inner Terai Sindhu1i 14.o 30.7 0.7 3.0 21.5 147.4 28.0 _6.5 Makwanpur 24.0 57.6 1.2 5.6 41.2 163.8 26.2 15.0 Chitwan 60.o 105.2 2.3 10.3 73.8 183.6 34.9 38.9 Dangdeokhuri 55.0 90.6 2.5 8.8 57.8 167.8 31.9 25.9 Udayapur 8g.0 44.6 1.0 4.4 29.5 112.6 21.4 8.1 Subtotal 2h. 328.7 7.7 32.1 223.8 775.2 1U2.4 81.4

Total Terai l.h36.4 2.265.7 66.1 220.2 1.317.8 202.09.774.1 415.8

Eastern Hills Taplejung 10.0 14.7 0.4 1.4 11.7 84.7 11.9 - .2 P Panchthar 15.0 21.0 0.5 2.1 16.8 145.8 23.3 -6.55 TIlAi 20.1 26.5 0.5 2.6 18.8 139.5 22.3 -3.5 Sankhusabha 9.0 16.2 0.3 1.6 12.9 114.3 16.0 -3.1 0 Tehrathum 13.0 22.0 0.4 2.2 16.6 119.3 19.1 -2.5 Dhankuta 14.7 34.2 o.6 3.1 24.1 107.6 17.2 6.9 Table 30: FOOD GRAIN SURPLUS - DEFICIT AND POPULATION BY DIsTRICTS, 1970-71 (continued)

12 3 4 5 6 7 8 9

Ekstern Hills (cont.) Solokhumbu 5.3 11.4 0.2 1.1 9.6 105.3 14.7 -5.1 Okhaldhunga 8.6 22.6 0.4 2.2 17.6 122.9 19.7 -2.1 rhotang 9.4 17.6 0.3 1.7 13.9 163.3 26.1 -12.2 Bhojpwr 16.2 34.8 0.7 3.4 26.0 195.0 31.2 -5.2 Ramechhap 12.5 28.9 o.6 2.8 21.5 157.3 25.2 -3.7 Sindhu Palanchok 13.0 33.2 0.7 3.2 25.3 206.3 28.9 -3.6 Kavrepalanchok _16 1.1 4 245.2 32.2 -4.2 Subtotal 163.3 329.9 77 32.0 249.8 1,906.5 91.6 -45io

Western Hills Dolakha 6.o 13.9 0.3 1.4 10.4 130.0 18.2 -7.8 Rasuwa 1.5 4.1 0.1 0.4 3.2 17.5 2.5 0.7 Dhading 15.1 30.2 o.6 3.0 23.0 236.3 37.8 -14. 8 Nuwakot 12.7 39.5 0.8 3.9 27.8 172.7 27.6 0.2 Manang 2.1 5.0 0.1 0.5 4.1 7.4 1.0 3.1 Parbat 8.0 16.0 0.4 1.6 12.1 118.7 19.0 -6.9 Kaski 17.0 55.5 1.1 5.4 39.3 151.7 24.3 15.0 Syanja 21.9 44.4 0.9 4.3 31.2 268.6 43.0 -11.8 Lampung 9.6 28.4 0.6 2.8 20.6 140.2 22.4 -1.8 Tanahu 15.4 36.0 0.7 3.6 27.1 158.1 25.3 1.8 Gorkha 10.9 27.8 o.6 2.7 20.5 178.3 25.0 -4.5 Dolpa 2.6 5.8 0.2 o.6 4.7 19.1 2.7 2.0 Mustang 2.5 5.5 0.2 0.5 4.3 26.9 3.8 0.5 Myagdi 8.3 19.4 0.4 1.9 15.0 57.9 9.3 5.7 Baglung 12.8 24.8 0.5 2.4 19.4 172.7 27.6 -8.2 Argakhachi 8.5 19.5 0.4 1.9 15.4 130.2 20.8 -5.4 Palpa 17.9 29.3 0.7 2.9 21.3 212.6 34.o -12.7 Surkhet 14.8 24.0 o.6 2.3 16.4 104.9 16.8 -o.4 Jajarkot 9.5 21.6 0.5 2.1 16.2 86.6 13.9 2.3 Dailekh 11.4 22.5 o.6 2.2 16.9 156.1 25.0 -8.1 Humla 3.6 4.9 0.2 0.5 4.o 29.5 4.1 -0.1 Jumla 5.5 8.9 0.3 0.8 6.5 122.8 17.2 -10.7 Mugu 2.6 5.2 0.2 0,5 4.1 25.7 3.6 0.5 Tibrekot 6.5 9.2 0.3 0o9 7.4 10.0 1.4 6.o Sallyan 12.1 33.6 0,8 3.3 25.1 141.5 22.6 2.5 Rukum 4,7 12.0 0.3 1.2 9.7 96.2 15.4 -5.7 Rolpa 4.5 11.6 0.3 1.1 9.4 163.0 26.1 -16.7 Pyuthan 11.9 28.4 o.6 2.8 21.4 137.3 22,0 -o.6 Doti 20,4 26.2 0.8 2.5 18.9 166.1 26.6 -7.7 Bajhang 9.2 14.5 0.5 1.4 10.3 108.6 15.2 -4.9 Bajura 9.5 14.1 0.5 1.4 9.3 61.3 9.8 -0.5 Achham 8.6 15.3 0.5 1.5 10.9 132.2 21.2 -10.3 C MIN Darchula 4.6 11.2 0.4 1.1 8.8 68.9 9.6 -0.8 C+w Baitadi 8.9 17.0 o.6 1.6 12.3 128.7 20.6 -8.3 O Dadeldhura 10.8 20.4 o.6 2.0 14.8 94.7 15.2 -0.4 Gulmi 15.0 2 o.6 303 25.6 227.7 36.4 -10.8 Subtotal 346.9 738.9 177 72.3 547.4 4,260.7 667.1 7-1976 Table 30: FOOD GRAIN SURPLUS - DEFICIT AND POPULATION BY DISTRICTS, 1970-71 (continued)

1 2 3 5 6 7 8 9

Kathandu Valle- Kat.hWAr e 24.9 73.0 1.7 7.1 47.1 353.8 56.6 -9.5 Bhaletapur 8.6 32.0 0.8 3.1 20.3 110.2 17.6 2.7 Lalitpur 14.3 42.7 1.0 4.2 29.5 .0 24.8 4.7 Subtotal 1777 3 4 7 .i5 96.9 699.0 -2,1

Total Hill 558.0 1.216.5 35.7 1187 894.1 6,786.2 1,o6o.8 -166.7

Grand Total 1,994.4 3,482.2 101.8 338.9 2,211.9 11,560.3 1,962.8 249.1

Source: Derived from T. Sakiyam, Evaluation of the Third Five-Year Plan Economic Analysis and Planning Division, MFAI, HiMG, Nepal, and updated Population Census data from CBS.

Notes on Table 30.

1. Crops Seed rates lV98s a. paddy 55 b. maize 30 c. wheat 66 d. millet, buckwheat 25 e. oats 40

2. It is assumed that the amount of foodgrains used in non-humans consumptidn, viz. feeds for cattle and other domestic animals and birds, and the loss due to insects and pests, will be 10 percent of the total gross foodgrain production.

3. It is assumed that of the total gross foodgrain production, 40 percent wilI be lost in dehuasking of rice anr 3 percent will be lost in milling of other foodgrains like maize, wheat, millets, etc.

4. The amount of edible foodgrains required per head, per annum has been assumd to be 190 kgs in case of Terai Region, 160 kgs in case of Hilly regions and 140 &s in case of the remote Hills areas where food shortage is perpetual.

5. The total cultivated area of the countr was estimated to be 1,845 000 ha. But, the cultivated areas of the following districts have been changed on the basis of the data obtained from the Cadastral Survey and on the basis of registration at the reverm offices (Mals). The districts (16) are: KathmandLi, Bhaktapur, Lalitpur, Jhapa, Sunsari, Morang, Siraha, Saptari, Mahottari, Dhanusha, Bara, Parsa, Er Rautahat, Kanchapur, Doti, and Achham, Hence the figure of 1.98 million ha. , B °

6. The population figures have been taken from the Second Population Census, 1970/71, made by CBS, HHG. wIi 0 7. The balance ---- (+) Surplus and (-) Deficit ---- of edible foodgrairn refers to the amount obtained by deducting the edible quantity required for human consumption from the total availability of edible foodgrairw . Table 31 : FOOD BATLAND E SHEET AND PEE CAPITA CONSUMPTION, 1970

Av 196 9/7oL' Av 1970 Area Seed Seed Feed and Gross Net Apparent Per Capita L Procfuction Harvested Rate Utilization Waste Availability Imports Exports Exports Food Demandr Cormumpti-onL (1) (2) (3) (14-3x(2) (5)=10% of (1) (6.±Z)4)5) (B) (9)-(8)-(7) Cl0ThC6)-(9) (11' (000 m tons) (1,000 ha) (kg/g) ------(1,000 M To-nsYP------(g

Foodgzrains

Rice

Paddy 2,2141.3 1,172.3 55 614.5 2214.1 1,952.7 Rice equi.valentL3 1,171.6 180.0 991.6 85.8

Maize 797.6 1433.6 30 13.0 79.7 70o4.9 15.0 - 15.0 719.9 62.3

Wheat 230.3 220.6 66 114.6 23.0 192.7 21.0 21.0 171.7 14. 9

Barley 214.0 26.3 25 0.66 2.4 20.9

Millet 125.3 1.12.0 25 2.8 12.5 110.0 1.0 1.0 109.094

Total FoodgrainB 3,1418.5 1,977.8 2,200.1 187.0 2,013.1 1714.2

Meat

Bu~ffalo 19.0 19.0 12.3-/4 - 12.3 31.3 2.7

Sheep and Goat 5.6 5.6 l3 - 1.3 6.9 .6

Pig 14.2 14.2 0-5/6 - 0.5 14.7 .1A Poultry 17.5 is- -- -03 78A.

Total Heat 4j6.3 146.3 114.14 -114.14 60.7 5.2

Milk andi Milk Products 552.0 552.0 14.0 3501 31.0 583.0 50.14

1 Average 1968/69 - 1970/71 21970 Population 11,556,200 60% of pddy by weight /4from 60,7000 heads @ 2014.5 lbs/head from 50,000 heads @ 27.3 kg/head ~ from 10,000 heads 0 145.5 kg/head 0H from 140,000 heads 0 .75 kg/head In the form. of ghee (17,000 m tons) or 31,300 m tons nilk equivalent. Source: Mission Estimates. Table 32t PROJECTED PER CAPITA AND TOTAL FOOD DEM'AND,1975, 1980 AND 19d5

Anmial Changes in Per Capita 1975 Consfomptionli 1980 conmmap n 1o8' Con3urption 1970 Consumption Income ConsumptionL Per Capita Total Per Capita Total CaP. ta Total Per Ca ita Total ELasticity Alt I Alt II Alt I Alt II Alt I Alt I Alt I hit I AltII I t+ klt I klt II AtTIAl7t2 (kg ton(n) 7S ) MF T (1,000 m toe TkgT 1 ( ii0 tons) - - kg -- (1,000 st-

Foodgrains

Rice 85.8 991.6 .30 o.o6 o.6 85.9 88.4 1,091.5 1,123.4 86.6 91.0 1,210.6 1,272.7 87.1 93.8 1,348.1 1,452.2

Maize 62.3 719.9 .20 0.04 0.4 62.6 63.5 795.8 807.2 62.9 64.8 879.5 906.1 63.2 66.1 978.7 1,023.6

Wheat 14.9 171.7 .60 0.12 1.2 15.0 15.8 190.7 200.8 15.1 16.8 211.1 234.9 15.2 17.8 235.4 275.6

Barley 1.8 20.9 .20 o.o0 0.4 1.8 1.8 22.9 22.9 1.8 1.9 25.2 26.6 1.d 1.9 27.9 29.4

Millet 9.4 109.0 .20 o.o4 0.h 9.4 9.6 119.5 122.0 9.5 9.8 132.8 137.0 9.5 10.0 147.1 154.8

Total Foodgrains 2,013.1 3...1L 2,276.3 2,.459.2 2,577.3 176.8 189.6 11,545.5 2 S35.6

Meat

rffa1o 2.7 31.3 1.10 0.22 2.2 2.7 3.0 34.3 38.1 2.8 3.4 39.1 47.5 2.9 3.7 4)..9 57.3

Sheep and Goat o.6 6.9 1.00 0.20 2.0 0.6 0.7 7.6 8.9 o.6 0.7 8.4 9.8 0.6 0.8 9.3 12.4

Pig 0.4 4.7 1.50 0.30 3.0 0.1 0.5 5.1 6.4 o.4 o.5 5.6 7.0 0.4 0.6 6.2 9.3

Poultry 1.5 17.U. 1.20 0.21. 2.4_ 1.5 1.7 19.1 21.6 1.5 1.9 21.0 26.6 1.6 2.1 24.8 32.5

Total Meat 60.7 66,1 .o 74.1 90.9 8_.2 lad

Milk and Milk Products 50.4 583.0 1.20 0.24 2.4 51.0 56.7 648.3 711.9 51.6 63.9 713.1 880.9 52.2 71.9 805.2 1,099.5

Pepulation (1970) - 11.556 dillion. PObtained by mltiplying incoe elasticities by average rate of growth of per capita income at (a) Alternative I: 0.2% (or 2.2% GODPgrowth); and (b) Alternrtive II: 2.0% (or .0% GOP growth). Population (19y75) 12,711,800 Popultion (1980) 13,983,002 Population (1985) 15,485,308

Soures Mission estimates. Table 33: F WUURAIN PRODUCTION TRENDS, 1970-1981

(000 m tons)

Trend,, Average 2/ Rate - 1970 1975 1976 1977- 1978 1979 1980 1981 Major Foodgrains

Rice 31 0.6 1,345 1,386 1,394 1,403 1,411 1,420 1,428 1,436 Maize -0.9 798 761 754 747 741 734 727 720 Wheat 7.4 230 329 353 379 408 438 470 505

Sub-total 2,373 2,476 2,501 2,529 2,560 2,592 2,625 2,661

Minor Foodgrain 1.8 149 161 164 169 170 173 176 179

Total Foodgrains 2,522 2,637 2,665 2,698 2;730 2,765 2,801 2.840 Total Foodgrains avai1ablg/for Consumption and Exports- 2,200 2,320 2,345 2,374 2,402 2,433 2,465 2,499

1/ Annual growth rate from average 1965/66-1967/68 to average 1970/71-1972/73 (Table 13). 2/ Average 1968/69-1970/71. 3/ Derived from paddy production at 60% conversion. 4r/ Assuming 12% of production is used for seed and feed or wasted. ANNEX 8 Page 37

Table 34: FOODGRAIN SURPLUS/DEFICIT, 1970-1981

Available for Demand-/ Surplus (Deficit) Production Consumption / Alt. I Alt. II Alt. I Alt. II

1970 2,522 2,200 2,013 2,013 187 187

1975 2,637 2,320 2,219 2,276 101 44

1976 2,655 2,345 2,265 2,333 80 12

1977 2,698 2,37h 2,312 2,392 62 (18)

1978 2,730 2,,402 2,360 2,152 42 (50)

1979 2,765 2,433 2,409 2,514 24 (81)

1980 2,801 2,465 2,459 2,577 6 (112)

1981 2,840 2,499 2,510 2,6h2 (11) (t43)

1/ From Table 33.

2/ Extrapolated from Table 32.

N.B. See Annex 1, Appendix 3, for qualifications on surplus (deficit) analysis. AldNEXl 6 Page 38

Table 35: EXPORT OF GOODS (Rs 000) TO OVERSEAS COUNTMSLL

Rs 000

Description of Goods 1966/67 1267/68 1968/69 1962/70* ' 1. Ptaw Jute 25,715 149,751 68,399 42,61 LV..5 33,319 2. Jute CDttings - - 10,516 2,703

3. Jute Goods 31,438 32,509 26,3414 22,94iL 23,U22

14. Hask 226 201 4,112 2,853 2,905

5. Bristle 2,284 6,885 14,258 16,713 7,967

6. Feathers 149 92 328 943 78

7. Curio Goods 192 1,473 1,907 4,004 1,864

8. Mica 37 1,415 9,317. 9,319 o79

9. Carpet 468 813 608 1,160 757 10. Miscellaneous 412 1,709 10,188 1142182 51 (Oil seeds, Candies, Mlorcoys, Goat' s skin, Cow Bezards, etc.)

Total 6o,941 94,848 XL46,oo6 114,730 85,009

* Revised

/1 All the countries excluding India and Tibet, jute cuttings included.

According to Central Bureau oI' Statistics, the shares of Nepal's exports in 1966/67 by distinction are as follows: India - 97.8 percent Tibet - 1.3 percent Overseas Countries- 0.9 percent Source: Nepal Rastra Bank, MiG, Nepal. Page 39

Table 36I-ImPOI T OF GOODS (Rs 000) FROM OVERSEAS COUNTRIESL_.,

Rs Oo

Description or Goods 1967/68 1968/69 1969/70 1970/71

1. ^eachin-ries and Spare Parts 8517 5459 1221 5 2. Raw Materials 14S967 20333 29CwG 3. Buildinpgs Constructional 5899 507e 581l 6-L.. electrie and household matavrials 4. Vehicles - Cars, Trucks, 757 177 2 3543 710• Scooter-s and lbtercycle et c.

5. Readyrade Garments, Socks and 10179 4789 11664 ?56>,o Carpets 6. Radios, Transistors, Record- 2186 791 2256 1367 Players, etc.

7. Beverages and Tobacco 929 3283 1321 13-S

8. Medicine and medicinal goods 442 629 3107 1467

9. Agricultural tools, implenents 3024 3561 4571 165t & fertilizers axid other inaterials

10. Stationery Goods 1262 101 576 2441

11. Cosmetics

12. Food and food articles 6622 8522 2483 922

13. Watch and watch materials 388 317 169 106

14. Photographic goods 744 233 918 493

15. Miscellaneous 2635 34912 ,2 43850 26369 (Laboratory equipments included)

TOTAL 13 58553 89780 1220L9 2,L644

LI All the cQuntries excluding India and Tibet. 2 Including developmental goods. f3 According to Ccntral Bureau of Statistics, the shares o: jLepa1ls m'-ports s' destination is as follows: India - 96.4 percent Tibet - 1.3 perce;it Overseas Countries - 2.3 perccnnt Source: The Nepal Rastra Bank, vG, Nepal. Ah13EX B page 4o

Table 37: VALUE OF AGRICULTURAL TRADE WITh INDIA, BY COMIODITIES, 1566/67 (Rs 000)

Agri - Major Commodities Import Export Net Exports

Live animals 113,069 5,395 -107,674

Maize 51 9,724 9,673

Th eat 653 250 -1403 Paddy 467 12,207 /2 11,7140

Rice 1,1403 167,190 /2 165,787

Sugar Cane 1 148 147

Jute 46,591 146,591

Tobacco 89 10 -79

IMustard 211 21,907 21,696

Meat and Meat preparation 13 __ 13

Other cereals and cereal preparations 15,133 42.,907 27,7714

Fruits and Vegetables 8,773 4,8141 3,932

3ugar, 3ugar preparation and honey 8,553 312 8,21

Tea, Coffee, Spices and manufactures thereof 11,964 6,396 -5,568

Animal feed 348 9,201 8,953

Miscellaneous food preparation 18,204 18 -8,l86

KiLk products 2,128 20,628 15,500

Fish and Fish preparation 1,706 27 -1,679

Agriculture, Total 182,766 3147,752 161L,966

/1 Host up-to-date figures as of January 1972. 77 Figures recorded at the customs offices and other check points. Unofficial estimates show roughly equal amounts of annual unrecorded exports.

Source: Central Bureau of btatistics, H.M.G., Nepal. Table 38: CONSUMER'S PRICE INDEX FOR KATHMANDU, 1966/67-1972/73

Fiscal Year: 1962/63 = 100

ub- rouped Feb.-Mar. Feb.-Mar. Commodities ommod- Weight 1966/67 1967/68 1968/69 1969/70 1970/71 1971/721972/73 1973 1974 ties _____ Food & Drink 44 70.00 151 14T 153 169 - t 179.7 201.6 194.6 244.6 Food grains 10 40.32 167 153 152 169 176.1 168.4 195.0 184.0 230.0 Oil & ghee 7 5.50 124 129 143 157 163.2 173.0 182.6 182.9 244.7 Liquor 2 4.63 148 170 200 238 264.2 289.2 321.7 296.7 356.1 Meat,fish and eggs 4 5.90 114 134 153 154 162.3 166.4 193.3 188.8 230.8 Vegetable & spices 11 8.28 125 122 131 154 190.9 191.8 194.9 174.8 245.6 Other consumer goods 31 30.00 113 115 122 135 132.9 143.5 156.0 168.3 188.6 Clothes & shoe 9 4.43 119 136 148 169 157.6 202.6 253.0 258.6 338.2 Fuel, Power & Light 4 10.34 113 99 104 411 110.6 114.8 123.1 134.0 136.3 Household goods 5 6.53 110 104 102 132 134.3 141.8 131.7 133.2 164.9 Overall Index 75 100.00 139 138 144 159 166.7 168.9 187.9 186.4 227.8

Sources Sankhikiy. Sandesh, Central Bureau of Statistics, National Planning Comuission, and FAMSD, October 1974.

o1I. A\TNa a Page 42

Table 3°: AVERAGE (NATIONAL) RETAIL PRICES FOR FOODGRAINS AND POTATO

(Rs/Kg)

Paddy Rice Wheat Maize Potato Arhar Gram Paddy Rice Year Coarse Coarse Fine Fine

1964/65 0.90 1.05 1.40 1.13 1.30 - - 1.14 1.96 1965/66 1.13 1.81 1.64 1.10 1.18 - - 1.35 2.27 1966/67 1.07 1.96 1.48 1.03 1.03 2.00 1.85 1.29 2.27 1967/68 1.10 2.15 2.42 1.21 0.91 2.22 2.06 1.23 2.27 1968/69 1.20 2.08 1.56 1.11 1.00 2.44 2.17 1.26 2.20 1969/70 1.31 2.36 1.55 1.21 1.08 2.25 1.93 1.30 2.38 1970/71 1.26 2.36 1.44 1.19 1.42 2.57 2.45 1.33 2.56 1971/72 1.41 ?2?4 1.66 1.32 1.37 2.51 2.46 1.55 2.70 1972/73 1.65 2.74 2.29 1.69 1.51 2.97 3.23 1.71 3.06 1973/74 1.76 3.04 2.47 1.70 1.99 3.41 3.80 1.97 3.55

Index

1964/65 100 100 100 100 100 - - 100 100 1965/66 126 117 117 97 91 - - 118 115 1966/67 119 126 106 91 79 100 100 113 115 1967/68 122 139 173 107 70 111 113 108 215 1968/69 133 134 111 98 77 122 117 111 111 1969/70 146 152 111 107 83 113 104 114 120 1970m1 140 152 103 105 109 129 133 117 129 1971/72 2.57 213 119 117 105 126 133 136 136 1972/73 183 260 164 150 116 148 175 150 155 1973/74 196 289 176 150 153 171 205 173 179

Source: EAPD, Agricultural Statistics of Nepal, 1972, and FAMSD, October 1974. ANNEX 8 Page 43

Table bo: AVERAGE (NATICNAL) RETAIL PRICE OF SELECTED CASH CROPS, 1964/65-1973/74

(Rs/kg)

Mustard Mustard /1 Year Oil Seed Jute- Tobacco Sugar

1964/65 756 - 2,713 6.23 - 1965/66 7.20 - 3,887 9.23 3.70 1966/67 6.87 1.47 1,202 6.15 4.25 1967/68 7.21 1.64 1,047 5.47 4.79 1968/69 7.39 1.79 2,064 8.15 4.59 1969/70 8.04 1.94 1,998 9.33 4.42 1970o1 8.73 2.18 2,013 9.46 4.26 1971t12 9.44 2.29 1,540 10.69 4.48 1972/73 9.70 2.93 2,650 12.70 5.09 1973/74 12.96 3.62 1,996 13.27 5.76

Index

1964/65 100 - 100 100 1965/66- 95 - 143 148 100 1966/67 91 100 44 99 115 1967/68 95 112 39 88 129 1968/69 98 122 76 131 124 1969/70 106 132 74 150 119 1970/71 U5 148 74 152 115 1971/72 125 156 57 172 121 1972/73 128 199 98 204 138 1973/4 171 246 74 213 156

/ Rs/ton

Source: EAPD, Agricultural Statistics of Nepal, 1972, and FAflD, October 1974. AKNTAX 8 Page .44

Table 41: AVERAGE (NATIONAL) RETAIL PRICE.S FOR LIVESTOCK PRODUCTS (Rs/Kg)

Year Egg Mutton Buffalo Pork Chicken }ilk Ghee Rs/ea. Meat _ - -

1961465 0.37 6.05 5.04 4.55 7.91 1.29 - 1965/66 0.39 5.49 2.71 4.33 7.46 1.314 - 1966/67 0.33 4.99 2.85 3.54 6.23 1.h4 11.10 1967/68 0.35 4.77 2.98 3.07 5.11 1.21 12.20 1968/69 0.37 5.65 2.67 3.72 7.72 1.45 13.30 1969/70 0.40 6.07 2.64 4.91 8.24 1.69 14.48 1970/71 o.46 7.00 3.26 5.09 10.03 1.85 14.47 1971/72 0.43 7.14 2.70 5.70 8.96 1.84 11.29 1972/73 o.45 7.60 3.25 5.35 10.50 2.31 16.29 1973/74 o.56 9.03 3.86 6.48 12.50 2.01 20.47

Index

1964/65 100 100 100 100 100 100 - 1965/66 105 91 54 95 94 104 - 1966/67 89 82 57 78 79 112 100 1967/68 95 79 59 67 65 94 110 1968/69 100 93 53 82 98 112 120 1969/70 108 100 52 108 lo0 131 130 1970/71 124 116 65 112 127 143 130 1971/72 116 118 53 125 113 13 101 1972/73 121 126 64 118 134 179 147 1973/74 151 149 77 142 158 156 184

Source: EAPD, Agricultural Statistics of Nepal, 1972, and FAMSD, October 1974. ANNEX 8 Page 4 5

Table 42: FOODGRAIN PRICE DIFFERENTIALS BETWEEN TERAI AND HILLS

Tarai Hills Hill X 100 (Rs/Ag) (Rs/Ag) Tarai

Padc 1967/68 1.22 1.45 119 1968/69 0.91 1.41 155 1969/70 0.92 1.21 132 1970/71 0.92 1.32 143 1971/72 0.92 1.60 173 1972/73 1.09 2.09 191 1973/74 1.28 1.98 155 Rice 1967/68 1.95 2.35 121 1968/69 1.74 2.13 122 1969/70 1.71 2.11 123 1970/71 1.71 2.12 123 1971/72 1.75 2.47 141 1972/73 1.97 3.11 158 1973/74 2.35 3.47 148

Wheat 1967/68 1.84 2.39 130 1968/69 1.53 1.80 118 1969/70 1.46 1.63 112 1970/71 1.49 1.63 111 1971/72 1.44 1.82 126 1972/73 1.80 2.50 138 1973/74 2.20 2.56 116 Maize 1967/68 1.15 1.33 116 1968/69 0.97 1.22 126 1969/70 0.84 1.16 138 1970/71 0.9'1 1.17 129 1971/72 1.28 1.67 130 1972/73 1.32 1.88 142 1973/74 1.62 1.85 112

Source: EAPD, Agricultural Statistics of Nepal, 1972, and FAMSD, October 1974. ANNEX 8 Pa-ge 46

Table 43s AGRICULTURE MARETING CORPORATION, FERTILIZER RETAnI PRICES, 1969/70 - 1973/4 (Rupees per m ton)

12 L0 1570/71 1 /72 1972/73 1973/74 Aumwonium Sulphate 876 850 1,000 1,557 1,658 Cobplex (20:20:0) 1,085 1,057 1,557 1,557 2,214 Colnplete (20:20:10) - 1,163 - - - Unaa 1,428 1,312 1,535 1,535 2,193 ?ftwiate of Potash 681 779 895 895 1,553 Sijgle S-uper Phosphate 735 756 760 760 Tri.ple Super Phosphate 929 945 - -

ComWound - 2,135 Bone Meal - - 770

Kisan Mal - 980

Source: Agriculture Marketing Corporation, October 197?. Table U4t DISTRIBUTION OF FARM HOUSEHOLDS BY SIZE GROUPS, HILLS AND TERAI

Total House- % Total House- Area of % of Total StrRte Si7e Group Average hold in Ftrate hold in Strata Holdings Area of Holdings h1) (2) - ( -) (4- (5-2)x(3) _(6) (ha) (ha) (No) (% ('aa) (% A. T h e H i 1 1 s..

Less than 0.10 0.05 658 14.27 32.9 1.6 0.10 - 0.20 0.15 877 19.02 131.6 6.3 0.20 - 0.41 0.30 1,336 28.98 WLoo.8 19.2 0.41 - 0,61 0.51 661 14.3h 337.1 16.2 0.61 - 0.81 0.71 372 8.07 26)4.1 12.7 0.81 - 1.02 0.90 244 5.29 219.6 10.6 Above 1.02 1.5 462 10.02 693.0 33.3

All Strata 0.7- b,610 99.99 2,079.1 100.0

B. T h e T e r a i.

0.00- 0.68 0.34 1,457 24.oo h95 2.3 0.68 - 1.69 1.2 1,392 22.81 1,670 7.9 1.69 - 3.39 2.5 1,279 21.02 3,198 15.1 3.39 - 5.08 4.2 593 9.75 2,491 11.8 5.08 - 6.77 5.9 hi 4 6.81 2,443 11.5 6.77 -10.18 8.5 432 7.10 3,672 17.3 1n.18 -13.54 11.9 2k9 -1.09 2,963 11.0 Above 13.54 15.8 268 4.39 h,234 20.0 All Strata 3.h8 6,084 100.00 21,166 99.9

TOTAL Nepal 2.17 10,69h - 23,21h5

1/ Tncludes Kathmandu 2/ Includes Tnner Terni

Source: Computed from EAPD, Fnrm M,?nagement Study, 1968/69. Table 145: DTSTRTPiTTTTTM OCTrAi.r. nv>TtnzrJrOIIn n; *S1ZA. KATHANDTJ AND OTHER WfILLS

Total WouSe- % Total Area of % of Total Strata Size Group Average holds in Strata Households Households Area of Holdings

(ha) +6h;- _ (ha )x

K a t hmandu

Less than 0.10 .05 78 8.8 3.90 0.8 3.3 0.10 - 0.20 .15 115 13.0 17.25 12.8 0.20 - 0.141 .30 220 25.0 66.oo o.bi 0.61 .51 160 18.2 81.60 15.8 0.61 _ 0.81 .71 100 11.L 71.00 13.8 10.7 0.81 _ 1.02 .90 61 6.9 5h.90 142.8 Abhove 1 .02 1.5 1147 16.7 220.50 100.0 TOTAL 58 881 100.0 515.15

Trhe Iill-s cluding Kathmandu Less than 0.10 .o5 580 15.6 29.00 1.8 0.10 - 0.20 .15 762 20.L 114.3 7.3 0/20 - o0.41 .30 1016 29.9 33h.8 21.6 16.3 0.L1 - 0,61 .51 501 13.41 255.5 0.61 - 0.81 .71 ?72 7.3 193.1 12.3 0.81 - 1.02 .90 183 4.9 164.7 10.5 Akbove 1.01 1.5 8.4 1072.5 30.2

T('TkL 0.42 3,729 99.9 1,5'63.9 99.8

Source: Computed from FEAPD, Farm Mana:,ement Study, 1968/69 A.IMEI 8 Page 49

Table 46: PER HECTARE COST AND RETURNS FRCO CROP PRODUCTION, SELECTED DISTRICTS, 1968-69 (Rupees)

ReturnsL2 Costats Ym Business Returns to District A B C Income Famzily Labor Net Profit RemarkE

Eastern Hills

Illam 1,603 1,984 4,073 6,063 5,682 3,593 paddy, maize, potato Kavre Palanchok 889 1,430 2,899 6,884 6,343 4,874 Paddy, maize, wheat, millet

hsestern Hills

Dhading 1,767 2,228 4,756 6,660 6,199 3,671 Paddy, upland paddy, maise,wheat Syangja 1,526 1,897 3,437 4,633 4,262 2,722 Paddy, maize Sallyan 857 1,147 1,971 2,588 2,298 1,474 Paddy, maize

Kathrnandu Valley

Kathiandu 1,307 1,650 2,837 6,760 6,417 5,230 Paddy, maize, wheat

Inner 1erai

Chitwan A. 927 1,108 1,767 3,413 3,232 2,573 Paddy, maize, mustard Chitwan E./4 194 216 258 1,999 1,977 1,935 Maize

Eastern Terai

Morang 2,485 2,709 3,465 2,063 1,830 1,157 Paddy, wheat, mustard, jute Saptari 1,679 1,976 2,540 1,908 1,611 1,047 Paddy, wheat, jute Dhanusha 2,100 2,606 3,699 7,357 6,851 5,758 Paddy, wheat, tobacco Parsa 2,500 2,901 3,845 3,319 2,918 1,974 Paddy, wheat, sugarcane

Western Terai

Rupandehi 882 1,048 1,415 1,030 864 497 Paddy, wheat Bardia 1,068 1,605 2,680 3,549 3,012 1,937 Paddy, maize, wheat, mustard Kailali 763 927 1,583 1,709 1,545 889 Paddy, wheat, mustard

/1 Costs A: These costs include the cash outlay for several specific items as follows: hired human labor, all animal labor (inputed for owned bullocks), seeds, fertilizer", manures (for home-produced manure only the cost of labor transport to fields was counted), irrigation, plant protection, fanm tools and implements (prorated according to days of use for different crops) and land tax charged against the major crops by districts. Costs B: These costs include all those in Costs A plus interest on the investment in fixed assets (land, livestock, tools and implements, farm houses). Costs C: These costs include all those in Costs B plus the imputed value of family labor. /2 Returns consist of: Gross Income - This includes the value of main output plus by-products. Farm Business Income - Gross income minus "Costs A". Returns to Family Labor - Gross income minus "Costs B". Net Profit - Gross income minus "Costs C". /3 Represent Terai conditions. 7U Represent Hill conditions.

Source: EAPD, Farm Management Study in Selected Regions of Nepal, 1968-69. ANNTEX 8 Page 5O

Table 47: PER HECTARE RETURNS TO FANILY LABOR- BY CROPS,SELECTED DISTRICTS, 1968/69

(Rupees)

Paddy Maize Wiheat Mustard Sugar Cane Tobacco Jute

Eastern Hills

nilam 1,706 1,067 - Kavre Palanchok 1,990 2,945 842

Western Hills

Dhading 2,622 1,211 882 Syangja 2,072 2,190 - Sallyan 1,682 616 -

Kathmandu Valley

Kathmandu 3,183 1,831 1,403 -

Inner Terai

Chitwan A 1,515 540 - 1,177 Chitwan B - 1,977 - - -

Eastern Terai

Morang 211 - 72 1,011 - - 545 Saptari 540 . - 758 - _ - 313 Dhanusha 199 - 258 - - 6,394 - Parsa 282 - 394 - 2,242 -

Western Terai

Rupandehi 570 - 97 - - Bardia 913 726 689 804 Kailali 393 - 470 486 -

/I Gross P-rm Income minus Cash Costs including interest (see Cost B in Table 46).

Source: EAPD, Farm Management Study in Selected Regions of Nepal, 1968-69. Table 48: PERi FARM COSTS AND RETURNS FROM CROP PRODUCTION, SELECTED DISTRICTS, 1968-69 (Rupees)

Costs Farm Business Family Labor District A B C Income Income Net Profit

Eastern Hills

Il1am 395 475 968 1,356 1,276 783 Kavre Palanchok 169 281 612 1,387 1,275 944

Western Hills

Dhading 196 243 511 803 756 488 Syangja 233 285 510 689 637 412 Sallyan 152 203 349 582 531 385

Kathmandu Valley

Kathmandu 552 708 1,223 2,876 2,720 2,205

Inner Terai

Chitwan A. 1,713 2,009 3,125 6,236 5,940 4,824 Chitwan B. 173 198 236 1,829 1,809 1,771

Eastern Terai

Morang 2,931 3,219 3,754 1,794 1,506 971 Saptari 2,452 2,860 3,682 2,297 1,889 1,067 Dhanusha 1,391 1,557 1,889 1,209 1,043 711 Parsa 2,233 2,630 3,456 2,553 2,156 1,330

Western Terai

Rupandehi 1,292 1,557 2,114 1,953 1,688 1,131

Bardia 3,164 4,328 6,942 10,140 8,976 6,362 mC Kailali 1,839 2,331 3,771 4,242 3,750 2,310 v >

Source: EAPD, Farm Management Study in Selected Regions of Nepal, 1968-69. Page 5,2

Table 49: RATES OF RETURN TO COSTS, LABOR AND CAPITAL, SELECTED DISTRICTS, 1968/69

Output/Cost IC' Return to Labor Output/Capital District Ratio Per Day (excluding 1and)Ratio;. (Rs)

Eastern Hills

Illam 1.88 7.37 0.27 Kavre Palanchok 2.68 7.52 0.39

Western Hills

Dhading 1.77 5.57 o.65 Syangja 1.79 9.16 o.42 Sallyan 1.75 lo.54 0.24

Kathmandu Valley

Kathmandu 2.84 13.20 0.57

Inner Terai

Chitwan 2 .46 11.88 0.56

Eastern Terai

Morang 1.31 4.61 o.63 Saptari 1.41 5.05 0.34 Dhanusha 2.56 16.41 0.78 Parsa 1.51 7.44 o0.58

Western Terai

Rupandehi 1.35 4.50 0.29 Bardia 1.72 9.84 o.60 Kailali 1.56 8.93 o.65

Source: EAPD, Farm Management Study in Selected Regions of Nepal, 1968-69. Table 50: NET FARM INCOMEB PER HOLDING BY FARM SIZE, BY SELECTED DISTRICTS AND REGIONS, 1968/69 (Rupees) The Hill District/Region Strata (he) Below 0.10 0.10-0.20 0.°0-0.41 0.I41-0.61 0.61-0.81 0.81-1.02 Above 1.02 Illam __ 134.7 11ul.3 365.)i 687F1 qt6.7 1,450.0 2,339.3 Kahrepalanchok __ 189.3 382.9 663.2 64h.5 1,261.6 1,394.0 1,906.8 Dhading -- 265.57 652.0 752.? 1,13h.5 1,643.4 1,983.1 3,495-9

Syangja -- 143.8 608.0 868.5 897.5 1,074.5 1,59?.8 ?,522.9 Sallyan -- 133.9 311.7 587.'i 937.9 977.8 1,071.5 ?,200.7 Hill Av.excl.Katkmandu -- 211.8 l119.2 647.L 860.3 1,180.8 1.j_8.3 2,)!93.2

Kath"'andu -- 191.88 753.7 1,935.5 119. 2,600. 3,5814

1 Tntn '4"11 8,,crrgp -_ '08. L,7 ?jS ) 1,n090.2 1,417.5 1.846 . 3,141.9

The Terai

Strata (hn) Belmo 0.67 0.67-1.69 1.69-3.39 3.39-5.08 5.08-6.77 6.77-lo.16 10.16-13.51? Above 13754

Chitwan 515.9: 1,313.7 3,916.3 2,699.? )j,)i93.8 3,521.9 5,06)h.51 8,074.5 Morang 138.9 693.6 1,09L.3 1,705.8 1.0?1.9 2,2hl1.7 1,R20.2 1,383.5 Saptari 158.9 541.3 1P295.7 9,817.3 3,672.4 3,533.7 5,094.8 6,850.3 Dhanusha 167.9 44;5.2 1,0019. 1,676.9 1,448.3 2,123.5 378.1 1,219.3 Parsa 116.2 0o6.8 959.1I 1,769.6 1,042.1 3,666.4 764.9 6,537.8 Rupandehi 286.8 881.7 1,632.6 2,343.5 3,152.9 5,737.1 5,892.8 10,442.3 Bardia 1417.1 703.2 2,034.0 ht,1?2.2 9,9L3.? 9,326.7 9,830.7 19,751.6 Kailali 131.7 876.h 1,916.8 2,493.8 3.193.4 4,777.2 7,730.2 11,155.4

Terai Average 208.0 732.8 1,731.)k 2,449.8 3,496.1 4,366.1 4,572.0 7,301.9

/1 Farm Business Income as defined in Table 46.

Source: Derived from EAPD, Farm Management Study, 1968-69, pp. 112 and 160. j

Aco ANNEX 8 Page 54

Table 51: AVERAGE INCOME OF FARM FAMILIES SMALL SIZE GRO Pg 1969-70 (Rupees)

Tncome From rncome from Arriculture Net Fnrm Other Than Region/bistT.tts U culture Eimend!tiire Income Apriculturc A. Hills 44o 12I 31L 513

1. Kathmandui 516 222 29b 98,6 20 Kavre 673 12)4 549 370 3. lalitp')r 389 53 326 35 h0 Nuwakot 357 q6 2(1 136 N Dhadin,, 185 71 111 3V7 50 KaskT. 323 10 218 h76 7. Syan-a 303 10n 197"95

.3. TerRi 000 1pQt 905 35R

S. Ynrar- 1,)69 273 796 -- 0. Saptari 713 171?570 117 10. Siraha 772 1t1 621 295 110 Dhaniq'ria 1.111 213 P2q 120 Mphottari A7h 125 719 97 13, SarlaM- 018R 20' 713 W)17 14. Rai,+ aa+t 1.101 1(1 135 315 15i P-ra 1 Q05 21 R1 2142 160 Prrsa 1 214 159 1 0R5( 3qx 17. Makwan.pur 535 1 hl 300 115 1. R,oR'andteW, 930 15n 7Qn 332 194 apilvrastu 753 135 618 1.083 20" Parke I 'oh3 19P 45 1121 21 Bardia 1,1b16 216 1,.20O 91 22. raijpli 1,971 2"N 14A06 32?

Overall Q07 16A 6h2 41(1

/1 Tn Uills = 1ess than 10 roparn (0,51 ha)

In Terai = less than h highas '?Q71 ha)

Source: Nepal Rastra Bank, Nepal A'nIc.ultirRl Credit Slirve:r, 197?, Vo'. IT, pp. 271, 274 ANNEX 8 Page 55

laL 5s2: AVERAGE INCCKE OF FARM FAMILIES MEDIUM SIZE GROUPa 1969-70 (Rnpees)

Income From Income from Agriculture Net Farm Other Than Region/Districts Agriculture Expenditure Income Agriculture A. Hills 749 284 465 658 1. Kathmandu 1,059 443 616 1,249 2. Ravre 893 301 592 635 3. Lalitpur 557 118 439 52 4. Nuwakot 586 331 255 6 5. Dhading 283 153 130 423 6. Kaski 863 251 612 583 7. Syanja 649 398 251 1,388

B. Tarai 1,682 598 1,084 505 8. Morang 1,797 562 1,235 235 9. Saptari 1,015 501 514 227 10. Siraha 1,312 80.9 696 513 11. Dhanusha 2,612 1,188 1,424 1,000 12. Mahottari 1,582 809 773 -- 13. Sarlahi 1,103 628 475 675 14. Rauitahat 1,9144 563 1,381 975 15. Bara 2,153 733 1,420 670 16. Parsa 1,803 624 1,179 571 17. Makwanpur 1,365 751 614 251 18. Rupandehi 1,0o44 493 551 614 19. Kapilvastu 1,107 384 723 2,635 20. Banke 1,764 388 1,376 323 21, Bardia 1,789 351 1,438 -- 22. Kailali 2,190 469 1,721 548

Overall 1,407 506 901 550

/1 In Hill = 10-20 ropani (005-1.02 ha) In Terai= 4-8 bighas (2.71-5,42 ha) Snurce: Nepal Rastra Bank, Nepal Agricultural Credit Survey, 1972 Vol II, pp 270, 273 aRUlIND 8 Page 56

Table 53: AVERAGE INCOME OF FARM FAMILIES LARGE SIZE GROUPa 1969-70

(Rupees) T

A~O Tt; l S T 1 10?r1m 4I2 Pa 1

1 0 T a+r.r'd' 9,( f3 1,.10) 13094 1 )0O

{~~~~~~~ ~~~~ 1 i4Enc(o; lo), ,>ont A, 'TIrI 1 91,n 574J

'o P N,S'-a' -''ia 11,;100 ?70 (131lltn"'0 231 254

* 0j,--a^^^,°37 1.32' Q,1? 33R 0Q Ssr,1-i 2, 1 34 1 .232`9 1(0 Siraha 2.202? 21 300 1. 17' 11 D-a--O1a 1 7C 2 7'* 1 e?'

1?,, a-t 2 ?.70r, 2.000 -_ 1 13L S-,aY' 2 )171 13 200

1¢, Raa ' 163 2 '°1 1,f70 1(. P-sa )>002 1 3 3) 0C) __ n " . lmakwn"ppi,-- 10 R-pa,-'; 3,069 1.°QL 1,n' 226 1, 4api7va5+.t'h,7<6 V17 3,83° 11 4Qh ?0) 31P2VsV t71 7 ?42 l 21. 1Rardl a 7 (,RP1;hRURN 9 Ka9R<'•i -I. 7 ,)30 1.127 )513 Rn2

Ovwrall 3,561 1,2A3 2, 2QP 1,049

/1 Tn 14. 1, _/ratpr than 20 roparis (1 oO2 ha)

Ir Tera'= greater than P l4gias 'U 042 ha)

Source: Nepal Rastra Bank, Nepal Agricullt.ural Credit Survry, 1972 TO . TT ppo2 60 272 Table 54: FARM SIZE DISTRIBUTION AND INCOMS BY REGIONS, 19o8/69

Averaae Income Per Holding Households Percentage of Total Farm Share of Total Total Imuome Share .of Farm Size Strata Net Farril Non-FarmZ2 ,Tetal in Strata Total Households Income in Strata Farm Income In Strata Total Incoze

(Ha) ,------7------7No.T ) S) ( ( T-T -T- 3 T H E H I L L S1

Below 0.10 209 343 552 658 14.3 137,522 3.0 363,216 3.1 0.10 - 0.20 475 779 1,254 877 19.0 416,575 9.0 1,099,758 9.3 0.20 - o.41 745 1,222 1,967 1,336 29.0 995,320 21.4 2,627,912 22.3 0.41 - 0.61 1,020 1,449 2,469 661 14.3 674,220 1465 1,632,009 13.9 0.61 - 0.81 1,418 2,014 3,432 372 8.1 527,496 11.3 1,276,704 10.8 0.81 - 1.02 1,846 2,621 4,467 244 4.3 450,424 9.7 1,089,948 9.3 Above 1.D2 3,11,Z 4,839 7,981 462 10.0 1,451,604 31.1 3,687,222 31.3

All Stratas 1009 1.546 2.555 4.610 120.2 4,653.161 100.0 11.776.769 100.0

THE TERAIL4

Below 0.67 208 96 304 1,457 24.0 303,056 2.7 4,394,928 22.2 0.67 - 1.69 733 337 1,070 1,392 22.8 1,020,336 8.9 1,489,440 7.5 1.69 - 3.39 1,731 796 2,527 1,279 21.0 2,213,949 19.4 3,232,033 16.3 3.39 - 5.o8 2,450 1,127 3,577 593 9.8 1,452,850 12.7 2,121,161 10.7 5.08 - 6.77 3,496 1,154 4,650 414 6.8 1,447,344 12.7 1,925,100 9.7 6.77 -10.16 4,366 1,441 5,807 432 7.1 1,886,112 16.5 2,508,624 12.7 10.16 -13.54 4,572 1,509 6,081 249 4.1 1,138428 10.0 1,514,169 7.7 Above 13.54 7,302 2,410 9,712 268 4.4 1,956,936 17.1 2,602,816 13.2

All Stratas 1.877 1.376 3.253 6.084 100.0 11.419.0j1 100.0 19.788.271 100.0

Total Nepal 425O3 i^4.4 22952 1019,4, 161 0t2&1Z2 1 Net Farm Income - Value of farm production - cash expenditure (excluding interest payment) &2 Derived from the Nepal Rastra Bank, Credit Survey, assuming similar ratios of non-farm to farm income, small, medium and largefarms. In the Hills - sall-less than 0.5 ha, medium-0.51 - 1.02 ha and large-greater than 1.02 ha. In the Terai - small and medium (less than 5.08 ha) had the sama factar, large-greater than 5.08. L3 Includes Kathmandu CO Includes Inner Terai Source: Tables 44, 50-53. &PM, Farm Managsment Study in Selected Regions of Nepal, 1968-69 NRB, AgricultarU Credit 9rvey of Nepal Table 55: FA1M SIZE D`19MIITfON AND I1COMM, X&TIHHAND, 1968/69

Averag e n H ldir Sampple House- Percentage of Total Agriculture Share of Total Total Income Share of Farm Size Strata Net7Fia J on 2 otha holds in Strata Total Households Incie in Strata Agricultare Irrcoae in Strata Total Irmom -- -R----- M J) -(%R% Below 0.10 192 641.3 833.3 78 14,97l8. 6 0.7 64,974 0.9

0.10 - 0.20 753 2,515.0 3,268.o 115 13.0 86,595 4.2 375,820 5.6

0.20 - 0.41 1,235 3,750.0 is,985.0 220 25.0 271,700 13.1 1,096,700 16.4

0.41 - 0.61 1,820 3,694.6 5,514.6 160 18.2 291,200 13.9 882,24z0 13.2 0.61 - 0.81 2,601 5,280.0 7,881.0 100 11.4 260,100 12.5 788,100 11.8 0.81 - 1.02 3,584 7,275.5 10,859.0 61 6.9 218,624 10.5 662,399 9.8 Above 1.02 6,386 12,963.6 19,349.6 147 16.7 93 8 ,74t2 45.1 2,844,303 42.3

5,247 7,610.0 T7o 2,981,937 100.06,7oIt,536

ll Net Farm Income - Value of farm production - cash expenditure (excludirg interest payments) L2 Derived from Nepal Rasta Bank, Agricultural Credit Survey, assuming similar ratios of non-farm to net farm incomes for -sl1 (less than 0.5 ha), medium (.51 - 1.02 ha) and large (greater than 1.02 ha) farms. Souroe: Annex 6 . Tables 45, 50-53. WPD, Farm Managenent Study in Felected Regions of Nepal, 1968-69 NRB, Agricultural Credit Survey of Nepal Table 56: CONVERSIOTN TABLE - LAN\1D M-ASUREF11ETS L

Khet Hectare Bigha Acre Matomuri Ropani Muri Psthi MPna So. Meter So. Yard

Khet 1.000 ' E-.000 1.30LL5 1.o56e I.2102 10.17CC 100. onr t'r)00.C(' 1 r0 o.n0 1 3).0r..n 1 1 ?

Hectame o.7665 1.000 1.50 4676 P 7.P003 1 c.1 1th)l 7 r' . 1032o 122(0'. 03P 1000no.0 11'ThK2.

6 Bigha 0.5110 o.6667 1.000 1. 465 5.2003 12.7769 C1.1077 1099.075 P180.36fS 6666.7 7963.2

Acre 0.3106 0.A052 0.6078 1.000 3.1607 7.765$)i 31.9C31 ' ?1.1P', ),'71.-70 hO0,l10 !Ph0.0

Matomuri 0.0983 0.1282 0.1°23 0.316)i 1.000 ?2-h51 o,P97C 1Q6.6P 11573,OnO 1292.0 i¢00

Ropani o.OL,oo 0.05218 0.07827 0.19?8P 0.)10'0 1.000 h.000 q0.00 ,',0)IoJ. 5?t.°P

Muri 0.0100 0.013045 0.01957 o.03210 O.101B 0.,O( 2 1.000 9.00n 160.000 j 1C%P

Pathi 0.00 0.0006oo523 0.009785 0.10161in o0.0050Q 0. Il o,oo. 1.000 3.000 4'.2

Mana 0.000062h 0.000O015 0.0001223 0.0002011 0.000636' 0 0 0 1 l t(I 0.0062 0n1?F 1.000 0.P9 n.-,

Square Meter 13045.0 10000.0 6667.0 0'n52.0 12P2.0 521.R 130CJY ZK,'9 0.02 1.Ono 1.l0)1 h

Square Yard 155R1.2 1191,J1.2 7963.2 LP)4o0 1530.O '2 1 ;i5.9n 70 0. "3o' 0.° 1.Ooo

/1 Values for Khet, Ropani, Muri, Pathi anrd Mna are not stndF-rdized in all N*eppPl dist.ricts. The vfflurs -4ven here -re standard for about 75 percent of the district. :ormOeof them, like Pnthi, Nunri, Pnl Manp. -re nlso usPd as volume mneasures for cereals.

Source: As given in Nepql's Third Plan, Page 172 nnd calclqted for hectqrps arfl -cres. Table 57s CONVERSION TABLE WEIGHT MEASUREMENTS USED IN NEPAI

Long - fj Seer CileO) DSeer (Teraei Kaimd Po--d TO DL tlogram ouintal Metric Ton

1. Pau 1.00 0.25 0.08333 0.213762 0.00534405 0.439712 0.0001963 0.1994508 0.0019945 (-.0C019945 !. Seer (Hills) 4.63 10C 0.33333 0.855049 0.0213762 1.7568S8 0.0007852 0.7978032 0.01'79i3 0.5007'J78 Dharni 12.CO 3.CC 1.00 2.245148 0.0641257 5.276544 0.0)'355S 2.39340i6 0 023934 0 OD239'J4 Seer (Terai) 4.6785 1.169625 0.389175 i. 0 0.025 2.07717 00091S375 0.9331 0.003331 0.OG.09231 . Ma.nd 187.11. 46.7es 15.-;5 40.00 1.00 82 2868 0.036735 37.3242 0.373242 0.C373242 . P.ond 2.3741992 0.5685496 0.163,1.66 0.4;e61 0.012153 1.00 0.03044643 0.4563 0.004535 0 00W,53i Ltong Ton 5094.2062 1273.551552 424.'171^4 IOS8.68 27.222 2240.00 1.00 101;.05 10.1605 i.0'605 . Kilogram 5.013769 1.253442 0..4178 4 1.07169 0.02:7Q2 2.20463 0.00098421 1.00 0.01 O.OC1 Quintal 501.3768 125.3442 41.7814 107.169 2.6792 220.463 0.098421 100.00 1.00 0.1 Metric Ton 513.768 1253.442 417.814 1071.69 26.792 2204.63 0.98421 1000.00 10.0 1.00

ourae: A,xn.xl Report, L.md Refrrr, Agric.Ature and Ford l;'n1st'y, 19i7-C3 (TranslAted)