Organic Agriculture: Opportunities in Nepal

ECONOMIC PERSPECTIVE TO EFFICIENT SOIL FERTILITY MANAGEMENT IN NEPAL

INTRODUCTION:

Soil is the uppermost part of the earth’s crust formed by the weathering of rocks and containing humus and material transfer. It is the very crucial and precious natural resource, and a non-renewable one in short term. Soils vary in terms of origin, appearance, characteristics and production capacity. The well-developed soils have a distinct profile with different layers. Major types of soils are formed from rocks by weathering processes over long periods extending to more than 1000 years. During weathering, physical disintegration of rocks and minerals occurs, further chemical and biochemical soil forming processes lead to their decomposition. Soils vary largely with respect to their natural fertility and productivity resulting in plant growth ranging from practically zero growth on extreme problem soils to abundant luxuriant growth of natural vegetation. Soil fertility is the inherent capacity of soil that enables it to provide essential plant elements in quantities and proportions for the growth of specified plant when other factors are favorable (Panda, 2010). Soil fertility evaluation is the measurement of availability of macronutrients like Nitrogen, Phosphorus, Potassium, Calcium, Sulphur and micronutrients for the growth and development of plant.

Properties of soil

Physical property

The texture, structure, color are important physical properties of soil. Healthy soils have high aggregate stability, low bulk density, and high available water capacity.

Chemical property

Similarly, pH, organic matter, macro and micronutrients are important chemical properties determining crop production and productivity. Fertile soils have neutral to slightly acidic pH, abundant and stable levels of phosphorus and potassium, adequate levels of micronutrients, and low salinity.

Biological property

Fertile and productive soils have large amounts of organic matter, high levels of active carbon, adequate and stable levels of mineralizable nitrogen (having too-high levels of nitrates can decrease soil health), and a thriving microbial ecosystem.

In the world only a small proportion of soil has good level of fertility. Most soils have medium fertility and some have even lower fertility, and are often referred to as marginal soils. The fertile soils are deep alluvial soils formed from river basins, organic matter-rich soils on loess material, nutrient rich Vertisols and volcanic soils. In most countries with large food demand, cropping cannot be restricted to the natural fertility of soil because of the large population and general shortage of arable land inorganic fertilizers are applied as external inputs to increase the productivity. The fertility of poor soil can be improved considerably using several methods and has been demonstrated in many countries. Degraded soils can also be restored to a satisfactory fertility level if managed properly. While, under poor management condition the highly fertile soil can be seriously depleted to the extent that the soils may become useless for agricultural production.

IMPORTANCE OF SOIL FERTILITY:

The Nepalese economy relies heavily upon the agriculture sector, a source of livelihoods for 65.6% of the country’s active population and contributes 28.89% to the total gross domestic product (Agriculture diary, 2075). The rapid population growth rate at 1.35% per year has placed considerable pressure on Nepal’s natural resources to meet the food demands of its population and has raised concerns over the long-term sustainability of its agriculture (Agriculture diary, 2075). Soil fertility is one of the key factors in determining agricultural production. Healthy soil produces healthy and vigorous plants which help to increase crop production and can address the problem of food insecurity. Improved soil fertility and nutrient management system is essential for successful cropping. Soil is the foundation on which all input-based high-production systems can be built. Fertile and healthy soil increase plant growth, reduce erosion, prevent against pest and disease outbreak, and can serve as a carbon sink.

STATUS OF SOIL FERTILITY IN NEPAL:

The soils of Nepal are derived mainly from young parent material and are highly variable based on the topography. A Land Resource Mapping Project (LRMP) carried countrywide survey and produced a soil classification report based on USDA soil taxonomy in 1986. It reported that 4 soil orders covering 14 soils group are encountered in Nepal. The main order of soil found in Nepal are Entisols, Inceptisols, Mollisols and Alfisols. However, Spodosols, Histosols, Ultisols and Aridosols are occasionally found. Mandal (2007) reported that 60% soils of Nepal have low organic matter (OM), 23% have low phosphorus (P), 18% have low potassium (K), and 67% of the soils are acidic. MOAD (2017) estimated that 310 kg/ha of plant nutrient is lost annually because of the cereal-based farming system, whereas only 67 kg/ha of fertilizer is added to the soil through various fertilizer sources. However, the poor soil management practice in cultivated lands has led to a higher rate of soil erosion, decreased crop production and productivity, and declined soil quality (Pimentel, 2013). The data on soil science results indicate that majority of Nepalese soil are low to medium in major nutrients, very low in organic matter and half of the soils are acidic in nature (Jaishy & Mandal 1999). In producing most of crop that remove in an average 14 kg Ca and 11 kg Mg per hectare per crop (Tripathi 1999).

CONSTRAINTS ASSOCIATED WITH SOIL FERTILITY:

Major problems associated with soil fertility management in Nepal are deforestation, which gives way for enhanced erosion by water and wind, salinization, flooding, water logging, and fertility depletion (Hartemink, et al. 2008). It is estimated that to form one inch of fertile soil, it takes about 500- 1000 years, but the same can be destroyed even in a short and single rain event. Rowell (1994) reported that various studies have estimated the soil loss ranging from 0.2 - 10.5%. Soil is primary resource for the households in agrarian country so, management of its fertility is essential to ensure the prosperity of such households. Continuous cultivation without addition of substantial amounts of soil organic matter in terai region and sharp decrease in soil organic carbon and nitrogen (Shrestha et al., 2004), increased cropping intensity, use of high yielding varieties, and increasing irrigation facilities have rapidly exhausted nutrients from soil. There is no doubt that demands on the soil resources will continue to increase and that further  intensification  of  agriculture will  be  needed  to  meet  food demands  in  the  future (Schreier et al. 1995, Pandey et al. 1996). Substantial use of farmyard manures (FYM), compost, crop residue, and fertilizers has increased lately to overcome the need of micro and major elements. The chemical fertilizers containing Nitrogen and Phosphorus applied in the field is washed away during rainfall due to runoff and mixes in the water bodies, this increases the nutrient content of water bodies resulting the condition called eutrophication. In eutrophication there is rapid growth of aquatic plant bodies resulting in the deficiency of oxygen in the water bodies (Hypoxia). Due to the depletion of oxygen in the water bodies the aquatic animals are adversely affected. The nutrient pollution is characterized as the marginal external cost which is the vertical gap between the narrowly defined marginal production cost and the more inclusive marginal social cost. These costs increase with increases in demand for the commodity, and as production increases, the downstream effect of hypoxia increases the gap between the production costs and the social costs. Internalizing some of the social costs involve producer level decisions on alternate farm management practices. This report aims to investigate the existing externalities in the soil fertility management process and also identify the possible solutions to internalize such externalities.

ECONOMIC EXPLANATION:

The soil fertility has important positive and negative external effects.

NEGATIVE EXTERNALITY:

Increased application of Phosphorus, Nitrogen and Potassium, forms the core strategy to increase soil fertility and improve agricultural productivity in response to societal demands. The prevailing farming practices involve socially suboptimal levels of use and containment that causes nutrient runoff into streams, rivers and ultimately to the sea. Such nutrient enrichment of water bodies (eutrophication) enhance the growth conditions for aquatic plant-life thereby increasing biological oxygen demand for species competing for resources. This leads to negative externalities in downstream of the agricultural region, in the form of water pollution reduced fish and other populations of economic interest, and lower recreational values. The economic approaches to internalize such externality are standards, taxes, and subsidies. According to Kaldor’s welfare criterion: “if a certain change in economic organization or policy makes some people better off and others worse off, then a change will increase social welfare if those who gain from the change could compensate the losers and still be better off than before. Thus, if any policy change benefits any one section of the society (gainers) to such an extent that it is better off even after the payment of compensation to the other sections of the society (losers) out of the benefits received, then that change leads to increase in social welfare”.  Informal flow of a Kaldor-Hicks type of compensation is assumed as long as the benefits from the first outweigh the losses of the second, consumer surpluses are expected. The problem occurs when the system overloads and downstream losses exceed the benefits of intensive agriculture.

Pigouvian Tax

A Pigouvian tax is a tax on any market activity that generates negative externalities. The pigouvian tax is intended to correct an undesirable or inefficient market outcome. It does so by being set equal to the social cost of the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to overconsumption of the product causing market failure. “The negative externality of the nutrient pollution is characterized as the marginal external cost which is the vertical gap between the narrowly defined marginal production cost and the more inclusive marginal social cost. These costs increase with increases in demand for the commodity, and as production increases the downstream effect of hypoxia increases the gap between the production costs and the social costs”. Internalizing some of the social costs involve producer level decisions on alternate farm management practices. The remedy recommended in mainstream economics in this situation is some form of Pigouvian Tax which is set to the marginal external cost. A tax shifts the marginal external cost curve up by the amount of the externality. If the tax is placed on the quantity of runoff from the field, the farmers have an incentive to reduce production to the socially optimum level. If the tax is placed on the percentage of runoff per unit of production, the farmer has incentive to change production processes or technology.

POSITIVE EXTERNALITY:

The fertile and healthy soils increase biodiversity, prevent erosion, sequester carbon, and reduce pest and disease outbreaks, they provide public benefits not captured by a single farmer. In economics, we refer to such benefits as positive externalities. These benefits are unpriced leading to market failure. The major approaches of internalizing positive externalities are:

Pigouvian subsidies:

Pigouvian subsidies is the most straightforward way for societies to internalize positive externalities. This method of internalizing externality is named after Arthur Pigou, an English economist who developed much of the theory around market externalities. A Pigouvian tax would reflect the public cost of an action that is not otherwise internalized in market transactions. Conversely, a Pigouvian subsidy would compensate a private agent for public benefits provided by some behavior. In the case of soil fertility, a Pigouvian subsidy would entail the government paying farmers to engage in soil fertility management practices. However, this is not an easy task. According to the theory, the size of the Pigouvian subsidy should be equal to only the benefits not captured by the private user. This number is difficult or impossible to estimate in the case of soil fertility. In practice, a Pigouvian subsidy that is too large will cost society more money than is needed to achieve the desired level of soil fertility.

Quota-based policies (cap-and-trade):

Another way to internalize externalities is cap-and-trade system. This approach is more suitable to manage negative externalities, and is probably not the most appropriate for soil fertility. However, carbon cap-and-trade programs affecting land use management as farmers are being compensated for practices that sequester carbon.

Coase theorem inspired bargaining:

The Coase theorem suggests that private bargaining can internalize externalities if property rights are well-defined and transaction costs are low. In the case of soil fertility, transaction costs are certainly not low, so, the Pigouvian subsidy would be a more realistic and effective approach for internalizing the externality.

RECOMMENDATION:

Soil fertility is a very customizable feature of soil. Since its management is directly related to crop production levels, both long and short term fertility management practices are necessary in order to either maintain existing good health of soil or to restore the fertility, so that sustainable crop production could be achieved. Moreover, soil fertility is inextricably linked to environmental resilience, and ecosystem services. However, while maintaining soil fertility there is a presence of both negative and positive externalities which must be taken into account in every planning and decision making process. The negative externality mostly occurs due to the runoff of nutrients from soil that increases the nutrient content of water bodies resulting a condition called eutrophication. It is hard to precisely quantify the costs bore by ecosystem due to these externalities, while the solutions to these might be as wide as reformation and revision of economic and policy frameworks. The solutions to the negative externality includes the Pigouvian tax through which the individuals degrading water quality while maintaining soil fertility are also made accountable, and thus compensate the affected. However, there are positive externalities associated with soil fertility also. As fertile soil maintains the balance in ecosystem and helps in conservation of ecosystem and biodiversity, this externality can be internalized by Pigouvian subsidy and carbon cap-and-trade method. In case of Negative externality, Pigouvian tax is the best method of internalization of externality while if positive externality is realized, Pigouvian subsidy would be more realistic in case of soil fertility management.

CONCLUSION:

There are several ways to manage soil fertility rather than merely depending upon chemical sources. Educating farmers on reducing pollution from agricultural activities, along with assisting them with choosing right amounts of nutrient and pesticide usage can play a vital role. Education of polluters is probably the best method the public has for reducing non –point source pollution problems. Similarly, use of bio-fertilizers and addition of organic materials are potential can be an alternatives to chemical fertilizers since it helps to minimize eutrophication. While from economic perspective, the negative externalities caused by the addition of chemical fertilizers while maintaining soil fertility can be solved by levying pigouvian tax to the polluter and the affected individuals should get compensation. Similarly, there is positive externality of soil fertility, as fertile soil maintains the balance in ecosystem and helps in conservation of ecosystem and biodiversity, this externality can be internalized by Pigouvian subsidy and carbon cap-and-trade method.

  

REFERENCES:

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