Kathmandu, June 2: Seeking to reduce Nepal’s growing dependence on agricultural imports, the government has unveiled a wide-ranging package of reforms, incentives and infrastructure investments aimed at revitalising the agriculture sector in the upcoming fiscal year 2026/27.
Presenting the national budget, the government pledged to strengthen the entire agricultural value chain—from production and processing to distribution and marketing—while making farming a more productive, profitable and dignified profession.
A key highlight of the budget is a new incentive scheme targeting commercial agriculture. Under a pilot programme, farmers investing at least Rs. 20 million in agriculture or livestock production will receive government grants covering up to 40 percent of their investment. The subsidy will be reimbursed at an annual rate of 10 percent over four consecutive years after production begins.
The government also announced plans to complete the nationwide farmer identification process and begin distributing farmer identity cards in the next fiscal year. To bring more land into productive use, local governments will establish land banks by utilising reclaimed riverbeds, unused public land and barren farmland. The private sector will also be encouraged to adopt an agro-pooling system to facilitate large-scale agricultural production.
At the same time, authorities pledged to curb the misuse of agricultural subsidies while ensuring genuine farmers continue receiving support for seeds, fertilisers, irrigation, electricity and agricultural insurance. Subsidies covering up to 80 percent of agricultural and livestock insurance premiums will continue, while other subsidy programmes will be gradually phased out.
To improve market access for farmers, the government announced concessional loans and interest subsidies for businesses purchasing agricultural products directly from producers. Agricultural services will also be restructured into a farmer-centred service system, with technical personnel deployed in every local government to provide year-round support through digital agriculture services and private-sector participation.
Rs. 32.46 Billion Allocated for Chemical Fertilisers
In an effort to prevent recurring fertiliser shortages during major planting seasons, the government has allocated Rs. 32.46 billion for chemical fertiliser subsidies in fiscal year 2026/27. The allocation is 12.6 percent higher than the current fiscal year’s budget of Rs. 28.82 billion.
Overall, the government has earmarked Rs. 46.92 billion for agriculture and livestock development programmes. An additional Rs. 2.07 billion has been allocated to the National Agriculture Modernisation Programme to boost productivity.
Focus on Agro-processing and Green Fertilisers
The budget also prioritises agro-processing industries. Mango processing centres will be established in Siraha and Saptari, while a tomato processing centre will be set up in Sarlahi. In Karnali Province, the government plans to expand fruit production zones focused on apples, walnuts and other high-value crops, alongside investments in cold-storage infrastructure.
To promote commercial farming, unused private agricultural land will be allowed to be converted into shares of commercial agriculture companies supporting farming and livestock enterprises. The government has allocated Rs. 360 million in conditional grants to local governments for promoting organic and green fertilisers.
In addition, a green urea fertiliser industry will be established through a partnership between the Nepal Electricity Authority (NEA) and the private sector. The government has pledged electricity subsidies and procurement guarantees to attract investment in domestic green urea production.
Animal Health and Quarantine Measures
To strengthen animal health services, livestock vaccines will be produced domestically with private-sector participation. The government has allocated Rs. 240 million for controlling livestock diseases, including foot-and-mouth disease, and announced plans to establish an animal quarantine facility at Hilsa in Humla.
Major Irrigation Expansion Planned
The government has also prioritised irrigation infrastructure, aiming to expand irrigation services to an additional 15,800 hectares of farmland in the next fiscal year. This would increase Nepal’s irrigated agricultural land coverage to 64 percent.
Under the Babai Irrigation Project, irrigation facilities will be extended to an additional 1,066 hectares, while restoration work on the Rajapur Irrigation Project will continue. The government has allocated Rs. 5.63 billion for the Babai and Bheri-Babai Diversion Project, whose headworks construction is scheduled for completion.
Similarly, the Sikta Irrigation Project has received Rs. 2.55 billion to expand irrigation coverage by 5,000 hectares in Banke district.
The government also plans to restart construction of the dam and powerhouse under the Sunkoshi-Marin Diversion Project through a new contract arrangement, targeting completion within four years. The project has been allocated Rs. 2.98 billion. To maximise the benefits of the diversion project, the Bagmati Irrigation Project will be upgraded to provide irrigation facilities across 122,000 hectares of farmland in Bara, Rautahat, Sarlahi, Mahottari and Dhanusha districts.
Meanwhile, expansion of the Mahakali Irrigation Project command area and infrastructure development under the Rani-Jamara-Kulariya Project’s Lamki section will continue with a combined allocation of Rs. 5.13 billion. An additional Rs. 1.83 billion has been allocated to expand groundwater irrigation to 3,980 hectares of farmland in the Tarai-Madhes region, where surface irrigation remains unavailable.
The budget reflects the government’s broader strategy of reducing food imports, modernising agriculture, expanding irrigation coverage and promoting private-sector participation to transform agriculture into a commercially viable sector. #nepal #agriculture
