Agriculture, natural resources and rural development / Agricultural policy, institutional and capacity development - Agricultural production - Agro-industry, marketing, and trade

Nepal is experiencing a rapid change in its farming systems, particularly in hilly areas that are between 500 and 3,000 meters (m) above sea level. In these areas, agriculture still provides livelihoods to 66% of the population, but the share of agriculture in rural income was merely 11.4% in 2014-2015, and remittance has become the most important source of household income. As outmigration from these areas continuously rises, about 30% of cultivated land has now been abandoned from farming. Also, climate change is shifting crop cultivation altitude, and increasing diseases, insect pests and wet days. Climate vulnerability index is highest in the West, Northwest and Northeast with mountain regions in the Northwest having the lowest adaptation capacity. These land abandonment, outmigration and climate vulnerability result in less livelihood options, further accelerating youth outmigration to urban areas and abroad.

The effective exploration of Nepal's horticulture potential has been constrained by a wide range of factors including: (i) lack of business and marketing channel; (ii) high post-harvest losses up to 40% of production due to poor quality planting materials, poor post-harvest management techniques and inadequate equipment and infrastructure for grading, packaging, and climate-controlled storage; (iii) limited access to loans, particularly the medium term loans required for horticulture production, due to complex loan acquisition and collateral valuation processes; (iv) shortage and high cost of seasonal labor; and (v) steadily declining farm productivity by 20% over the last 15 years.

The declining fruit and nut crop productivity has led to Nepal's orchard productivity falling below the world average in 2017. This is a result of: (i) poor quality planting materials in the absence of nursery regulations such as Nursery Act; (ii) old and senile orchards with limited use of machinery; (iii) small landholding farms, characterized by land fragmentation, with an average size of 0.6 ha; (iv) limited water storage in hilly areas preventing year-round farming; and (v) lack of resilient varieties to climate change induced diseases. Also, female farmers in hilly areas are more likely to face a lack of equitable access to, and control over, productive resources such as land, credit, and technology.

Yet, there are new opportunities emerging for farmers in hilly areas. Nepal's diverse agro-climatic conditions and geophysical locations provide a wide range of opportunities for tropical, sub-tropical and temperate fruit and nut production. Between 2008-2018, both the total area and the volume of fruit production has increased by more than 70%.4 Still, domestic fruit and nut supply is not meeting the fast-growing demand. Fruit and nut demand in Nepal is increasing because of urbanization, rising national wealth, improved knowledge of nutrition and increased tourist flow. Between 2013-2017, nut importation rose by 43% and apple importation rose by 260%. This resulted in a 136% increase in the cost of fruit, nut, and potato importation during the same period.

Higher profits from commercial fruit and nut farming could help retain the younger population. It also offers income generation opportunities for women who are heading households after male outmigration and are disadvantaged in finding off-farm employment. Engagement of women, and excluded and vulnerable groups in less labor-intensive horticulture production, marketing, and processing could help them be economically empowered and socially recognized in the household decision-making process. Through supporting fruit and nut farmers, the project will help the country to meet the horticulture demand, and increase hilly area farmers' income, employment opportunities and climate resilience.

Livelihoods of rural households improved (Agriculture Development Strategy 2015-2035).

Resilience of farmers to climate change improved (Agriculture Development Strategy 2015-2035).

Beneficiary farmers' agricultural income from climate-resilient horticulture farming increased.

Institutional capacity for nursery and horticulture sector management improved.

Production and productivity of project farmers increased.

Value addition to hilly area horticulture produce enhanced.