After reviewing key reports, it is evident that despite the government allocating over 3.2 billion NPR annually in agricultural subsidies, actual farmers have not benefited adequately. According to the Auditor General’s report, the agricultural grant system is inefficient and plagued by irregularities, with increasing risks of duplicate disbursements. Due to the absence of proper farmer registration and classification, those with influence have accessed subsidies, while the Ministry is preparing to implement a new system to address these issues. Kathmandu, May 23 – The government allocates billions yearly to boost agricultural production and reduce reliance on food imports. However, the real farmers working tirelessly in the fields are unable to access these benefits. Untimely delivery of fertilizers and quality seeds has caused hardships, while subsidies disbursed from the state treasury often benefit influential individuals rather than those who farm the land.
To qualify for government grants, entities must be registered companies with tax identification and proof of tax payments. Most rural small-scale farmers are unaware of these legal formalities and cannot reach government offices. Conversely, influential actors quickly register agricultural firms overnight to benefit from subsidies, often becoming untraceable afterward. Subsidies allotted for tractors, machinery, and cold storage facilities remain neglected or unused. Federal, provincial, and local governments distribute grants differently, leading to allegations of individuals receiving multiple benefits across all levels. Although the Auditor General highlights these problems annually, the government has yet to implement effective reforms. Agricultural production stagnation has maintained Nepal’s dependency on imported food, with annual imports amounting to nearly 300-400 billion NPR.
Government spending on agricultural grants has consistently increased. Over six years, grant allocations have nearly doubled, but production and investment have not shown commensurate growth. The Auditor General’s 63rd annual report characterized Nepal’s agricultural grant system as “unproductive, irregular, and lacking clear objectives.” During one year, the Ministry of Agriculture, Forestry, and Environment spent 3.213 billion NPR through twelve types of subsidy programs, but results remain disappointing. The Financial Procedures and Financial Accountability Regulation 2077 mandates institutions receiving grants to monitor expenditures against targets and produce annual reports, yet the Ministry has failed to enforce this effectively.
Following the implementation of federalism, divergence in grant program management across the three government tiers, lack of updated records, and poor coordination have increased the risk of duplicate benefits for the same recipients. Incomplete farmer registration and ID issuance have allowed access only to influential stakeholders, marginalizing genuine smallholder farmers. Coordination gaps among government levels have made tracking costs and monitoring subsidy effectiveness difficult. Consequently, despite substantial expenditure, agricultural productivity has not significantly improved. Approximately 83.51% of subsidies fund chemical fertilizer purchases, with the remainder facing scrutiny regarding effectiveness and transparency.
Double Grants: In fiscal year 2076/77 (2019/20), the government granted 1.683 billion NPR for agriculture. This amount nearly doubled to 3.213 billion NPR in the last fiscal year. According to Ministry data, grant amounts increased continuously from 1.683 billion in 2076/77 to 1.968 billion in 2077/78, then 2.183 billion in 2078/79. There was a major leap to 3.604 billion NPR in 2079/80, about 1.5 billion more than the previous year. However, this level was not sustained, dropping to 2.934 billion in 2080/81, before rising again to 3.213 billion NPR in 2081/82, an increase of 300 million NPR from the prior year.
Agricultural expert Uddhav Adhikari highlights that the core problem lies in government policy. “The system does not recognize real farmers. Requirements such as company registration, tax clearance, and audit reports exclude most farmers, while only those registering companies can claim subsidies,” he said.
After expanding projects, 90% have ended up as broken investments. Once grants are spent, the registered companies often vanish. While most subsidies fund chemical fertilizer purchases, small projects remain dominated by influential stakeholders. Farmers requesting subsidies face questions like “Where is your firm?” Non-farmers registering companies overnight receive state assistance, often under political protection, engaging in illicit fund mobilization.
More than a decade after starting farmer registration in 2072 (2015), only 2 to 2.2 million farmers are listed, although 62% of Nepal’s population depends on agriculture. Experts emphasize that mere registration is insufficient without proper classification to ensure targeted subsidy distribution. Many non-farmers exploit the system by registering as cultivators. Researcher Dipesh Nepal states that even though agricultural loans are offered at 5% interest, misuse is rampant, with funds largely invested in personal businesses or lands. Budgets earmarked for agriculture at local levels frequently go to road construction under the guise of ‘agricultural roads.’ Experts criticize that billions in subsidies favor chemical fertilizer users, neglecting soil-conserving farmers. Organic farmers receive no incentives, with policies detrimental to those preserving soil health.
National Agricultural Modernization Project and local governments provide grants for machinery and infrastructure, but many tools remain unused due to improper deployment. Large cold storage centers, despite construction, are non-operational “white elephants.” Agricultural equipment dispatched incorrectly is now unusable. The government subsidizes only foreign hybrid seeds, ignoring traditional native seeds preserved by farmers. According to Adhikari, “Because traditional seeds like indigenous maize receive no subsidy, dependency on external inputs has grown.” He suggests that subsidies should be distributed based on actual soil and farming conditions rather than paperwork alone for effective utilization.
Ram Krishna Shrestha, Joint Secretary at the Ministry of Agriculture, Forestry, and Environment, does not entirely accept claims of subsidy misuse. He disputed rumors and reports, stating that only a small portion of total grants are disbursed through proposals, with the majority spent directly on chemical fertilizers, seeds, and insurance. “Many wrongly believe grants are only allocated via proposals,” Shrestha said. The largest share goes to chemical fertilizers delivered to farmers through cooperatives, ensuring broad access. Subsidies for seeds, small-scale irrigation, and sugarcane farmers also reach direct beneficiaries. “Sugarcane subsidies are transferred directly into farmers’ bank accounts,” he added. “The government covers 80% of agricultural insurance premiums, which are provided to farmers through certified insurance companies.”
Challenges with Proposal-Based Grants: The Ministry acknowledged issues with the controversial proposal-based subsidy system. Many farmers are unable to write proposals or receive notice of calls for proposals, resulting in exclusion. Regulations require transparent publication of calls and assessment of submissions before awarding grants, but many uneducated or uninformed farmers cannot participate. Shrestha stated that the Ministry plans to reform subsidies to ensure access by genuine farmers. Farmer registration and classification are current priorities. Upon completion, grants, services, and benefits will be allocated based on clear identification and categorization. “Once identified, subsidies will be transferred directly to farmers’ bank accounts to reduce leakage and prevent access by non-farmers, thereby minimizing duplication,” he explained.
To reduce dissatisfaction in subsidy distribution, the Ministry has introduced a new ‘waiting list’ system, prioritizing grants based on budgets when funds are limited. Measures are underway to end duplication and confusion caused by overlapping authority among the three levels of government. “Efforts are ongoing to clarify the roles and jurisdictions of federal, provincial, and local governments and to delineate subsidy distribution areas,” Shrestha said. The Ministry aims to develop a technologically sound and result-oriented grant system following completion of farmer identification and classification.
