Agricultural mechanization is one of the key processes that will affect the future of smallholder farming systems in Asian countries, including Nepal, where just 8 percent of farmers use tractors, 26 percent use iron plows, and more than 60 percent of intercultural operations are managed by women. Poor infrastructure is a major constraint on the mechanization of agriculture in Nepal. But providing easy credit and raising awareness of financial intermediaries can help to mitigate those constraints and facilitate mechanization.
USAID Nepal, through IFPRI, aims to support the Government of Nepal in improving the policy and regulatory environment by reforming the country’s business regulations and supporting the enactment of farmer- and business-friendly input policies and procedures under the Policy Reform Initiative Project (PRIP). As part of this effort, IFPRI conducted several empirical assessments of the issues affecting the promotion of agricultural mechanization (or agri-mechanization) in Nepal.
One assessment addressed the problems and challenges faced by stakeholders—farmers, agrimachinery providers, producers and fabricators, researchers, and traders—and assessed how the adoption of custom-hired services affects farm households across farms of all size. The main objective of this empirical assessment was to identify policy solutions for the strategic implementation of the agri-mechanization promotion policy passed in 2014.
To understand the policy questions in depth, the team conducted a literature review, collected primary and secondary data for analysis of mechanization in Nepal, interacted frequently with a variety of stakeholders, and reviewed the policy environment.
Key Findings and Policy Recommendations
The study on agri-mechanization in Nepal found that smallholder farmers are likely to benefit from the adoption of tractors through custom-hiring services. But they may also have incentives to exit farming and specialize in nonfarm income-earning activities. IFPRI researchers found that operators providing machine services lacked training, which contributed to poor demonstrations and low adoption of machine use among farmers. Because the government had not made mechanization a priority in the past, the sector is currently in a developmental state, and mechanization is not widely recognized as a substantial tool for better crop productivity.
IFPRI researchers also analyzed the policies and provisions governing the agri-mechanization sector, and recommended strengthening Nepal’s agri-mechanization promotion policy and focusing on implementation. Issues surrounding taxation (that is, the custom tariff and VAT) also need to be resolved. Finally, the establishment of networks and coordination with other sectoral and cross-sectoral policies and an agricultural mechanization credit policy are needed.