SUMMARY, CONCLUSION AND POLICY IMPLICATIONS

The economic development of Nepal is largely dependent on the development of the Hill regions, as the Hills occupy a significant place in the geographic, demographic and agricultural framework of the country. The majority of the farmers in the Hills are operating their intensive crop-livestock farming systems at subsistence level. Rapidly increasing population, decreasing size of land holdings, declining productivity per unit of "Pakho" land, high soil erosion and deforestration in the Hills call for the investigation of all possible means of raising the incomes of the people in the Hills, where no new land is available. This situation has focused the attention of the planners on the relatively underutilised "pakho" land of the Hills.

The literature reviewed in Chapter 1 showed that there is little scope for more intensive production of existing crops, but there is scope for more profitable crops, or switching over to commodities like horticultural tree crops in which the Hills are likely to have a comparative advantage. Detailed micro-level studies examining the economics of enterprises and enterprise contributions using both production functions and linear programming have stressed potential of fruit and vegetable production in the Hills (Calkins 1981, 1982). Although static in nature, these studies emphasized the importance of these crops for profitability and trade, nutrition and employment.

The development plans also encourage the growing of horticultural crops in the Hills. However, the Sixth Five Years Development Plan (1980-85) explicitly cautioned that the suggested specialization in horticultural crops in the Hills should not mean the neglect of other possible forms of production. This, in turn, suggests "multicropping", which aims to increase crop production by the multiple use of the same resources within a specified period of time.

enterprise models for cereal and horticultural crops to be implemented by Ministry of Food and Agriculture but little work has been done on integrating these enterprises models into the whole farm. R/N IRDP (1983) also prepared some farm models for different cereal crops and horticultural tree crops. However, these models were little more than ideas, as they were not subjected to thorough economic assessment and, again, they did not take into account the possibility of intercropping with cereals and potato.

Our present exercise was designed to analyse the economics of apple and walnut crop production in the case study area and also to investigate the economic benefits associated with intercropping these horticultural tree crops. The three model farm sizes assumed for apple or walnut orchards for a small farm size (SHH=0.15 ha.), a medium or relative large farm size (MHH=0.5 ha.) and for an orchard with the pooled land of a small farmers group (SFG=1.5 ha.). An analysis of the profitability for apple and walnut crop production in these farm sizes was done. However, the models were not confined to the monocropping of the perennials. By taking into account the spatial and temporal constraints of these base crops, each of three intercropping models were built for the same three farm sizes. They were named: Model I for apple or walnut, Model II for apple or walnut and Model III for apple or walnut. From these ex-ante models the economic benefits associated with cereal and potato intercropping among apple or walnut trees were analysed, to show their profitability or productivity on 'pakho" land in the study area. An important aspect of this study is that the approach adopted was relatively simple and could be replicated by the Ministry of Food and Agriculture, for these and other enterprises and for other areas of the country.

Although partial budgeting techniques were used to analyse the cropping systems, care was taken to include as many "whole farm" consideration as possible. The Multi-period budgeting technique used was basically the same as the discounted cash flow approach that is standard with Benefit/Cost analysis. The prices used, however, were as close as possible to those actually faced by the farmer, although not all prices were strictly 'market prices'. The analysis was made easier by using the MULBUD computer package. Three standard economic

criteria, namely, the Sum of Net Present Value (SNPV), Internal Rate of Return (IRR) and Benefit/Cost (B/C) ratio, were used to determine the economic viability of the models. The cost of time was taken into account by discounting benefits and costs at 33.5 per cent and also by

calculating the IRR. Sensitivity analysis was done to check the

economic robustness or the 'sustainability' and 'stability' of the

models. Not only was the productivity of the orchards enhanced by

intercropping, but so too was the 'stability', in the sense of

lessening the negative net returns in the early years and evening-out labour flows. The cropping intensity was increased from 100 per cent to a peak of 170 per cent in the first year.

The results for apple and walnut showed very much higher returns per unit of "pakho" land than did the annual crops in the study area. Moreover, the results of the sensitivity analysis of both apple and

walnut demonstrated that the models are robust with respect to

substantial changes in assumptions. Thus the break-even level for the SNPV, at a 13.5 per cent discount rate, allows yields to fall by 55 per cent and product prices to fall by 50 per cent. However, not many farmers in the study area grow these crops as commercial enterprises, because of the long gestation period involved. The intercropping models of apple or walnut allowed intercropping of cereals or potato among the apple or walnut trees during their immature years. Thus the model helps

to solve the food problem during the unproductive years of the

orchards. Moreover, the results of the sensitivity analysis of all the

intercropping models show that the models are able to sustain

substantial unforseen decreases in returns or increases in costs and Stil 1 'pay'.

The analysis showed that apple provides more employment on average than the annual crops. The orchards provide employment for both family and outside labour. The young perennials require more labour than they do when mature, because intensive maintenance care is needed to ensure

healthy trees are grown. As the trees grow older, the labour

requirement within the orchards declines, however, the increased output has to be marketed and processed which requires substantially more

labour. Furthermore, there is the possibility of establishing some

and walnuts. In addition, the income per labour-day used is far higher for the orchards than for cereals.

If these enterprises do turn out to be as profitable as this analysis suggests, they would have a substantial impact on the overall

income and health conditions in the district. In addition,

horticultural tree crops could provide external benefits by protecting

land from high soil erosion. The new mode of management in the Central

Hills would improve the well-being of the people.

This diagnosis of the problem and the design of this component of a possible horticultural project has only been undertaken from the farmer's point of view. However, this district has already suffered

from 'top-down' plans being imposed on it (Uphoff, 1985). Genuine

consultative interaction with farmers would be essential for detailed design work. Nevertheless, the results strongly suggest that the income of the poor farmers in the project area can be raised by specializing

and trading in horticultural crops, particularly apple or walnut.

However, the study has not looked in detail at such things as credit requirements, marketing channels, organization and management of the orchards. All would be extremely important for the success of the proposed cropping systems, but could not be examined because of the limitation of time and lack of data. But, as suggested in Chapter 3, the design of such projects should be seen as an iterative process, where other aspects can be added as the feasibility of each step is assessed. The excellent results of the profitability aspects of apple

and walnut should encourage such further research. If substantial

public funds are required to lunch a substantial project then such

further work should also include a full economic and social

cost-benefit analysis from the national point of view, the credit

requirements for the orchards, as well as the environmental impact of the orchards on the fragile environment of the Hills. Clearly, trials on a pilot basis with a range of specific varieties would also be necessary before widespread adoption of such farming systems could be recommended. Even if the trials are successful and the systems are

recommended by the extension services, they will require careful

monitoring to guard against disease and to ensure that cultural