The economics of horticultural tree crops in Rasuwa district, Nepal

Abstract

The economic development of Nepal is largely dependent on the development of the Hilly regions. The Hills occupy a significant place in the geographic and the economic setting of the country. The majority of the farmers in the Hills are operating their intensive crop-livestock farming systems at a subsistence level. Income levels have been declining in recent years due to increasing population, decreasing size of land holdings, the declining productivity of "pakho" land, soil erosion and deforestration. Under such circumstances, it is important to undertake a study aimed at exploring the possibility of increasing Hill-farmers income by introducing more profitable enterprises in which the Hills might have a comparative advantage. This is particularly important for "Pakho" land. This study explores the possibilities for increasing the incomes of the farmers in the Hills by introducing horticultural tree crops and also by intercropping cereals or potato among the trees. The study takes into account the stability and sustainability of the proposed system. Three separate models are built for apple or walnut for three different farm sizes. These include both household level production units and also the pooled land of a Small Farmers Group. Similarly, three separate intercropping models are built for apple or walnut with due consideration of the spatial and temporal constraints of the perennial crops. The analysis is undertaken at the farm level with multi-period budgets using estimated market prices brought back to the "farm gate". The cost of time is taken into account by discounting benefits and costs by 13.5 per cent. Three standard economic criteria, namely Sum of Net Present Value (SNPV) (and the equivalent Amortised Value), the Internal Rate of Return (IRR) and Benefit Cost (B/C) ratios, are used to determine the economic viability of the models from the farmers point of view. Because of the ex-ante nature of the analysis of the proposed farming systems, care is taken to make all the assumptions explicit. Furthermore, sensitivity analysis is undertaken to check on the 'sustainability' and 'stability' of the models. The apple and walnut enterprises give much higher returns than cereals or potatoes grown on "pakho" land in the study area. The encouraging results of the sensitivity analysis for both apple and walnut demonstrate the relative stability of the results. The intercropping models improve the performance by helping to cover the costs during the gestation period of the tree crops. They also help by providing food during this gestation period. In addition to the financial returns, such tree crops provide external benefits by helping to protect land from soil erosion. The models have the potential of improving equitability of incomes within the community by providing employment within and outside the orchards. However, this study does not attempt to quantify or value such externalities. These ex-ante results are sufficiently encouraging to suggest that thorough research should be undertaken on the productivity and marketability of specific varieties of apples and walnuts and on the management practices necessary to minimise possible negative interactions between the intercrops and the trees. Show more