International Centre for Integrated Mountain Development

Kathmandu, Nepal

Improving Upstream VC Coordination – Case of Bay Leaves from Nepal

Dyutiman Choudhary, HVP & VC, ICIMOD

Conceptual Framework

• Linking small producers to markets.

• Terms of engagement in value chains

• Integrating horizontal (poverty, environment and gender) and vertical elements in VC.

• Action Research – upgrading, action points and risks/rewards

The context

• High Value Product - export and market demand.

• Used as spice and traditional medicines.

• A major source of income for poor indigenous people.

• ICIMOD-FECOFUN action research initiative under a global programme.

Approach – Action Research

ACTION PLANNING

Considering alternative courses

of action

TAKING ACTION

Selecting a course of action

EVALUATING

Studying the consequences of an

action

SPECIFYING LEARNING

Indentifying general findings

DIAGNOSING

Indentfying or defining a problem

Interventions

• Baseline information collection

• Participatory Value Chain Mapping and Analysis

• Developing upgrading strategies

• Action planning and implementation

• Participatory Monitoring

Road head Traders /District level traders East (Udayapur, Terathum, Dhankuta, Morang), Central Makwanpur, Sindhuli, Rasua) West (Palpa, Salyan,Jajarkot, Pyuthan Kailali) NRS 10-12/KG

Wholesale Traders East (Dharan, Gaighat, Lahan, Saptari-Kanchanpur, Kakarbhitta) Central (Gaur, Hetauda, Butwal, Ghorai, Tulsipur) West (Nepalganj, Attaria ( 2500 tons) NRS 20-24/KG

Herbal Tea & Spices, TM in Kathmandu & local markets(200 tons)NRS 25-28/KG

Indian Traders Siliguri, Kolkata, Tanakpur Lucknow, Kanpur, Delhi(IRS 20-22/kg) 2150 T

Local Fairs (Dhanusha & Gaur) 140-150 tonsNRS 38-40/KG

Cultivators/Collectors/CFUGs (NRS 4-7)

Product manufacturers in Kathmandu (HPPCL) and private companies) NRS 4000/kg

Ingredient in Sancho (A pain balm) and other products

Spices/Medicinal Plants based Industries in India

Export Market

District Level Processors – Udayapur 250 T

Existing Bay Leaf Market Channel in Nepal

Retailers & wholesalers (Nepal)

Distributors in North India

Domestic Market

Bay Leaf value chain (Routa, VDC) (Udayapur, Nepal)

Local/District Trade

PermitBuyGradeStorePackTransportSell

ProductionCollection

CultivateHarvestDryBundle TransportSell

Wholesale& Export

PermitBuyStoreQuarantineTransport

Import

QuarantineBuying Value Addition

Con-Sumption India

SpicesLeavesRe export

Basic functions in the VC

NurseriesFarmers/collectors

Exporters Indian Buyers

SpecificInputs

Seedlings

Local & Wholesale traders

IndustriesConsumers

Actors in Bay Leaf value chain

NRS 40NRS 20-24NRS 10-12

1300 5 5-7

400 T

NRS 4-7

10-12

Major Issues

• Lack of capacities & information• Lack of transparency and “arms

length” market relationships. • Unorganised production and

lack of business platform• Minimal value addition and low

prices• Destructive harvesting

• Lack of supporting policies

Upgrading Strategies

• Horizontal Coordination

• Vertical Contractualisation

• Process, Product and Volume upgrading

Coordination through Institutions

• Producers groups.• Registration of apex body –

cooperative.• Appropriate representation of

women.• Mobilizing funds – shares. • Quality Standards – market

demand.• Local certification• Diversifying market access

Strengthening Institutions

• Training and capacity building

• Exposure trips to markets• Establishing procedures

for improving efficiency• Arrangements for

sustainability• Empowerment – improved

bargaining capacity; negotiations skills

Vertical Contractualisation

• Contract with buyers – ‘getting a better deal’

• Interlocking contracts• Learning from buyers• Increased prices – from

Rs 7/kg to Rs 16/kg in 2008

• Further increased to Rs. 20/kg in 2009

Learnings

• Value chain interventions can lift economic status of producers

• Impact positively in gender relations and environment sustainability

• Value chain approach in HVP has potential for poverty reduction.

Thank you