World Conservation Union (IUCN) Nepal

National Strategy for Sustainable Development (nssd)

Status Review and Dialogue

Land and Agriculture

Devendra P. Chapagain

January 2001

I Purpose

This is a review of the current state of policies, programmes, legislative framework and institutions that singly or in combination concern sustainable land use policy, land management and agricultural development in the country. This review seeks to achieve two main goals, namely: (a) provide an insight into the planning, budgeting/annual programming, implementation, monitoring and evaluation processes and the role of and the extent of involvement of the major stakeholders, including the intended/target beneficiaries; and (b) draw lessons/principles for use by the concerned authorities in Nepal both in ongoing plans/programmes/projects and those in preparation, and also for the guidelines of donors in providing aid to Nepal.

The country’s efforts toward sustainable development, achievements made thus far, and gaps and weaknesses could not be comprehended properly without first tracing the historical process of interventions. Hence this paper starts with such a review of the past, and goes on to the current status. Finally, based on the past experience, implications are drawn for future actions that could guide the government and the donor community in more effectively promoting sustainable development in land use and agricultural development.

II Context

Historically, economic development has been the principal preoccupation of the government ever since the overthrow of the Rana Rule in 1951. Planned development began in 1956 with the launching of the First (five-year) Plan that year, and the country is mid-way into the implementation of the Ninth (five-year) Plan. On the other hand, sustainable development is relatively a new concept in the development history of Nepal.

For the past nearly four decades, the agriculture sector of Nepal has been caught in a spiral of low growth (see APROSC and JMA 1985, chapter 1). Yet, little analytical work appears to have been undertaken to ascertain the principal determinants of this phenomenon, and much less on initiating effective remedial measures. All we know in general terms is that this predominant sector of the economy is still overwhelmingly subsistence-oriented, highly diversified at the farm level (an antithesis of specialisation and commercialisation), and grossly ill served with access to modern productive inputs and technology delivery services.

In recent years (1984/85-1999/00), Nepal's GDP in real terms has grown at an annual rate of slightly less than five percent (Table 1). In contrast, agricultural GDP during the same period grew only by less than three percent. These growth rates were still lower during the period 1974/75-1983/84. However, these differences are mainly due to the official revision of agricultural and national GDP series from 1984/85 onwards, rather than due to a perceptible shift in the overall structure of the economy and on the technological frontier. In any case, these trends, when compared to the annual population growth of about 2.5 percent, present a quite disturbing picture.

Note: These are annual average growth rates computed by fitting least-squares log-linear regression lines.

Source of basic data: HMGN, Ministry of Finance, Economic Survey (1999/2000).

The production of the two principal food crops (paddy and maize) over the period 1974/75-1996/97 grew nationally by less than 0.5 percent per year, with negative to near zero growth in the mountains and hills. These alarming trends for paddy and maize were to some extent compensated for by the rather encouraging growths in wheat and potato (Table 2).

Table 2: Average Annual Growth Rates in the Production of Four Major Crops, 1974/75-1996/97, in Percent

Note: Calculated the same way as Table 1.

Source of basic data: HMGN, Ministry of Agriculture.

The rather insignificant three percent growth in the country's predominant economic sector¾ employing more than 80 percent of the economically active population and contributing around two-fifths to the gross domestic product¾ is quite inadequate to meet the country's growing food demand, and to trigger a process of overall economic transformation.

It is also noteworthy that the proportion of the economically active population depending on agriculture has fallen by about 13 percentage points in the past two decades, from 94 percent in 1971 to 81 percent in 1991. On the other hand, the share of this sector in the GDP has dropped more sharply, from around 72 percent in 1974/75 to 40 percent in 1997/98. These disproportionate drops in the sector's share in the total employment and income indicate a declining productivity within the sector.

III Policies and Programmes

Government policies, strategy and priorities as reflected in the two previous periodic plans (Seventh and Eighth Plans) and the current Ninth Plan, among others, are: (a) high priority to the provision of production inputs in irrigated areas for food production, and around the processing plants for supplying industrial raw materials; (b) concentration of efforts for the production of perishables such as fruits, vegetables, milk and fish in accessible areas; (c) protection of tenants through rent fixation; (d) expansion of irrigation, particularly hill irrigation; and (e) afforestation through a participatory approach (NPC 1985, 1992, 1998). Following the preparation of the Agriculture Perspective Plan and its endorsement by the government in 1995, the Ninth Plan has reiterated the crucial importance of the agricultural sector in the overall economic transformation by adopting an agriculture led growth strategy.

A comparison of the objective statements of the previous Seventh and Eighth Plans and the current Ninth Plan indicates broad similarities both at the aggregate and at the sub-sectoral levels, although the Eighth Plan put more emphasis on regional balance and the need to take advantage of the ecological diversity of the country, while the Ninth Plan has relied heavily on effective implementation of the Agriculture Perspective Plan. Similarly, a concern for environmental protection and preservation of the country's biodiversity is explicit in the Eighth and Ninth Plan documents. Insofar as the issue of poverty alleviation is concerned, the Seventh Plan document has treated it through the "fulfilment of basic needs, and increasing productive employment opportunities", while the Eighth and Ninth Plans have devoted separate chapters on this issue. In fact, the Ninth Plan’s main objective is to reduce poverty through the implementation of programmes in the identified priority sectors such as agriculture; water resources; social sector; industry, tourism and international trade; and physical infrastructure.

The distinguishing feature of the Ninth Plan is the adoption of a 20 year perspective and its emphasis on an agriculture led and integrated cross-sectoral development approach.

IV Ninth Plan

The strategy of the Ninth Plan is "integrated development of agriculture and forestry sectors and high, sustainable and poverty alleviation-oriented economic growth with a focus on those sectors" (NPC 1998; p. 73). The plan seeks to achieve high economic growth through effective implementation of the Agriculture Perspective Plan by increasing agricultural productivity by "guaranteeing the safety of land ownership, giving the landless access to land, extending land ownership, and alleviating poverty through the promotion of economic growth and employment by establishing, developing and expanding agro-based industries" (Ibid., p. 73).

Environment and sustainable resource management is recognised in the Ninth Plan as well. It defines resource management from the standpoint of sustainable economic development as fulfilling the needs of the present and future without depleting the available stock of resources (p. 270).

The following are the objectives of the plan regarding environment and sustainable development (p. 275):

• Consolidate the functions of the environment cells and planning sections of various ministries to ensure integration of environmental considerations in the overall economic development process;
• improve the work efficiency of human resource engaged in environment related areas;
• establish coordination among the agencies concerned with environment and development;
• adopt an integrated approach toward environment and development;
• formulate and coordinate legal provisions related to national resource conservation';
• expand the coverage with respect to biodiversity;
• continue scientific approach to forest management;
• fix emission and effluent standards and enforce mandatory and voluntary measures for pollution control;
• devise legal measures to effectively mobilise the nongovernmental organisations and private sector in environmental protection, public health and waste management;
• adopt consistent policies related to economic and fiscal matters and the environment; and
• minimise the loss to life, property, national heritage and development infrastructures arising from natural disasters, establish an appropriate organisation for natural disaster management and develop national capacity for disaster control.

A separate section is devoted to "environment and agriculture" (Chapter 10, Section 11) under which emphasis is given to the need for balanced use of fertilizers and integrated plant nutrition management (IPNM), integrated pest management (IPM), appropriate land use, conservation of the Siwalik zone, community and leasehold forestry programmes, application of bioengineering methods in the construction of agricultural roads, and promotion of perennial horticultural and cash crops in the mountains and hills.

The plan spells out the following 20 different areas as the major sectors of development thrust (Ibid., pp. 76-104), and these do not include sustainable development: (i) Macro-economic stability; (ii) poverty alleviation; (iii) population planning and family welfare; (iv) human resource development; (v) domestic savings mobilisation; (vi) development of private sector and enhancement of competitiveness; (vii) science and technology; (viii) information technology; (ix) development of agriculture sector; (x) electricity development; (xi) tourism development; (xii) utilisation of ecological variations and biodiversity; (xiii) regional balance; (xiv) development of backward regions; (xv) productivity enhancement and quality management; (xvi) development of agro-industries; (xvii) decentralisation and strengthening of local self-governance; (xviii) mobilisation of NGOs for local development; (xix) women’s development and empowerment; and (xx) administrative reforms.

However, interrelated areas such as (i) environment and natural resource management, (ii) land use plan and land reform, and (iii) forest development appear in a separate chapter (Chapter 9) entitled "Environment and Sustainable Resource".

Sector objectives in the Ninth Plan are the following:

• Poverty alleviation through increased productivity of resources and inputs;
• prevention of adverse environmental impacts of external (purchased) inputs and natural resources through their balanced use;
• Promotion of agro-based industries and industrialization through diversification and commercialization of agriculture;
• Enhancing women’s participatory role in agricultural development and develop their leadership in productive activities; and
• Improve the people’s nutritional level and food security through the production of food and nutritive products.

The Ninth Plan treats agriculture as the lead sector, meaning that developments in other sectors and subsectors (such as irrigation, roads, electricity, industry and trade) would be designed with a view to making a positive contribution toward meeting the objectives of the agricultural sector. The plan envisages to restructure and reorient the programmes, budgetary allocations, human resource mobilisation and institutional resources along the priorities mentioned in the APP. Consistent with the APP strategy, the plan seeks to adopt an integrated approach by simultaneously dealing with interrelated areas such as land reform (limited to removal of dual ownership and attention to squatters and kamaiyas), irrigation, agricultural roads, agricultural cooperatives and agro-industries.

V Resource Allocation

In terms of allocation of public sector resources, the agricultural sector (broadly defined to include agriculture, forestry, fisheries and irrigation) has been receiving the highest share of public expenditure, particularly since the Sixth Plan period. Of the total amount of Rs 19,815 million spent on this sector in real terms during the period 1984/85-1994/95, the share of agriculture proper was 38.7 percent, while that of irrigation was 43.8 percent. Forestry accounted for the balance (16.7%), while land reform received only a marginal (less than 1%) amount (Table 3).

Year

Nominal

Real

%

Nominal

Real

%

Nominal

Real

%

Nominal

Real

%

Nominal

Real

%

84/85

703.6

703.6

42.28

652.2

652.2

39.19

17.9

17.9

1.08

290.4

290.4

17.45

1664.1

1664.1

100

85/86

856.2

738.1

41.03

846.7

729.9

40.57

18.9

16.3

0.91

365.0

314.7

17.49

2086.8

1799.0

100

86/87

681.7

516.4

35.07

846.8

641.5

43.57

26.7

20.2

1.37

388.4

294.2

19.98

1943.6

1472.3

100

87/88

928.9

623.4

41.24

854.7

573.6

37.94

19.6

13.1

0.87

449.6

301.7

19.95

2252.8

1511.8

100

88/89

1016.2

627.3

31.51

1623.2

1002

50.33

29.3

18.0

0.91

556.7

343.6

17.25

3225.4

1990.9

100

89/90

1183.5

650.3

62.62

1204.8

66.2

40.51

38.8

21.3

1.30

547.2

300.7

18.39

2974.3

1038.5

100

90/91

1534.6

787.0

48.66

1118.9

573.8

35.48

40.4

20.7

1.28

460.1

235.9

14.58

3154.0

1617.4

100

91/92

1276.0

550.0

28.97

2212.2

953.5

50.23

31.3

13.5

0.71

884.3

381.2

20.08

4403.8

1898.2

100

92/93

2077.2

827.6

41.31

2017.3

803.7

40.11

5.9

2.3

0.12

928.8

370.0

18.46

5029.2

2003.6

100

93/94

2300.3

842.6

35.37

3232.1

1183.9

49.70

4.2

1.5

0.06

966.5

354.0

14.86

6503.1

2382.0

100

94/95

2348.0

801.4

43.56

2637.1

900.0

48.92

1.7

0.6

0.03

404.0

137.9

7.49

5390.8

1839.9

100

Total

14906.2

7670.7

38.71

17246.0

8674.3

43.78

234.2

145.4

0.73

6241.0

3324.3

16.78

38627.9

19814.7

100

Within the irrigation subsector, a large chunk of the resources has gone to large and long-gestation surface irrigation projects whose reliability, utility and cost recovery have been widely questioned. The Eighth Plan itself says: "Construction works of big projects planned to provide irrigation facilities to large areas [are] not being completed in time and completed projects [are] not operating in full capacity. [There is] no timely availability of water required for irrigation and [there is] increasing financial burden on HMG due to disappointing realization of water cess and consequent need to make large annual budgetary investments in repair and maintenance of the system. Per hectare costs of projects constructed at the government level [are] higher" (NPC 1992, p. 262). Yet, the share of resources allocated to the large projects in the total public sector outlay for irrigation is higher (75%) in the Eight Plan as compared to the Seventh Plan (66%). The reason seems to be the commitment made with the donors during the past plans and protracted delays in their completion.

A study on public resource allocation to agriculture (Thapa 1994) showed that the resources allocated particularly for research and extension services is declining in real terms. The same study also indicated that a substantial portion of the budget allocated to agriculture proper (i.e., crops, livestock and fisheries) was for the purpose of subsidising fertilizer prices (withdrawn recently).

VI Constraints and Awareness Regarding Sustainable Development

Misplaced Priorities

A serious weakness lies in the way main development problems and constraints are identified in one way and policy prescriptions and development programmes are implemented another way. For instance, lack of physical and institutional infrastructure, rugged terrain, and land-locked geographic position and open and porous border with India are often cited as the main hurdles to Nepal’s development. The array of macro-economic policy prescriptions made by the influential donors in the wake of ‘liberalisation and privatisation’, for example, suffer from this fallacy. The hasty move to privatise some of the activities dealing with the distribution of critical and sensitive production inputs such as chemical fertilizers without considering the prerequisites of prior preparation is an example of the false assumptions related to institutional infrastructure[1]. Of direct concern to the agriculture sector is the confusion created by such false assumptions regarding the role of the government and the private sector in the actual distribution of farm inputs and outputs vis-a-vis assurance of quality and safety of the products and services traded.

A prudent approach under such a situation would be to give priority to the development of basic physical and institutional infrastructures. The rugged terrain and the land-locked situation in fact imply the need for more of physical infrastructures such as transport and communication networks than are required under relatively easier geographic conditions. Another important requirement is to strengthen the key institutions and develop the country’s internal capacity to recognise the changing internal and external milieu and to adjust itself accordingly. It includes the development of internal capability to redefine the role of the existing institutions rather than to destroy them to create yet another unsustainable (hence temporary) institution. Unfortunately, destruction of the existing institutions, mostly at the behest of the ‘donors’, has become a predominant feature of the recent past.

Destabilisation of the administrative machinery seems to be an endemic phenomenon in Nepal. It manifests itself in the all too frequent personnel turnover. Every time a minister changes, a wave of personnel turnover takes place at all the levels, starting with the Secretary of the concerned ministry and then on to the lower echelons pervading the entire organisation. Considering the fact that the Nepalese bureaucracy is relatively young and that personal attention and attitude of the managers still heavily influence most of the development activities, the effects of such turnover is detrimental. Since the country is extremely diverse, full knowledge of the socio-economic and agro-ecological nuances is a sine qua non for any programme to succeed. Viewed from this angle, the effect of the frequent personnel turnover on agricultural development is disastrous.

The turnover rate was equally high in other entities, such as the Agricultural Inputs Corporation (AIC) (responsible for fertilizers and seeds), Agricultural Development Bank (ADBN) (which provides credit), and the Ministry of Water Resources (MOWR) and the Department of Irrigation under it (which is responsible for irrigation).

Lack of continuity in the programme is an immediate effect of such personnel changes. As a result, the same or similar programmes are repeated time and again. A new donor may pick up a programme as a new one, especially if the programme is initiated after some hiatus and the initial donor or collaborator has withdrawn. This leads to frustration among those who have seen such repetition time and again. With the passage of time, these frustrated individuals become senior staff members in the administration. This tendency in itself has become a serious constraint to Nepal’s agricultural development as the available scarce resources are wasted.

Therefore, the real challenge lies in avoiding such a tendency. The best strategy to do so would be to empower the entities that provide continuity through full decentralisation. This means delegation of authority to the point of action within the organisation, and devolution of authority to the local bodies and people’s representatives at the grass-roots level, and to the lower echelons of bureaucracy.

Considerable stability potentially exists at the District Development Committee (DDC) level since its members are elected for a term of five years, and the chair rarely changes during that period. Besides, according to the recent decentralisation move, the DDC is expected to play a coordinator’s role and serve as the focal point for all the development activities at the district level. As will be referred to later also, this is the brightest spot on the scene that should be capitalised for agricultural development as well.

About two-thirds of the development budget (capital expenditure) of His Majesty’s Government of Nepal (HMGN) is derived from external sources either as grant-in-aid or as long term loan. In the recent years, the proportion of external loan[2] is rapidly increasing as compared to grant-in-aid. All political parties that have formed the government since 1991 have taken the instance that higher levels of foreign aid are an indicator of their popularity among the donors. As a result, regardless of their preaching and ideological orientation, all the governments formed since the general election of 1991 have given priority to increasing the volume of foreign "assistance", while relegating the relevance of the "assistance" to secondary or tertiary level. This tendency has contributed to increasing the already high level of external dependence. It has also become a constraint to efficient resource allocation as most of the domestic resources including technical manpower are tied to the "assistance" as counterpart contribution.

The destabilised bureaucracy hardly gets any chance to maintain continuity and the associated advantage in negotiating with the ‘donors’. The mandate and priorities of the various ‘donors’ operating in Nepal seem to be constantly changing, regardless of Nepal’s needs and priorities. In a situation like this, it is easily conceivable that the real priorities of Nepal are relegated to a secondary position[3]. Thus such a heavy dependence on the donors has become a serious constraint to maintaining the minimally required continuity in any programme, let alone the question of assessing its long-term sustainability[4].

In effect, the above situation demands a much higher degree of professionalism, continuity, and a full understanding of the country’s basic problems and requirements on the part of donors and cooperators. Given its level of development, the possibility of Nepal’s essential requirements differing from the priorities and the agenda of the donors should not be ruled out. Therefore, the issues are how to: (a) insure that the country’s requirements receive priority considerations; and (b) avoid potential wastage of resources and frustration.

VII Sector Specific Issues and Constraints

The sector specific policy and institutional issues and constraints are manifest in a number of ways. The frequently cited cases include the unavailability of good quality seeds and chemical fertilizers, inadequacy of irrigation facilities, lack of technical know-how, inadequacy of the extension services, disease and pest infestation problems, lack of market opportunities, and inadequacy of credit facilities. To facilitate the analysis and identification of policy actions, these constraints could also be reclassified as: (a) domestically produced inputs which include seeds, planting and breeding materials, and irrigation facilities; (b) internationally procured inputs such as chemical fertilizers, pesticides and herbicides; and (c) support services such as agricultural credit, markets and marketing facilities. In general, their origins lie in the lack of prioritisation. Wherever a semblance of priority existed in the past, they either lacked continuity or were uncoordinated with other activities.

Inadequacy, lack of timely availability, or poor quality of seeds and planting and propagation materials are repeatedly cited among the avoidable, yet the most serious, widespread and recurring constraints. Unavailability of seeds of high yielding cereal varieties at affordable prices cited as one of the constraints faced by the farmers has two dimensions. The first is related to the actual physical shortage or unavailability. The second is related to the price or ‘affordability’. Both are interrelated. A variety of approaches have been tried in the past to remove these constraints, and yet, they persist. It is a result of the predominance of subsistence production on small farms across the diverse agro-ecological conditions amidst rudimentary transport infrastructure throughout most of Nepal. The situation does not favour large-scale production and distribution of limited varieties of any given crop and to take advantage of economies of scale. On the contrary, these physical limitations contribute to increasing the cost of distribution, especially the seeds of cereal grains. The varieties have to be commercially attractive and promise high returns. On the other hand, the research system is compelled to recommend only those varieties that are suitable for relatively low fertility and low-external inputs regime because fertilizer is not easily available and most of the Nepalese agriculture is still rainfed. The latter situation and its requirements somehow lead to selection of varieties that do not yield much.

Table 4 presented below indicates the results of such a policy. Ever since its establishment in the early 1960’s, the agricultural research system of Nepal has recommended 44, 15 and 27 improved varieties of rice, maize and wheat, respectively. The highest average yield levels achieved in the research stations under optimum technical conditions are taken as the potential yields of the recommended varieties. Measured against this yardstick, the potential yield of the highest yielding variety of paddy is just about 50 percent higher than the average yield achieved by farmers of Kathmandu, the district which recorded the highest average yield for that crop in 1998/99. The situation is slightly better for wheat and maize. Yet their potential is still lower than the national average yields of the country with the highest yields of these crops within the Asia-Pacific Region save the case of wheat for New Zealand.

Table 4: Potential Yields of Recommended Varieties of Paddy, Maize and Wheat in Comparison with the Highest Ads Obtained within Nepal and in the Asia-Pacific Region

Notes:

(1) Figures for the Asia-Pacific region refer to the year 1998.

(2) The figures refer to the average of both early and summer paddy.

(3) The yield of one variety was as low as 2.2 mt per ha.

(4) Separate figures are not available for the yield of early paddy.

Sources: MOA (1999), Statistical Information on Nepalese Agriculture 1998/99; and FAO (1999), Selected Indicators of Food and Agriculture Development in Asia-Pacific Region, 1988-98, Regional Office for Asia and the Pacific.

Most of the seed production and distribution in Nepal is traditionally extremely decentralised. It is still in the hands of millions of farmers, and it is explained, at least partly, by the above reality. It should be taken as the major determinant in designing a seed production and distribution strategy. Yet, it seems consistently ignored. On the contrary, attempts were made in the past to produce and distribute seeds through a centralised system via the AIC. All decisions would take place in Kathmandu in the headquarters of the AIC as this approach is bureaucratically convenient. This is the crux of the problem. They failed, as was to be expected.

It should be clear at this point that the problem was not with the AIC as an institution as such. It is with the enforcement of a centralised system of planning and control. The extreme ecological diversity together with physical inaccessibility due to poor transport and communication facilities has created a variety of isolated micro-economies in Nepal. This reality demands a decentralised management system. What has actually been adopted in Nepal is a centralised system. Hence the anomaly.

The issue of affordability has three aspects which need attention. The first is related to the actual cost of production and distribution. The preponderance of small-scale production of several varieties of a given crop is a reality dictated inter alia by diverse ecological conditions of the country. As mentioned above, decentralised production and distribution is the only policy option in this situation to reduce the cost of production, especially to ensure proper distribution in the short run. In the medium to long run, however, improvement in transport is necessary in order to reduce the cost of distribution. The second aspect of the issue of affordability is the factor-product price regime. The existing price regime vis-a-vis the expected yield from the open pollinated varieties of cereal crops does not make them commercially attractive. The third aspect is related to expectation. Thanks to the donor driven projects and programmes, farmers expect free or highly subsidised distribution of production inputs at their doorstep. "In spite of the farmers’ willingness to use improved seeds, they perceive that the price of AIC seeds is high", as reported in the Shakya study[5]. It is essentially a reflection of such expectations created by the earlier donor sponsored interventions. Donors’ cooperation is necessary to rectify the situation.

What has been said about the seeds of the cereal crops is true of fruit plants and young animals as well. Shortage of seeds, planting materials and the like (in the livestock sub-sector) has become a constraint of generic nature. Despite years of ‘efforts’, and a very high potential to produce these critical inputs domestically, a lasting solution is yet to be found. Generally, the search has been for a solution from within the hard-core agriculture sector, that too confined to the technicalities. A sustainable solution, however, requires more investment and effort outside the realm of the hard-core agriculture sector. This is the crux of the problem.

A study mentioned earlier observed that "low crop yields in Nepal are mainly due to severe soil fertility constraints. This in turn is due to slow growth in fertilizer use and declining availability of organic manure. Chronic inadequacy of aggregate fertilizer has been, and continues to be, the most binding constraint to rapid growth of fertilizer use in the country. Analysis of both demand and supply bear this out"[6]. This constraint has become more serious recently as the result of a confluence of policy rigidities on the domestic front and developments in the external sector.

A brief recapitulation of the historical background to fertilizer marketing and pricing is necessary in order to understand fully the underlying reasons behind this situation. Mineral fertilizer was introduced to Nepal as late as in 1960/61. Until 1965, import and distribution of fertilizer was in the hands of the private sector traders without government interference[7]. To begin with, the government accepted the donors’ recommendations to popularize the use of fertilizer[8] as a mean to increasing food production. A number of donors supported this policy. They not only provided fertilizers on a grant basis[9], but they also helped to create the Agricultural Supply Corporation (ASC) as the sole agency for fertilizer procurement and distribution, and in rapidly expanding it. In essence, the present AIC[10] is a reorganised ASC. Thus, it were the donors, which pushed for the government’s heavy involvement in fertilizer trade.

On the pricing front, until 1972, fertilizer prices were determined on the basis of cost (to AIC) plus principle although AIC and its predecessor organisations were created for service, not as a profit making organisation. Generally, a donor would provide fertilizers on grant. These fertilizers would be sold at a predetermined price, which would generally be close to the sales price in the adjoining areas of India. It would also consider the international cost-insurance-freight (c.i.f.) price up to Calcutta, the port of entry, plus the cost of transport and marketing. The sales proceeds after deducting the AIC’s costs were deposited in a specially created ‘counterpart fund’ account of the respective donor. The monies so generated in the counterpart fund were then spent on