Nepal must seek to feed India and Bangladesh, rather than merely fuel them (through electricity supply). A new, committed emphasis in Nepal’s agriculture has the potential to absorb the projected surge in electricity generation and create broad-based economic growth.
In a 2019 Asian Development Bank (ADB) publication—“Dysfunctional Horticulture Value Chains and the Need for Modern Marketing Infrastructure: The Case of Nepal”—Siddiq and Basher estimated that reducing Nepal’s post-harvest losses of fruits and vegetables by around 75 percent would yield annual savings of approximately $675 million. It will take approximately 3,000 MW of hydro power export to produce comparable annual earnings.
Around 80 percent of the country’s population lives in rural areas and is agriculture-dependent. This means that enhanced agricultural incomes from reductions in post-harvest losses could touch the lives of some 22 million Nepalis. Hydro-export based earnings, on the other hand, would touch maybe a few thousand directly employed in the industry.
Today, Nepal has just under 1,500 MW of hydropower capacity; and has an aspirational plan to add another 15,000 MW within the next decade. It has spent the past 15 years pursuing India to open its electricity markets, leading to a historic power trade agreement in September 2014. In the years since, Nepal has spent approximately $550 million in electricity imports from India and expects to export electricity worth approximately $10 million this year. Over the same time, some $4 billion of our agricultural products rotted away.
Nepal must, of course, harness its great hydro potential. Seeking opportunities for electricity exports to India and Bangladesh is, no doubt, necessary for that. But we cannot rely on the stars twinkling in distant skies alone. The great bounty of hydropower generation must also spill over to enhance our competitive position in agriculture and get our economy roaring again.
Nepal’s agriculture is a story of great promise overwhelmed by insurmountable constraints. Governments have tried, pouring in billions of dollars into a wide range of programs. Over the years, however, the constraints have only deepened and hardened.
Suddenly now, however, the promise of abundant electricity supply, in combination with other socio-economic factors, has opened an unprecedented opportunity to radically transform agriculture.
First, Nepal’s agriculture is ready for massive mechanization. In fruits and vegetables, for instance, where Nepal holds the greatest competitive advantage in exports, there is a need for investments in post-harvest management, storage, and distribution. These require cold-storage networks, refrigerated transport, and supply chain, not to mention the mechanization of upstream activities in agricultural methods. Unlike before, Nepal is now well-positioned for mechanization as outbound migration has reduced labor availability. Faced with acute labor shortages, Nepal’s farmlands now welcome mechanization. Investments in mechanization are only possible if there is a promise of abundant and reliable electricity supply.
Second, digital technologies offer opportunities to aggregate and scale Nepal’s agricultural production in ways not possible before. Distributed small farm holdings, each producing a little, was a core challenge. Digital technologies can help overcome that challenge, aggregating production by eliminating information asymmetry, connecting buyers and sellers, relaying information, and facilitating trade. Advances and access to digital technologies like blockchains, information platforms, data and analytics now make it possible to be as competitive with one apple tree as with a thousand. Such digitization can only be enabled if there is an underlying belief in our agricultural prospects, and a promise of abundant and reliable electricity supply.
Third, for a country with such abundant water resources, Nepal’s agriculture is hopelessly parched, dependent almost entirely on rain. Every inch of Nepal’s agricultural land could be irrigated to enhance the predictability and competitiveness of our production. There is enough water to get around, and now abundant and reliable electricity to push water to the fields where it is needed.
To embark on this vision, the government must overhaul its approach to agriculture. One way perhaps may be to focus primarily in establishing agricultural standards and testing so that aggregation, management, transport, commerce, and export are enabled, while letting the private sector take the lead in establishing supply chains, digitization, aggregation and market creation.
But if I were the agriculture minister, an easier place to start may be to call the Minister of Energy, Water Resources, and Irrigation, and say, “Hello Comrade, how much electricity can you produce? I’ll buy it all.”
