KATHMANDU: The Ministry of Agriculture and Livestock Development has set up a high level committee to dig through nearly Rs 197.73 billion in subsidies handed out since fiscal year 2015/16, after years of audit warnings that the money has not lifted farm output.

The five member panel, led by joint secretary Badri Prasad Dahal, has six months to trace duplicate payouts, identify the people who actually received the funds, and judge whether the spending worked.

The push follows a pointed challenge in parliament from the opposition lawmakers including Rastriya Prajatantra Party lawmaker Khushbu Oli, who told the House that subsidy money has been going into pockets rather than fields, and it revives a pattern of earlier probes whose findings were never acted on.

How much has Nepal spent on agricultural subsidies over the past decade, according to the Auditor General’s records?

The Office of the Auditor General’s compiled annual reports put total agricultural subsidy disbursement at approximately Rs 197.13 billion across ten fiscal years, running from 2015/16 through 2024/25.

This figure represents direct subsidy outflow recorded in the office’s annual audit reports and does not necessarily capture every ancillary cost, such as administrative overhead, transport subsidies tied to fertilizer movement, or losses absorbed informally at the local level.

Year-on-year, the figure climbed unevenly, starting near Rs 10 billion in the earliest year tracked and ending above Rs 32 billion in the most recent year for which full figures exist.

Office of the Auditor General

The scale of spending alone places agriculture among the largest subsidy categories in Nepal’s federal budget, alongside fuel and social security transfers, and successive auditor general reports have used this cumulative total to argue that subsidy spending has grown faster than measurable gains in farm productivity or food self-sufficiency.

How was this Rs 197 billion broken down between fertilizer and other subsidy categories?

Of the total amount, close to Rs 150 billion, or roughly three-quarters of all agricultural subsidy spending over the decade, was directed toward chemical fertilizer purchase and distribution programs run jointly by the Agricultural Inputs Company and the Salt Trading Corporation.

The remaining amount, approximately Rs 48 billion, went to individual farmers and business-registered farms through interest subsidies on agricultural loans, equipment grants, irrigation support, and various provincial and local-level grant schemes.

In the most recent fiscal year alone, auditors found that more than 83 percent of one year’s agricultural ministry disbursement went purely to fertilizer procurement, leaving a comparatively small share for diversification programs such as horticulture, livestock, or agro-processing support.

This heavy tilt toward fertilizer has drawn criticism because fertilizer subsidies are price-support mechanisms tied to import volumes rather than productivity outcomes, meaning the money is spent regardless of whether yields actually rise.

Which fiscal years saw the steepest jumps in subsidy spending?

According to the Auditor General’s year-wise figures, spending rose from about Rs 10.04 billion in fiscal year 2015/16 to Rs 10.78 billion the following year, then dipped slightly to Rs 8.77 billion before climbing again.

The sharpest jump came between fiscal years 2018/19 and 2022/23, when annual subsidy outlay rose from roughly Rs 12.29 billion to Rs 36.04 billion, more than tripling within four years. This period coincided with global fertilizer price spikes following supply disruptions linked to the COVID-19 pandemic and the Russia-Ukraine war, which pushed import costs higher and forced the government to expand subsidy allocations just to maintain existing fertilizer volumes.

Spending eased slightly to Rs 29.34 billion in 2023/24 before rising again to about Rs 32.13 billion in 2024/25, the latest year for which detailed figures are available, suggesting the elevated spending plateau has persisted rather than reverting to pre-pandemic levels.

What does the Auditor General mean when it calls the subsidy system “unproductive and disorganized”?

The characterization stems from repeated audit findings that subsidy money has not translated into proportionate gains in agricultural output or productivity, despite spending roughly doubling within six years.

Auditors point to several structural weaknesses: the absence of a unified, cross-verified farmer registry that spans federal, provincial and local governments; weak monitoring of whether subsidized inputs or cash actually reach intended beneficiaries; and a near-total lack of follow-up evaluation on whether funded programs continued operating after disbursement.

In one cited case, agencies in Sudurpaschim Province distributed over Rs 380 million in subsidies without any subsequent check on whether the funded projects generated the promised employment or production increases.

Because each level of government runs its own subsidy programs independently, with no shared database, the same individual or organization can potentially draw benefits from multiple agencies for the same activity, a risk auditors explicitly flagged as the system’s most basic design failure.

Is there evidence that subsidy money has been claimed twice by the same recipients?

The Auditor General’s reports do not provide a single nationwide count of confirmed double-claims, but they consistently warn that the risk is structurally built into how subsidies are administered.

Because federal, provincial and local governments each run independent agricultural subsidy programs without sharing a common farmer database, the same person, cooperative, or business entity can apply to more than one tier of government for grants covering similar or identical activities, such as irrigation equipment or livestock purchase, without any cross-check flagging the overlap.

Provincial-level rules in some regions, such as Sudurpaschim, explicitly limit a beneficiary to one subsidy program per fiscal year, but auditors found no monitoring mechanism enforcing even that single-province rule consistently.

The absence of a unified registry means duplicate or near-duplicate disbursement is plausible at scale, even though documenting every individual instance would require matching records across dozens of separate district and provincial offices that currently operate in isolation from one another.

Have wealthy businesses or large agro-industrial firms benefited from subsidies meant for small farmers?

Yes. Investigative reporting and earlier audit findings have documented cases where interest subsidies on concessional agricultural loans, a scheme originally designed to help returnee migrants and small entrepreneurs without collateral access bank credit, were instead claimed by large, already-established agribusiness houses.

Big dairy processors and a major tea-estate operating company were among entities found to have received hundreds of thousands of rupees in interest subsidy payments tied to loans that were not capped tightly enough to exclude large borrowers.

A former finance ministry official involved in designing the scheme has acknowledged that lawmakers never envisioned large industrial operators as beneficiaries when the concessional lending facility was created.

Because the loan ceiling for subsidized interest rates was set high enough to cover substantial agribusiness borrowing, and because banks process the subsidy claims without strict verification of the borrower’s existing wealth or company size, the structure effectively allowed established business groups to access the same subsidized credit intended for first-time, capital-constrained farmers.

What did the internal government investigation into commission-taking by field staff find?

A ministry-appointed review team, formed in mid-2018 to examine reported irregularities in farm subsidy distribution, found that roughly 35 percent of subsidy money meant for farmers in certain programs was being withheld as informal commission by local agricultural staff before reaching beneficiaries.

In one documented case from Bardiya district, a farmer group had been approved for a cash subsidy of about Rs 65,000 for cooperative farming and small irrigation work, but bank and office records showed the group actually received only around Rs 42,000, with the remaining Rs 23,000, exactly the commission rate the team later calculated nationally, unaccounted for.

The review concluded this was not an isolated incident but a recurring pattern across multiple district offices, where officials responsible for verifying and releasing subsidy payments extracted a cut before farmers ever saw the funds, effectively reducing the real value of subsidies far below their budgeted amount.

Has subsidy spending actually improved Nepal’s food self-sufficiency or reduced agricultural imports?

The data suggests otherwise. Despite a six-year period in which cumulative agricultural subsidy spending roughly doubled, Nepal’s import bill for agricultural and food products kept climbing rather than shrinking. In the year immediately following that period, the country imported close to Rs 198 billion worth of agricultural and food-related goods, a figure comparable to the entire decade’s subsidy spending being tracked in this report.

Within just four months of a subsequent fiscal year, agricultural imports already exceeded Rs 68 billion. Food grain production has also shown volatility tied largely to monsoon patterns rather than subsidy levels, with at least one year recording a production decline even after a substantial subsidy increase.

Farmers working meticulously across a patchwork of vibrant vegetable plots in Chitwan. File photo

This disconnect between rising subsidy outlay and rising import dependence is central to the Auditor General’s repeated conclusion that the spending has not delivered proportionate productivity gains, reinforcing concerns that subsidies are functioning as a recurring fiscal transfer rather than a genuine productivity investment.

Why does fertilizer continue to dominate the subsidy budget instead of more diversified support?

Fertilizer subsidies are politically and administratively simpler to execute than productivity-linked programs because they involve a small number of bulk procurement contracts handled by two state-linked trading entities, rather than thousands of small, individually verified grants.

Successive agriculture ministers have also cited domestic political pressure, since farmers experience fertilizer shortages directly and visibly during planting seasons, making fertilizer subsidies a highly visible and electorally sensitive commitment that governments are reluctant to scale back even when budgets tighten.

Procurement delays caused by public procurement law requirements have further entrenched the reliance on subsidy-linked bulk import deals, since ministries argue that without subsidized pricing, farmers would face international market rates that spiked sharply after global supply shocks.

The result is a budget structure where fertilizer subsidy alone consumed more than 83 percent of one recent year’s entire agricultural subsidy allocation, leaving comparatively little room for newer, output-linked programs such as agro-processing grants, mechanization support, or climate-resilient seed development that auditors and economists argue would more directly raise productivity.

What changes has the agriculture ministry proposed in response to the audit criticism?

Ministry officials have indicated they are developing a new farmer registration and classification system intended to create the unified record auditors say is currently missing, which would allow subsidy applications to be checked against a single database rather than fragmented local registers.

This system is meant to distinguish between genuine smallholder cultivators and larger commercial operators so that future subsidy rules can apply different eligibility thresholds rather than a uniform policy that currently allows large businesses to qualify for the same concessional schemes as subsistence farmers.

Separately, recent federal budget announcements have signaled a shift toward private-sector partnership models, including incentives for private fertilizer production through arrangements with the national electricity utility to support so-called green urea manufacturing, which would reduce reliance on imported fertilizer over time.

However, none of these proposed reforms have yet been implemented at the scale needed to address the structural monitoring gaps the Auditor General has flagged across more than one consecutive annual report, and ministry officials themselves describe the registry work as still in a preparatory data-collection phase.

How has the fertilizer subsidy budget evolved most recently, and is it considered adequate?

For the upcoming fiscal year, the government has allocated about Rs 32.46 billion specifically for chemical fertilizer purchase, even as the overall agriculture and livestock sector budget was reduced to roughly Rs 46.92 billion from approximately Rs 57.48 billion the previous year, an overall cut of around Rs 11 billion.

Despite this overall reduction, the agriculture minister has separately stated that the fertilizer subsidy budget remains insufficient to meet actual import and distribution costs, telling a parliamentary committee that supply bottlenecks persist not because fertilizer cannot be sourced internationally but because allocated funds run out before adequate volumes can be procured and transported to depots in time for planting seasons.

This recurring funding shortfall has been cited as a major reason farmers in various regions report fertilizer arriving late or in quantities far below demand, even in years when the nominal subsidy allocation appears larger than previous years on paper.

Does Nepal’s federal structure make agricultural subsidy oversight more difficult?

Yes, and auditors have identified this directly as a contributing factor. Since the implementation of federalism, all three tiers of government, federal, provincial, and local, now run their own agricultural subsidy programs simultaneously, often covering overlapping categories such as seed support, irrigation equipment, or livestock grants.

Because no single tier currently maintains records that are shared with or cross-checked against the others, a recipient in one municipality could theoretically receive a subsidy for the same stated purpose from their local government, their province, and a federal program in the same fiscal year without any of the three offices being aware of the others’ disbursement.

This fragmentation also makes it harder for journalists, auditors, or oversight committees to compile a true national picture of subsidy spending, since data must be manually gathered from hundreds of separate provincial and local offices that follow inconsistent reporting formats, a problem the Auditor General has cited as a basic precondition that must be fixed before any meaningful evaluation of subsidy effectiveness can occur.

What has happened to plans for a domestic fertilizer factory that would reduce dependence on imports and subsidies?

Plans for a domestic urea fertilizer plant have been discussed by Nepal’s investment promotion authorities for roughly two decades, beginning with budget allocations for a factory initiative first proposed in the early 2010s, yet no plant has been built.

A feasibility study conducted by the national investment board years ago estimated that establishing a domestic urea industry would cost approximately Rs 70 billion, primarily because Nepal lacks the natural gas reserves typically used as feedstock for urea production and would need to rely on an energy-intensive alternative production process.

The most significant obstacle identified across multiple study rounds has been the energy supply requirement, since fertilizer manufacturing demands a large, consistent and affordable electricity or gas source that Nepal has historically struggled to guarantee, alongside the need to import raw materials from India or other markets regardless of where the finished fertilizer is manufactured.

Recent budget documents reference a renewed effort involving the national electricity utility and private investors to develop a “green urea” production model using domestic hydropower, though this remains at an early planning stage rather than active construction.

Who ultimately bears the cost when subsidy money is misallocated or captured by non-target groups?

The direct fiscal cost falls on Nepal’s general taxpayers and the national treasury, since agricultural subsidies are funded through the regular federal budget rather than a ring-fenced agricultural development fund, meaning misallocated subsidy spending reduces the resources theoretically available for other public priorities such as health, education or infrastructure.

The indirect cost falls on smallholder farmers themselves, who are the policy’s stated intended beneficiaries but who auditors and independent investigations suggest often receive a diminished or delayed share of subsidy value, whether through field-level commission-taking, late fertilizer delivery caused by budget shortfalls, or competition for the same subsidy pool from better-connected commercial applicants.

Over time, this combination erodes public trust in subsidy programs generally, since farmers experiencing repeated shortages or delays become skeptical that announced subsidy increases will translate into tangible support, even as published budget figures show subsidy totals rising year after year, creating a persistent gap between the government’s stated commitment to agriculture and farmers’ lived experience of the support.

What would meaningful reform of Nepal’s agricultural subsidy system require, according to auditors and analysts?

Based on the recurring recommendations across multiple Auditor General reports, meaningful reform would require at minimum a single, verified national farmer database accessible to and updated by all three tiers of government, replacing the current fragmented record-keeping that makes duplicate claims and untracked spending possible.

It would also require shifting at least part of the subsidy structure away from blanket fertilizer price support toward programs more directly tied to measurable productivity or income outcomes, alongside mandatory post-disbursement monitoring so that ministries can determine whether funded projects, equipment, or livestock purchases actually remained in operation rather than simply confirming that money left government accounts.

Analysts have additionally called for hard eligibility caps that exclude large, already-capitalized businesses from schemes explicitly designed for smallholder and first-time farmers, closing the loophole that allowed established agribusiness and dairy companies to draw concessional interest subsidies alongside subsistence cultivators.

Without these structural changes, auditors warn that subsidy totals will likely keep climbing in nominal terms while productivity and self-sufficiency indicators continue moving in the opposite direction, repeating a decade-long pattern the data has already established.

What new investigation has the government launched into agricultural subsidy misuse, and what is it expected to examine?

In June 2026, the Ministry of Agriculture and Livestock Development formed a fresh five member committee to carry out a focused, line-by-line review of the entire Rs 197.73 billion disbursed since fiscal year 2015/16.

Unlike earlier audit cycles, which mainly compared budgeted amounts against spent amounts at an aggregate level, this committee has been instructed to examine misuse, duplicate benefit, the actual effectiveness of each program, and the real status of beneficiaries on the ground, meaning it is expected to physically verify whether named recipients exist, farm the land claimed, and still operate the equipment or livestock the subsidy paid for.

The committee must also revisit findings from past study and investigation reports that were never acted on, effectively auditing the government’s own track record of inaction alongside the original spending. It has been given six months to submit its findings, a deadline that, if met, would produce the most comprehensive single accounting of a decade of farm subsidy spending Nepal has seen.

Who is leading the new committee, and what specific powers or tasks has it been given?

The committee is convened by joint secretary Badri Prasad Dahal and includes senior agriculture extension officer Prakash Raj Bista from the Agriculture Information and Training Centre, ministry under secretary for accounts Tilak Prasad Chapagain, senior veterinarian Dr. Manoj Kumar Shahi, and section officer Prakash Dulal.

Beyond producing a narrative report, the panel has been tasked with identifying specific instances where subsidy payments were misused, flagging cases of double benefit across different programs or government tiers, and conducting what the ministry has described as a gap analysis of the existing disbursement system, essentially mapping where controls failed and why.

The committee is also expected to issue concrete policy recommendations for tightening subsidy management going forward, rather than simply cataloguing past problems, which sets it apart from several earlier review exercises that ended with a report and no follow-up action.

What prompted lawmakers to demand this latest round of scrutiny over farm subsidies?

The immediate trigger was a sharp intervention in parliament on June 12, 2026, when Rastriya Prajatantra Party lawmaker Khushbu Oli told the House of Representatives that agricultural subsidies needed to be investigated because the money was being misused under the cover of farmers’ names.

She argued that the state could always produce figures showing how much had been disbursed but never figures showing a matching rise in agricultural production, and said plainly that the subsidy was going into pockets rather than into fields.

Her remarks landed against a backdrop of mounting frustration that agricultural output has stayed largely flat even as subsidy allocations climbed, and they pushed the ministry to formalize a review that had, until then, mostly existed in the form of scattered audit findings rather than a dedicated investigative mandate.

What did the audit of the Improved Seed for Farmers Program reveal about how project funds were actually spent?

An audit of the Rs 3.28 billion Improved Seed for Farmers Program, a six-district initiative in western Nepal backed by the International Fund for Agricultural Development and other partners, found that a large share of the money went toward items with little direct connection to seed improvement or farm productivity.

Records showed purchases of 178 motorcycles, 20 four-wheelers, more than 200 laptops and tablets, 49 desktop computers, and dozens of photocopiers, printers and cameras, together worth more than Rs 322.1 million, alongside Rs 203 million spent on consulting services and Rs 505.3 million on training seminars.

Researchers who reviewed the spending pattern described it as evidence that agriculture had effectively become a front for unrelated procurement and travel-heavy program administration rather than a vehicle for raising what farmers actually produce, a critique that mirrors the broader concern driving the new ministry-wide investigation.

What did Nepal Rastra Bank’s own research find about misuse of subsidized agricultural loans, and how did the government respond?

A study carried out by the central bank found that roughly 14 percent of concessional agricultural loans disbursed through banks and financial institutions were being misused, meaning the borrowed funds were diverted toward purposes other than the farming or livestock activity for which the subsidized interest rate had been approved.

The finding added central bank weight to years of anecdotal reporting about loan diversion and helped prompt the Ministry of Finance to discontinue the Interest Subsidy Loan program entirely, ending a scheme that had been one of the more frequently cited channels through which wealthier, better-connected applicants accessed subsidized credit meant for small and first-time farmers.

Nepal Rastra Bank office at Thapathali. Photo: Bikram Rai/Nepal News

The discontinuation marks one of the few instances in which documented misuse directly led to a program being shut down rather than merely flagged in a report.

What did an earlier agriculture ministry task force conclude about where farmer grant money actually went, and why did nothing change afterward?

A task force formed under the agriculture ministry roughly six years before the current investigation concluded bluntly that government farmer grants had, in its own words, poured money down the drain, finding that benefits went almost exclusively to applicants in collusion with the officials responsible for approving and releasing the funds rather than to the farmers and agro-businesses the schemes were designed to help.

The same report found that grant money was frequently used to purchase vehicles and other goods unrelated to agricultural production rather than contributing to farm output.

Despite the severity of these findings, no individual or office was held accountable, and farmer advocates have since described the gap between repeated official acknowledgment of misuse and the complete absence of consequences as an open secret that nobody in government has been willing to take responsibility for, a pattern the new committee will need to break if its findings are to have any lasting effect.

Why have previous investigation and audit reports on subsidy misuse failed to produce accountability or lasting reform?

Nepal’s pattern across at least three separate review exercises, the 2018 commission-taking study, the later task force on farmer grants, and successive Auditor General reports, has been that investigators identify specific, often quantified problems, such as a 35 percent informal commission rate or misuse rates in double digits among loan recipients, without any subsequent mechanism translating those findings into prosecutions, recovery of misused funds, or structural fixes to the underlying approval process.

A former agriculture minister publicly promised to release the names of those responsible for subsidy misuse after taking office, yet the committee formed during that tenure produced a detailed breakdown of more than Rs 107 billion in spending without any individual facing consequences.

This recurring sequence, a credible study followed by public acknowledgment followed by no enforcement, is precisely what lawmakers and analysts say the newly formed committee must avoid repeating if the government’s stated six month review is to mean anything beyond producing yet another report that sits unimplemented.