Nepal
is an agro-dominated economy wherein 35% of the total GDP is contributed from
this sector.
 |
| Rice fields in Changu Narayan village in Nepal. |
According to the latest data from the World Bank, 28-30% of the total land of Nepal is cultivable. Keeping in mind the scope and the potential of the agricultural sector in an economy such as ours, how can a derivative market benefit the farmer’s productivity levels?
With
each passing year, the farmers in Nepal are facing various obstacles from the
market. From various studies conducted on a domestic and international front,
monstrous hiking of the prices from the middlemen remains the predominant
factor. A farmer produces their produce at a certain cost. But when the
middleman gets their hands on these products, the price is inflated to
unimaginable levels. In short- these middlemen are not providing the right
prices for the produce when the product reaches the consumers.
The
case of black cardamom furnishes the best example. Poor
farmers are compelled to sell their products at much lower rates immediately
after the harvest, when the general scenario is just the opposite.
Nepal,
despite being the world’s largest exporters of cardamom, has not been able to
reap the benefit out of the immense potentiality. Lack of proper knowledge among
the farming community has been the major hurdle and thereby, the middlemen are
taking advantage of this scenario. So, what can a derivative market contribute
to make this market a thriving one is a big question.
The
derivative markets of Nepal should start with few basic steps. Firstly, the
lack of knowledge among the farming community remains the major hurdle. In this
regards, the farmers can be directed to trade their agricultural products in
the derivative market so that they can get the right price rather than selling their hard produced crops
at lower prices. But, given the current practices, is it possible?
According
to Integrated Regional Information Networks, commonly known as IRIN,
agriculture in Nepal is facing problems due to under investment, lack of
research and usage of obsolete technologies in the sector. Also, decline in the
resource allocation from government from 3.7 percent of total government
spending 10 years ago to 2.6 percent in year 2013 in the agricultural sector
has hampered the development of the agricultural sector. If those cultivable
lands are used again by educating the farmers about the long term benefits,
then they will not need any loans or any other financial support. By
educating farmers, the derivative market can also provide avenues for the
enhancement of the economy.
The
day is not far when a farmer from a corner in our economy, confidently stores
his produce in a warehouse and proceeds to the exchange to auction it. But the
question arises-When?
Written by: Shristy Shakya
The article was published in The Himalayan Times on 28th December, 2014. Link to the article
