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Farmers’ perceptions of service delivery and policy support from smallholder dairy in Nepal: Nepal case study

D.D. Joshi

Director, National Zoonoses and Food Hygiene Research Centre (NZFHRC)
Chairperson, Nepal Veterinary Council (NVC)

Conclusion Questions raised in the case study


In a land area of 54.4 thousand square miles, Nepal has a population of 23 million people. The total number of livestock is 9.71 million cattle and buffalo, 4.3 million sheep and goats, 4.9 million poultry, a small number of pigs, horses, mules, yaks and chauries. The number of people engaged in the agricultural sector is about 9.7 million, whereas the total number of cattle and buffalo population is 9.71 million heads. This shows that each farm household in Nepal with 5.8 persons on the average keeps 5.8 livestock. Nepal ranks as one of the highest amongst the developed countries in terms of population density of cattle and buffalo (CBS 1998).


This is a case study of a 45 years old smallholder dairy farmer Mr Ram Prasad Bastola from Fical village of Ilam District, Mechi zone, Eastern Development region of Nepal. This case study represents over 75 thousand such farmers of Nepal who are currently producing and selling milk to the formal and informal dairy market channel of the country (DDC 1999). Farmer’s selection was done on the basis of his involvement in dairy farming and milk selling to the Milk Producing Co-operative Society (MPCS), member of this MPCS, member of local farmers organisation and participation in different training programmes organised locally by Fical Milk Chilling Centre (MCC), Department of Livestock Services (DLS) and credit agencies. The interview was based on the structured questionnaire and personal observation.

Mr Bastola has a small two story stone Pakka house made from stone with 1.5 ha of cultivated land. He lives with his 60 years old mother, his 40 years old wife, one 15 years old son named Shyam, two daughters Rita and Gita of 10 and 13 years old respectively. He has secondary education and can read and write Nepali very well. His son is in the 8th grade and goes to school in Fical. His wife and two daughters are literate although never have been to high school. His mother is illiterate.

Milk production in Nepal is an integrated part of the traditional production system with small non-commercial holdings. Many of these small farmers market milk directly to urban areas and the surplus through the DDC or private dairies. Milk and milk products provide an important contribution to the nutrition of the many people living in rural areas as well as urban Nepalese families. Farmers own about 40% of Nepal’s dairy livestock with less than 0.5 ha per family (Ministry of Finance 1998). These farmers have few sources of generating cash income. Their small plots of land are insufficient to feed their livestock so they have to depend on communal pastures and forests that are over-utilised. It will require major efforts and investments to introduce and motivate the large groups of small farmers to apply productive technologies that are environmentally sustainable. However it seems the only option available.


In this case study I have used participatory rural appraisal (PRA) approach method to interview an individual smallholder,  Mr Ram Prasad Bastola, from Fical village of Ilam District with cow milk pockets. This case study has used both the primary and secondary level information. The case study is based on a review related documents, supplementary primary field survey, discussion and interview with specialists and interactive meetings with observations.

In this PRA approach method I asked the farmer some questions and discussed with his family members on the following topics:


Mr and Mrs Bastola produce crops, livestock and mixed farming as an integrated approach. They grow mostly paddy, maize, beans, millets and little potatoes with green vegetables for their own home consumption. Mr Bastola has two milking cows, one local breed called ‘Siri’ and other Jercy crossbred, with one calf and one heifer along with two goats and one dog.

Mrs Bastola has a major responsibility to look after cow feeding, milking and cleaning the cowshed. Sometimes she also goes to sell milk to the MPCS. In Nepal wife and husband have equal share of work at the farms but cash income goes to the husband. Husband and wife share benefit.

He was asked how much milk his cows produce and he replied that he gets 6.5 litres of milk from Jercy crossbred and 3.5 litres from Siri cow in one milking period. He sells 10 litres of milk to the MPCS. He said that he is a member of this society. He cannot sell evening milk because there is no provision for selling milk in the evening markets. He consumes the rest of the unsold milk at home in the form of curd, whey, butter ghee and hard cheese. Milk price is paid by MPCS to him every 15 days on the basis of the quality of milk. Fats and solids not fat (SNF) are not allowed in the content of the milk. He said the price of one litre of milk is Rs. 15 which is not enough because the production cost is higher than this price. He also said the price is controlled by His Majesty’s Government (HMG) of Nepal. At present cost of production in Nepal is Rs. 19.75 per litre. He further explained that the MPCS has no control on pricing system. He further stated that this pricing system established by HMG/Nepal is based on fat, solids-not-fat (SNF) and total solids (TS) in the milk (NDDB/DSP Report 1999). Regarding the question of animal feed, he said he has to buy concentrate feed from a local market. He also mentioned that he feeds his milking cows at the rate of 1 kg/day per cow along with crop residues, salt, fodder grass called Amaliso, and some time khole (locally home made ration). He also mentioned that about 90% farmers in Ilam have crossbred cows for milking purposes and they feed their cows just like him.

He further said that DDC, the only public sector institution of the country was established. He said that there are about 1000 MPCs in the country and they have union at districts, regional, and central level and have not done well to the farmers. Mr Bastola is also a member of the farmers’ organisation, where he discusses about the different aspects of livestock development, research, credit insurance of animals, veterinary services, extension and marketing system in the district.

Asked whether he has been to any farmers training organised by Department of Livestock Services and farmers visit programme, Mr Bastola replied that he had been to Biratnagar to participate in farmer’s group training for 15 days and visited the Biratnagar, Hetauda and Kathmandu milk supply schemes of DDC. During the training he learned that the HMG/Nepal had approved ten years dairy development plan, livestock master plan and Agriculture Perspective Plan (APP) and ninth five-year plan. He was also taught that in the livestock sector, HMG/Nepal had implemented Livestock Sector Master Plan (LSMP) since 1993. The plan had the coverage for 10 years. In the mean time, a twenty-year Agriculture Perspective Plan (APP) was designed in 1995 with the strategy of agriculture led growth for the rapid economic growth and poverty alleviation in the country. He was also told that the livestock sector strategy under APP emphasised meat and milk production, animal nutrition (specifically nutritional fodder supply), health and marketing (APP 1998).

He was asked about the future potentiality of more milk supply from farmers to the market. He replied that the future of milk production level depends on the potential from producing additional milk through modern technology, better extension efforts and, open policy for milk price paid to the farmers to convert the potential to the reality. He also pointed out that it would depend on two aspects: production increase in already collected area, and the effect of additional road network in the milk shed areas.

Regarding the role of DLS and National Agriculture Research Council (NARC) in development of technology, animal health, livestock research and extension services, he commented that on the production side, DLS is involved in the development of technology, animal health and extension services. NARC is involved in agricultural research and has almost no involvement in livestock research. At present extension services at the rural level are carried out by DLS through JT/JTA and some village animal health workers who are good and effective. He further explained that recently private sectors have also started playing a significant role, basically in animal health. He did not like the private veterinary services because it is not good for the poor farmers like him to pay the additional fees. There is no artificial insemination (AI) service in the district so the farmers have to depend on natural cross breeding with local bulls.

Regarding the question of live animals purchasing and selling at bazaars/markets, he replied that the marketing system for live animals particularly dairy cattle and buffalo is fragmented. There is no orderly system that exists in the distribution of improved dairy livestock and the volume of trade is also not known but seems to be growing. There are no nucleus dairy animal breeder farms in the country so far developed either in the government or in the private level. He said he had difficulties last year buying his Jersey cow from Darjeeling India.

With regard to the question of cow milk cheese making in Ilam, he said that there are eight cheese factories located in Ilam out of which four factories are run by DDC and the rest four by private sectors. He pointed out that these plants are going to close soon because of bad location, poor quality of milk, high temperature and cow milk mixed with buffalo milk that created problems in the quality of Kanchan Cheese manufacturing. He said he tried selling milk during the holiday but none of them agreed.

With regard to the question on whether co-operative movement in dairy is successful or not he answered that, since he is also a member of MPCS, the co-operative movement is successful only when the members know the details of the co-operative functions. He said that many farmers of his society are not aware on co-operative principles, so appropriate mechanisms should be developed for creating awareness and to make the movement successful.

Last year, Mr Bastola and his neighbour went to the Ilam District Agriculture Development Bank for credit to buy a Jercy crossbred milking cow along with a calf. Mr Bastola took a loan of Rs. 20 thousand and also animal insurance, which he has been paying the premium of 6% and 15% interest rate to the DAB/N. His neighbour’s cow died six months ago and he has not had insurance compensation yet. This is a big economic burden to this farmer.

On the question of World Trade Organization (WTO) impact on the Nepal dairy industry, he said that the importance of the WTO for Nepal will not affect trade with other countries because Nepal is a small country with no impact on the world market and has low barriers to entry. He also emphasised that WTO will have the effect of potentially opening markets in the South Asia region. Nepal will have to aggressively compete with prices in the region. He further pointed out that as far as Nepal’s market is concerned, the HMG/Nepal has already opened border policy with India (World Bank 1998). He further said that DDC is presently exporting milk to India but on subsidised prices, which is not good for the farmers in the long run to sell at the present price paid to the farmers in Nepal.

Asked about the role of private sector dairy companies emerging in Nepal, he replied that their levels of management, technical knowledge, and marketing expertise are weak and are only beginning to develop. He pointed that the country has to focus on the market segments that they can supply to meet the needs of consumers. The range of potential products is increasing, and Nepal diaries need to focus on product development and diversification. He also stressed that Nepal’s borders are open to imports that places pressure on producers and processors to be efficient and competitive.

Regarding the milk holiday question, he replied that he had been facing this problem since 1991/92. He further said that all these created a mismatch between milk offer, milk collection, and serious market search by the producers for selling additional milk and milk products. The result is that there has been a milk holiday since 1991/92. He also criticised the HMG/Nepal policy for the rapid expansion of roads and liberalising the market in the last decade. Sufficient adjustment has not yet been made between road expansions and there is no additional milk processing operation at the public and private sector. Road expansion doubled in 1990’s compared to 1980 leading to faster increase in milk offered by farmers. He also expressed that HMG/Nepal did not go for parallel increase in the capacity in DDC, although some capacity were increased through rehabilitation of old DDC plants between 1988–89. A milk powder plant with the milk consumption capacity of 35 thousand litres/day was established in 1991. These capacities got occupied quickly. In the mean time, HMG/Nepal laid additional emphasis on economic liberalisation with the start of 8th plan (1992–97) and up to 9th plan period. No processing capacity has been added to the public sector to date (National Planning Commission 1992, 1998).

Furthermore he suggested that introducing new varieties are other options for increasing milk demand. There is very high scope for introducing school milk by targeting at least the boarding school. Similarly, condensed milk option also exists, if we want to tap the potential supply to the military. Whole and skim milk powder, flavoured milk and yoghurt (stirred), ice cream and other various products also have prospects in view of growing exposure to the urban people with the modern life style. He further suggested that milk supply in the office complex is also a possibility to reduce the milk holiday.


At the end of the interview with Mr Bastola I asked him what sort of implications, issues, lack of process in livestock development and future strategy and lessons learned can be told in this case study from his side on priority basis. He concluded by ranking the issues and problems below:

Detriment milk pricing policy of the government

The government policy on fixing the producer and retail prices is a major detriment to the development of the dairy industry because prices are set under a climate of political influence with no relevance to general market conditions inside Nepal or to border prices. The policy has set both the producer and retail price effectively constraining the dairy processing industry with margins that do not reflect general business cycles and the impact of rising costs, wages, utilities, taxes etc. The classified pricing system that is based on differentiation of markets and the demand characteristics of the products will provide a better return, a larger market, or both rather than a single price for milk for all uses. The National Dairy Development Board (NDDB) should look into this pricing system to account for quality of the milk being delivered to the collection and processors.

Livestock breeds

He indicated that they had poor indigenous breed of livestock and lack of exotic livestock breed stock in the country. As a result every year farmers have to spend lots of money in India to buy animals. Most of the time they do not get true breeds of dairy animals from Indian markets.

Inadequate delivery of animal health services

Livestock extension and animal health services in dairy sector are subsidised to the farmers but are inadequate and not available at the time when needed. Mr Bastola pays for the medicine and veterinary services fee arranged privately. It does not mean that he does not like to pay fee to private practitioners.

Dairy animal marketing

There are poor marketing facilities for live animals and animal products within the country. Animals hat-bazaar system should be organised and developed in all five developing region of the country.

Milk co-operatives

Regarding the milk co-operative movements he said that there are critical issues and lots of confusion in operating the co-operatives at grassroots levels because many farmers or the members of the co-operatives are not well informed on the principles and functions of the co-operatives. The co-operative movement has been more or less a forced phenomenon. MCC are established with political colours and cannot fulfil their actual co-operative based objectives. There is lack of co-ordination between Department of Co-operatives (DOC) that has regulatory functions and the National Co-operative Development Board (NCDB) that has promotional functions.

Mass education programmes

There is a great need to educate consumers on how to launch new dairy products, otherwise the new market penetration would be tough.

Milk marketing

There is lack of infrastructure for collecting, processing and marketing milk and milk products at village levels. Village road development programmes should be started as early as possible.

Poor livestock farm management

There is poor livestock farm management system at farming levels as can be seen in Mr Bastola’s farm. There is no research attention given to this aspect either from DLS or from NARC.

Lack of long-term appropriate livestock policy

A livestock policy concentrating on pocket developments for specific products such as milk pockets with identified potential is important for optimising the use of investment, extension staff and other support resources. This will also help to develop markets through the commercialisation of the products. The present policy where the government does everything is not effective. The system has to be decentralised and liberty and legal rights should be given to the MPCS.

Livestock supporting services

There is lack of supporting services like research activities on farmer’s problems. These problems in livestock sector are related basically to inadequate extension, lack of research facilities, less focus on market orientation and commercialisation.

Questions raised in the case study

There are a number of questions raised in this case study and some of the most important questions are mentioned here.

1. What should be the organisational–administrative system of DDC?


2. Should government veterinary services be privatised?

3. Is it economical for farmers to go to India every time for animal purchase? What should be the solution for this?

4. Who and how can we solve the livestock credit facility and insurance compensation?

5. Who should regulate milk and milk product pricing policy in the country?

Options are:

6. How can we re-organise the livestock research and development approach method for the up-lifting of smallholder dairy farmers?

Options are:


I am most grateful to National Dairy Development Board (NDDB), India, and to International Livestock Research Institute (ILRI). My gratitude goes particularly to Dr Amrita Patel, Chairman, NDDB, and Dr Hank Fitzhugh, Director General, ILRI, for their kind invitation and support to me to participate in this workshop. I must thank my staff of NZFHRC particularly Ms Meena Dahal for the computer support.


Agriculture Perspective Plan. 1997/98. Ministry of Agriculture, His Majesty’s Government, Kathmandu, Nepal.

CBS (Central Bureau of Statistics). 1998. Statistical Pocket Book 1998. CBS/NPC Kathmandu, Nepal.

DDC (Dairy Development Co-operation). 1999. Annual Report 1999. Lainchaur, Kathmandu, Nepal.

Ministry of Finance. 1998. Economic survey fiscal year 1997–98, His Majesty’s Government, Kathmandu, Nepal.

NDDB (National Dairy Development Board)/DSP Report. 1999. Hariharbhavan, Lalitpur, Nepal.

NPC (National Planning Commission). 1992. Eighth five-year plan (1992–1997), NPC, His Majesty’s Government, Kathmandu, Nepal.

NPC (National Planning Commission). 1998. Ninth five-year plan (19980–2003), (1992–1997), NPC, His Majesty’s Government, Kathmandu, Nepal.

World Bank. 1998. World Bank Development Report 1998. Knowledge for development. World Bank, Washington, DC, USA.

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