ADB is the principle lender in Nepal's endeavor to improve the chronically stagnated and traditional agriculture sector. Gradual removal of subsidy from irrigation and chemical fertilizer was among the conditionalities tied up by the bank with the release of Second Agriculture Program Loan. Out of targeted expansion of 8800 shallow-tube wells last year, only about 20 percent target was met. The figure for the current year is more disturbing as only 20 tube-well has, so far, been installed against the target of 4,300. Though Indian farmers are heavily subsidized in terms of basic agriculture inputs like irrigation, fertilizer and electricity, Nepali farmers enjoy non of these subsidies.
Indian agriculture produce even in the domestic market.
With subsidy removal, price of shallow-tube wells has shot up sharply. In 1997, the price in installing one shallow-tube well used to cost Rs 10,000 with 80 per cent subsidy. However, with subsidy brought down to zero, now it costs Rs 50,000. Government is contemplating reintroduction of subsidy in the underground irrigation schemes also because there were some inconsistencies in the irrigation subsidy policy, said a government official. Research studies have shown that the cost for irrigation of one hectare of land through shallow-tube wells is Rs 20,000 while irrigation of same piece of land by surface irrigation scheme is well over Rs 1,20,000.