"New technology is the key for survival in food business"
KL Dugar, Chairman of KL Dugar Group shares his views about the food business and his Group’s plans for expansion in it and entry into other sectors.
What is the current situation of food business?
The entire industrial sector of the country is badly affected by the current volatile political situation. Every sector is bearing a huge loss due to frequent general strikes. No one is able to have smooth business operation. No one is paying proper attention in agriculture. Farmers are not able to get the fertilisers or irrigation. They are unable to take their products to the markets due to strikes and blockades. Moreover, the production has gone down owing to the climate change brought about by the global warming. At the same time, the population and the income levels of the people in our neighbouring countries, India and China, are increasing. One third of the global population is in India and China, where the grain consumption is increasing at an alarming rate, thus driving the prices up not only in these two countries but throughout the world. On the other hand, due to the global warming, weather forecasting has become difficult. This has posed problems in increasing food production. This has created a very unbalanced situation in the world food market.
How do you visualise the food business in Nepal?
Both of food production and food business in Nepal are now in the declining trend. We do not know the quantity of food grains that enter Nepal from various points of the open border. We are not able to provide our farmers with modern agricultural facilities due to which we are unable to encourage them to diversify into new crops. If you look at the rice production of the Indian states adjoining Nepal, they are growing good quality rice, be it Basmati or any other variety including duplicate Basmati. We too can easily grow such rice in Nepal, at least on the land adjoining these rice growing centres of India. But we lack the technical know-how. The entire country is now bogged down in political wrangles. So nobody has time to ponder over the economic problems. That is why we are not able to diversify our crops and our farmers are suffering more and more. In the current situation, as the domestic food grains production has declined, food import is increasing. More and more quantities of food grains are being brought to Nepal directly and openly through the porous and open border. Developed countries like Japan and Holland produce wide range of same food products, thanks to the diversification in agriculture. We too can do the same in Nepal as we have a very diversified climate within a small geographical area. But we have not been able to do that.
But the government’s recent data has shown an increase in food grains production this year. How was that possible?
The government data is not reliable, be it for the domestic production or for the imports by informal channels. In fact, the Indian grain brokers operating at various places in India along the Nepali border are also buying rice, wheat and other grains from Nepal when their level of food stock declines. The government has no records of the transactions of these brokers.
As you are not in food grain production but in food grains trade, is not the production decline an opportunity for you as a businessman?
Not at all. For any trader, the good opportunity is only when the production increases. Larger the volume of trade, larger will be the size of profits. As you might have noticed the buyers visit those places where the concentration of sellers is large and those shops where the quantity stored is large. Because they think that in such places the prices are most likely to be lower than elsewhere. The same thing applies to food business as well.
Looking at the reports from the world over, the production of food grains has been increasing in every country. How do you comment on that?
The production might have increased in absolute terms, but it is far less when compared to the rate of increase in consumption worldwide. The agriculture in entire Europe has been badly affected by global warming while the consumption of food is increasing. Likewise, demand for food grains in India and China is increasing very fast due to their rapid economic growth. Recently, the Indian government banned the export of various food grains due to the high rise in domestic demand. Compare that with the fact that India was one of the major exporters of food grains not so long ago. If proper measures are not initiated to boost the production of food grain globally then the world has to suffer the scarcity of food in five to seven years. I am not only talking about food grains but each and every crop, vegetable and other agricultural products.
What has the Nepal government done to increase the production of food grains within the country?
Basically nothing. Plans and policies are there but they are only in the papers. Farmers’ problems are getting the least attention. The government should learn from the modern farming practices applied in its northern and southern neighbours. Their advanced technology has taken them far ahead. Why cannot we do that? We have a suitable climate for so many different crops. We have high lands, low hills and plains for farming varieties of crops, vegetables and fruits. So, we have high potentials. What we lack is the support from the government. For example, the practice of growing coconut was rare in Nepal 20 years back. I first introduced coconut farming in Janakpur 18 years ago. Now you can see that almost every homestead has coconut trees around it. Similarly, we used to import strawberry from Mumbai in the past but now we are producing quality strawberry here in Nepal. Wide opportunities are there. The government should grasp them.
What can the private sector do to increase food grain production in Nepal?
Not much in the present context. It is difficult for the private sector to hold even one square kilometres of land for farming in the country. Only the government can remove this hurdle. If the government comes with proper planning, private sector can do a lot. If the government initiates action towards this direction, the private sector can support the process.
Cardamom, banana and other products are being exported from Nepal. What do you say about it?
Cardamom and ginger have been the major export items of Nepal for years. But the government has not facilitated these exports properly. For instance, we are growing and exporting big cardamoms while there is a growing demand for small cardamom which is more expensive. We should, therefore, begin to grow small cardamom as well. But we are not able to do that. Likewise, farmers here are growing Sona Mansuli rice. With the proper management and guidance from the government they can easily grow Basmati rice which can fetch more than double the price of Sona Mansuli. But the government has not thought about this for various reasons including the political instability. However, we are hopeful that the political impasse would be over soon and the government would take proper action to uplift this sector.
What is your personal vision for the development of Nepali food sector?
We can do exceptionally well in the fruit farming in Nepal. We can farm fruits like orange, lemon, apple and strawberry in the cold hilly regions and mango, litchi, guava in the plains. If we grow fruit in a massive scale with proper management, it has the prospect of becoming famous worldwide. Currently, a small quantity of fruits is being exported to India and the third countries with proper packing and they are rapidly gaining recognition in the international market. Take an example of Yarsha Gumba. If its harvesting is properly managed by the government then the farmers can highly benefit from it and the government also would collect higher revenue. Proper management from the government is needed also to save the lives of the Yarsha Gumba collectors. Every year many people die while collecting Yarsha Gumba. If the fruit farming is managed properly then it would be of permanent nature. It would not be a temporary farming like that of rice or wheat.
Can you tell about specific problem the sector is facing?
We are not able to produce quality rice as we have the old fashioned rice mills in most parts of the country. At present automatic and modern rice mills are the norms everywhere including in the bordering area of India. These mills enhance the quality of rice. In India, the government pays special attention to the farmers’ problems. It provides appropriate financial support to the farmers and sends technologists to the fields to demonstrate the use of modern technology for improvement in the quality as well as quantity. We don’t have that system. In Nepal, there are lots of opportunities. We can produce world class apple juice and other fruit products, but sadly we are failing to do that.
We have domestic production of mustard oil. Still we are also importing the same. What is your view about this?
The reason is the same the old fashioned mills. In India they use highly advanced mills for the production of oil. The government provides the farmers with those modern equipments in loan. In Nepal, some 200 thousand tons of mustard oil is produced annually. We can increase it up to one million tons if the government provides the required support.
There are various institutions functioning under the Ministry of Agriculture. What prevents them from playing an effective role?
Ministry officials, whether they are engineers or other experts, do only the paperwork. They do not visit the field to know the reality or to demonstrate modern techniques to the farmers. So the Nepali farmers are unable to benefit from innovations. The officials also need to monitor the development of new technologies anywhere in the world and communicate that to the farmers. That too is missing here.
Based on your experience, how do you visualise the future of branded food business in Nepal?
The future prospect of branded food in Nepal is very bright. As we all know that most of the Nepali people in the past used to grow rice, store it in and consume it later themselves. But the trend has now changed; they buy the packed rice from the market as per their choice and need. This itself shows that packed food in the country has a bright future provided the political situation comes on the right track and the government supports the agriculture sector. The packed food industry can grow very fast. The people are getting brand conscious day by day. Therefore, the branded food business is in the rising trend.
What are the possibilities of the export of branded and non branded foods from Nepal?
The possibilities are very high. We have been exporting flour on a trial basis and it is encouraging. The main thing is that the country should attain normalcy first. Every thing would be alright in the normal situation.
We have seen that a lot of food grain traders have now left the field and diversified in other sectors. But KL Dugar Group is still in it. What is the secret behind it?
Food grains business has lots of difficulties. One should always be looking to invest in the new technology as it is ever changing. Adoption of new technology is the key for survival in food business. Due to the competition in the field we have spent a lot on marketing and modern machine to produce higher quality food products. Other players lacked on those counts and could not survive in this business. Moreover, the prices of the food grains fluctuate in the international market. Therefore a lot of patience is required in food grains business. We have maintained the patience while others found it difficult. Our sole motto is to provide higher quality food products to the Nepali population. Still, we are involved not only in food grains. We have also diversified in other sectors like construction, hydropower and banking. We have constructed various types of houses and flats through our new company, KJ Property Builders. Similarly we are planning to set up State Bank of Nepal with the paid up capital of Rs. 2 billion. But we have not reduced our original business of food. Instead we are ever expanding it.
