NATIONAL REPORT

                                   ON


                      UNITED NATIONS CONFERENCE ON


                       ENVIRONMENT AND DEVELOPMENT


                                 (UNCED)


                             COUNTRY : NEPAL




                              TEAM MEMBERS


    This report was prepared by New ERA consultants.  The members of
    the National Review Committee contributed to improve the quality
    of the report.

TABLE OF CONTENTS

ABBREVIATIONS AND ACRONYMS

Part A

A. EXECUTIVE SUMMARY

Part B

B. DEVELOPMENT TREND AND ENVIRONMENT

B-I RESOURCE ENDOWMENT

              1.  Introduction
              2.  Land use 
              3.  Forests and Bio-diversity 
              4.  Water Resources 
              5.  Minerals  
	

B-II SUMMARY OF SECTORAL ANALYSIS

 
              1. Agriculture, Livestock and Fishery 
              2. Forestry 
              3. Social Services 
              4. Urban Sectors 
              5. Industry and Tourism 
              6. Water Resources 
	

B-III DEVELOPMENT TREND

 
              1. Economic Growth 
              2. Finance 
              3  Trade 
              4. Demographic Trend 
              5. Income Distribution  
	

B-IV ENVIRONMENTAL ISSUES

 
              1. Introduction 
              2. Land Degradation 
              3. Deforestation 
              4. Pollution 
              5. Hazardous Waste 
              6. Public Health 
	
	

Part C

C. RESPONSE TO ENVIRONMENT/DEVELOPMENT ISSUES

C-I POLICIES AND STRATEGIES
 
              1. Policy Goals 
              2. Strategies 
	

C-II LEGISLATION

 
              1. Introduction 
              2. Existing Laws 
              3. Treaties and Conventions 
 
	

C-III INSTITUTIONS

 
              1. Governmental Organizations 
              2. Non-Governmental Organizations 
	

C-IV PROGRAMMES AND PROJECTS

 
              1. Sectoral Activities 
              2. Biotechnology 
              3. Information and Training 
              4. Environmental Planning and Environmental Impact 
                 Assessment 
	

C-V INTERNATIONAL COOPERATION

 
              1. Major Economic Institutions 
              2. Multinational Corporations 
              3. United Nations and Specialized Agencies 
              4. Financial Assistance 
              5. Regional Co-operation 
	

C-VI STRATEGY FOR THE FUTURE

 
              1. Introduction 
              2. Population Control 
              3. Land Use Management 
              4. Bio-diversity Conservation 
              5. Energy Development 
              6. Pollution Control 
              7. Enabling Mechanisms 
	

Part D

D. EXPECTATIONS FROM THE CONFERENCE

ANNEXURES

 
         A.   Evolution of Environment-Related Policies, Laws and 
              Institutions 
 
         B.   Nepal: Environment Related Legislation 
 
         C.   Agencies with Environmental Responsibilities 
 
         D.   Nepal: Chronology of Some Environmental Institutional 
              Development 
	

--------------------------------------------------------------------- ABBREVIATIONS AND ACRONYMS

 
 
    ACAP      :Annapurna Conservation Area Project 
    ADB       :Asian Development Bank 
    ADNN      :Agriculture Development Bank of Nepal 
    ANM       :Auxiliary Nurse Midwife 
    ARTEP     :Asian Regional Team for Employment Promotion 
    BNF       :Biological Nitrogen Fixation 
    BNP       :Basic Need Programme 
    CEDA      :Centre for Economic Development and Administration 
    CCNCR     :Council for the Conservation of Natural and Cultural 
               Resources 
    CITIS     :Convention on International Trade on Endangered Species 
    EIA       :Environmental Impact Assessment 
    ESP       :Electrostatic Precipitator 
    FPDB      :Forest Products Development Board 
    GDP       :Gross Domestic Product 
    GIS       :Geographical Information System 
    HMG/N     :His Majesty's Government of Nepal 
    ICIMOD    :International Centre for Integrated Mountain 
               Development 
    IDA       :International Development Agency 
    INSAN     :Institute of Sustainable Agriculture, Nepal 
    KMTNC     :King Mahendra Trust for Nature Conservation 
    MPFS      :Master Plan for the Forestry Sector 
    NARSC     :National Agricultural Research and Service Centre 
    NCCNR     :National Commission for Conservation for Natural 
               Resources 
    NCS       :National Conservation Strategy 
    NECG      :Nepal Environment Conservation Group 
    NEFES     :Nepal Forum of Environmental Journalists 
    NPC       :National Planning Commission 
    NTV       :Nepal Television 
    OGL       :Open General License 
    PCRW      :Production Credit for Rural Women 
    PWA       :Protected Watershed Area 
    RLABB     :Research Laboratory for Agricultural Biotechnology and  
               Biochemistry 
    RONAST    :Royal Nepal Academy of Science and Technology 
    SAARC     :South Asian Association for Regional Cooperation 
    SAF       :Structural Adjustment Facility 
    SAL       :Structural Adjustment Loan 
    SAP       :Structural Adjustment Programme 
    SWMRMC    :Solid Waste Management and Resource Mobilization Centre 
    TCN       :Timber Corporation of Nepal 
    TDC       :Town Development Committee 
    TDN       :Total Digestibe Nutrients 
    UDS       :Ulcerative Disease Syndrome 
    UNCSTD    :United Nations Centre for Science and Technology for 
               Development 
    UNEP      :United Nations Environment Programme 
    UNIDO     :United Nations Industrial Development Organisation 
    VDC       :Village Development Committee 
    WDR       :Western Development Region 
 -----------------------------------------------------------------

Part A

EXECUTIVE SUMMARY
 
    Resource Endowment 
 
    Nepal, situated in the Central Himalayas, is a country having both 
    physiographic and climatic contrasts compared to its small area of 
    147,181 sq. km.  The country's economy depends largely on the use 
    of its natural resource base.  Among the least developed countries 
    of the world, Nepal's economic growth has been hampered by the 
    lack of economic opportunities and infrastructure.  The problems 
    have been further exacerbated by growing poverty and environmental 
    deterioration.  Environmental problems in the country emanate from 
    excessive dependence on the use of natural resources.  
 
    About two-thirds of the country is occupied by hills and mountains 
    with steep to very steep slopes.  Nepal's lowland Terai is formed 
    of rich alluvial sediments while the Siwaliks, which stands as a 
    transition between the Terai and the Mountains, is mostly 
    erodible.  The nutrient status of soils, as a result, differs from 
    place to place.  In Nepal, soil nutrients are also washed away by 
    erosion during the heavy rains.  Erosion has been made worse in 
    areas where agriculture is practised, specially on the steeper 
    slopes.  
 
    Though the country produces 85-90 percent of its foodgrain 
    requirement, the production of cereals per unit area has not 
    increased.  Since the mid-1970s, emphasis has been given to land 
    use based on regional and ecological potentialities such as 
    livestock, farming and horticulture in the Mountains, horticulture 
    in the Hills, and cereals and cash crops in the Terai.  
 
    Thirty-seven percent of the country's area is under forest cover 
    while that under agriculture is about 20 percent.  On an average, 
    the population is 5.7 per hectare of net cultivated land.  Eleven 
    percent of the forest land is in a degraded state while another 26 
    percent has less than 40 percent crown cover.  Forests in Nepal 
    are not well distributed compared to population density.  The 
    share of forests in the country's GDP is about 15 percent which 
    also remains the source of livelihood for a large section of the 
    population. 
 
    From 6.4 million ha in 1964, the total forest area is estimated to 
    have declined to 5.5 million ha by 1985.  About 0.2 million ha of 
    the Terai and Siwaliks forests were cleared through planned 
    settlement and illegal felling between the 1950s and 1985.  
    Nepal's total forest bio-mass is about 648 million tons. 
 
    Seventy-five percent of the country's energy requirement is met by 
    fuel wood.  Per capita fuel consumption in the Hills and Terai is 
    about 708 kg and 689 kg respectively.  The annual timber 
    production is estimated to reach 0.1 m3 per capita by the year 
    2000 AD.  Forty-two percent of the TDN (Total Digestible  
    Nutrients) required is supplied from the forest sector with heavy 
    pressure on the Hills. 
 
    The current tree plantation rate is unable to meet the 
    deforestation rate.  A 25-year Forestry Sector Master Plan being 
    implemented from 1988 emphasises on community and private forests, 
    national and leasehold forests, soil conservation and watershed 
    management, conservation of the ecosystem and genetic resources 
    and medicinal and aromatic plant development.  
 
    Over 5400 species of vascular plants including over 245 species of 
    endemic plants and 700 species of medicinal plants and 175 species 
    of mammals, 850 species of birds, 170 species of fishes, 600 
    species of butterflies, 50 species of moths and 180 species of 
    dragon flies have so far been identified in this country.  These 
    species are being protected and conserved through national parks, 
    wildlife reserves and conservation areas covering 12 percent of 
    the country's area.  Two of the national parks have also been 
    included in UNESCO's World Heritage Sites. 
 
    Nepal is drained by three major river systems namely the Kosi, 
    Gandaki and Karnali.  The combined flow of the rivers of the 
    country is about 200 billion cubic metres in a year.  The country 
    has a theoretical hydro power potential of 83,000 MW.  Out of 
    this,  only 42,130 MW (50.8%) could be harnessed economically.  
    However, the present installed capacity is only 238 MW.  
    Electricity is available to about 9 percent of the population.  
    Irrigation is provided to about 0.94 million ha, of which about 80 
    percent is in the Terai.  
 
    Both surface and ground water is used as drinking sources.  In 
    1990, about 7.2 million people representing 38 percent of the 
    population had access to piped water supply.  The plan is to 
    provide improved drinking water to all by the year 2000 AD.  Water 
    sports like white water rafting, canoeing and boating have been 
    gaining popularity in recent years.  
 
    Nepal has good deposits of cement grade limestone and sub-economic 
    mineral deposits of copper, iron, tin-tungsten, lead and zinc and 
    glass sand.  Some limestone deposits are exploited for cement 
    production.  Lead and zinc, magnesite and marble are also under 
    production.  The mining sector contributes about 2.3 percent to 
    the GDP.  However, the full potential of the mining sector remains 
    to be explored. 
 
    Economic Development 
 
    No significant economic growth has been achieved despite the 
    implementation of a series of development plans since 1956.  
    Rising population pressure on the land and a sectoral development 
    approach have led to the deterioration of the environment.  The 
    per capita income estimated in 1988 was US $ 180 per annum, which 
    declined to US $ 113 at the prevailing exchange rate in mid-1991.  
    The overall GDP grew at about 3 percent per annum during the  
    period 1964/65 - 1989/90, while per capita income during the same 
    period showed an annual growth rate of about 0.8 percent.  The 
    economic condition has, therefore, not improved because of the gap 
    between investment and savings and marginal returns despite heavy 
    investment. 
 
    There has been no change in the pattern of consumption over the 
    last 16 years.  The major part of income in Nepal is spent on food 
    and other essential goods.  However,there is a rising trend in 
    public consumption, from 8 percent in 1974/75 to 11.7 percent in 
    1989/90.   Hence, Nepal has yet to create a foundation for 
    sustained economic growth and development.  
 
    Between 1974/75 and 1989/90, regular and development expenditure 
    budget grew by 12.2 times and 12.9 times respectively.  The rapid 
    increase in regular and development expenditures, discrepancies 
    between investment and savings, trade and balance of payment and 
    revenue and expenditure have created many distortions in the 
    economy. 
 
    More than 50 percent of the total revenue collection is from 
    imports.  About 10 percent of the GDP is from import- based 
    revenue.  About one-fifth of the total revenue is derived from 
    non-tax sources such as license fees, import licenses and 
    auctions.  Out of the government expenditure, 65 percent was spent 
    on consumption goods in 1988/89.  A major percentage of regular 
    expenditure presently goes for payment of salaries and allowances, 
    subsidies to public enterprises and in debt servicing.  In the 
    fiscal year 1989/90, debt servicing accounted for 34.2 percent of 
    the regular expenditure budget showing an increase of 25.4 percent 
    over 1974/75.  The total outstanding foreign debt reached US $ 
    1186.3 million at the end of the first nine months of 1989/90, 
    accounting for 39.7 percent of GDP.  
 
    Foreign aid increased to 40.8 percent and 59.6 percent of total 
    and development expenditures respectively in 1988/89 as compared 
    to 25.5 percent and 40 percent in 1974/75.  The level of foreign 
    aid commitment increased 36.1 times in rupee terms, during 1974/75 
    and 1989/90.  Increasing dependence on external assistance along 
    with an increasing proportion of loans has increased the burden of 
    debt servicing.  
 
    Nepal's trade deficit has been growing.  In the last 16 years, 
    exports have increased annually at the rate of 12.5 percent 
    against a growth rate of 18 percent in imports.  The trade deficit 
    with India has been increasing at the rate of 11.1 percent during 
    the last 15 years.  The major exports of Nepal are woollen carpets 
    and ready-made garments.  Export of finished products increased 
    from 8.7 percent to 63.1 percent during 1974/75 to 1987/88.  The 
    balance of payments situation continues to remain favourable, 
    despite an increase in the trade deficit by 17.4 percent per annum 
    during 1982/83- 1987/88.  This has been possible due to the large 
    inflow of foreign assistance.  Trade reforms have been implemented 
    under the SAP using measures like the licensing system,  
    OGL/passbook system, auctioning of import licenses for commercial 
    items, and cash incentives for the export of certain items to 
    third countries.  
 
    At present, Nepal has 86 industrial establishments in the 
    manufacturing sector under foreign collaboration.  Only 52 of 
    these have started production while the rest are at different 
    stages of establishment.  Public enterprises, established under 
    grant assistance, on an average, invested US $ 3 million in 
    foreign capital, 15 times more than the average foreign investment 
    in the private sector.  In spite of incentives and concessions 
    granted to foreign investors, involvement of international 
    corporations in Nepal's industrial sector is low. 
 
    In 1989/90, about 62.4 percent of the total foreign assistance 
    comprised of loans while the remaining 37.6 percent was received 
    as grants.  There were 158 projects financed by 17 donor countries 
    for which 76.3 percent of the total financial assistance was in 
    the form of grants. The share received by the agricultural, 
    irrigation and forestry sectors indicates the increasing 
    importance attached to the natural resource sectors.  
 
    Nepal has been receiving aid from UN agencies since the 1950s.  
    Their role in the country's development has been significant and 
    meaningful.  Aid from UNDP has been increasing since 1972.  The 
    quantum of UN aid increased to US $ 26.3 million by 1985 against 
    US $ 3.1 million between 1953 to 1961. Agriculture and natural 
    resources development received the largest share of UNDP aid (23% 
    of the total) during 1972-85.  Eight major sectors for support and 
    development had been identified in the aid package.  About 113 
    projects were identified for implementation with UNDP funding of 
    about US $ 92 million within the period of 1986-91.  There has, 
    however, been a shortfall in UNDP aid of about US $ 50 million 
    which has necessitated across the board cuts on projects in the 
    identified sectors.  
 
    Multilateral loans to Nepal from IDA of the World Bank account for 
    about 45 percent of the country's external debt.  The largest 
    share of IDA loans (48.3%) during 1969 to 1986 had been allocated 
    to infrastructure projects, followed by agricultural and rural 
    development (41 %).  In the mid-1970s, the World Bank shifted its 
    loan priority from infrastructure to the agricultural sector.  The 
    Asian Development Bank, which has a different priority for loans, 
    provided Nepal with about 36 percent of the total loan between 
    1979/82.  The sectoral distribution of ADB loans between 1969 and 
    1982 shows that agriculture, industry and transport are the 
    primary sectors accounting for about 66 percent of the total loan.  
    The ADB has also provided industrial loans to the private sector.  
 
    Nepal's current population, estimated to be 18.5 million, is 
    expected to reach 24 million by 2000 AD.  Though the death rate 
    continues to decline, the crude birth rate and the infant 
    mortality rates are still very high, in spite of various 
    population control measures.  Nepal has also experienced a high  
    rate of Hill-Terai migration since the 1950s, due to declining 
    productivity in the Hills and better economic opportunities in the 
    Terai.  Urban growth rate is currently 7.6 percent of which 40 
    percent is through migration. 
 
    Literacy rate reached 38.9 percent in 1990 and about 87 percent of 
    children in the 6-10 year old age group have received primary 
    education.  Urban literacy is nearly double that of the rural 
    population.  About 39 percent of the male and 12 percent of the 
    female population had become literate by 1990.  The aim is to 
    provide primary education to all children in the 6-10 year old age 
    group by the year 2000 AD. 
 
    Over 90 percent of Nepal's total population depend on agriculture 
    for their livelihood.  Agriculture and related activities account 
    for 82.2 percent of the rural and 34.4 percent of the urban 
    employment.  The agricultural sector has been forced to absorb the 
    growing labour force every year.  This phenomenon has created 
    pressure on the natural resource base and has resulted in further 
    fragmentation of agricultural land.  Grain production increased by 
    only 1.3 percent during 1975/76 and 1985/86, productivity fell by 
    0.5 percent while the population increased by 2.6 percent.  Of the 
    total population, 42.5 percent is estimated to be below the 
    poverty line in terms of minimum calorific requirement.  About 97 
    percent of the absolute poor live in rural areas.  
 
    Environmental Issues 
 
    The major environmental problems in Nepal are caused by land 
    degradation, deforestation and pollution.  Poverty is the root 
    cause of environmental degradation.  Land and forest resources are 
    over-exploited because of heavy dependence in the natural resource 
    base while water and mineral resources are under-utilized owing to 
    lack of financial resources and infrastructure.  Soil erosion, 
    fertility decline, sedimentation and floods have degraded and 
    continue to degrade the land.  Soil loss ranges from 5-200 
    mt/ha/yr depending on the land use and land form.  Their causative 
    factors are steep slope cultivation, use of marginal land, 
    overgrazing, forest fires, nutrient deficiency and population 
    pressure.  Continued compulsions to cultivate marginal land are 
    resulting in further encroachment on forests and grazing lands.  
    Nepal's land resource is also under pressure from a high number of 
    unproductive livestock which take about 42 percent of the TDN from 
    forest land.  The absence of a national land use policy and 
    programmes, and a narrow sectoral approach, have led to land use 
    conflict, particularly between forestry and agriculture.  
 
    Deforestation in Nepal is primarily due to the extraction of fuel 
    wood, fodder and timber, overgrazing and frequent fires, 
    encroachment on forest land for agricultural expansion, and 
    poaching and smuggling.  As forests are not evenly distributed in 
    relation to the population, all accessible forests are over-used 
    and depleted.  Many species of wild plants and animals have been  
    threatened by the destruction of their habitat outside the 
    protected areas. 
 
    Water and air pollution is particularly evident in urban and 
    industrial areas.  Available data indicate high bacterial 
    contamination, mainly during the rainy season, in urban water 
    systems.  Even springs have been found to be contaminated.  
    Industrial wastes, including toxic effluents, are discharged 
    directly into the rivers and streams without any treatment in 
    major urban areas and industrial districts.  The water quality as 
    a result has deteriorated.  Instances of water-borne diseases are 
    frequent and on the rise.  
 
    The burning of moist wood for domestic cooking and heating in 
    poorly ventilated houses has contributed to poor indoor air 
    quality in rural areas of Nepal.  Urban air pollution is also on 
    the increase due to old vehicles, incomplete combustion of fossil 
    fuel and industrial emissions.  
 
    Noise levels in most urban centres are also of high intensity due 
    to heavy and light vehicular movement.  Other sources of noise 
    pollution include industries, indiscriminate use of horns and 
    amplifiers in public places during ceremonial activities.  
 
    In Nepal, it is a common practice to dispose off toxic and 
    industrial wastes without any sorting or pre-treatment.  At 
    present, industries dump their solid wastes, including toxic 
    wastes, on their premises or illegally dispose them off in rivers 
    or on public lands. In some cases, industrial wastes are also used 
    as by-products.  
 
    Policies and Strategies 
 
    Development planning in Nepal began in 1956.  The First Plan 
    (1956-61) emphasized agricultural production.  The need for 
    wildlife conservation was realized during the Second Plan 
    (1962-65).  The Third Plan (1965-70) drew attention to the 
    prevalence of deforestation and the need for soil conservation.  
    The Fourth Plan (1970-75) emphasized the protection of biological 
    diversity through the establishment of national parks and wildlife 
    reserves.  The Fifth Plan (1975-80) introduced a land use and 
    water resources development policy, soil and watershed management 
    programmes, and recommended plantation and management of forest 
    resources.  The Sixth Plan (1980-85) initiated environment impact 
    assessment (EIA) and incorporated environmental issues with 
    emphasis on population control.  The Seventh Plan (1985-90) 
    included many environmental programmes and made EIA mandatory for 
    all major development activities. 
 
    A National Conservation Strategy for Nepal endorsed by HMG in 
    1988, proposed a conservation action agenda.  The Master Plan for 
    the Forestry Sector (25 year plan) has placed emphasis on 
    programme approach and consists of community and private forestry, 
    national and leasehold forestry, soil conservation and watershed  
    management, and conservation of ecosystems and genetic resources, 
    as priority programmes under the six primary development 
    programmes. 
 
    There was Plan Holiday in 1991.  The Eighth Plan (1992-97) will 
    include environment as a separate sector.  The plan will duly 
    address the critical role played by poverty, increasing 
    population, low level of economic growth, ill-planned urbanization 
    and industrialization on the environment with the integration of 
    human development and environment conservation.  It will also set 
    out policies and an intended plan of action in relation to the 
    environment including a comprehensive system of environmental laws 
    that will ensure all future decisions on investment to take full 
    account of their effect on the environment. 
 
    The Constitution of Nepal 1990 has included environmental 
    protection under the directive principles and policies of the 
    State.  Based on this constitutional provision, a special 
    committee on natural resources and environmental protection has 
    been constituted in the House of Representatives (Lower House).  
    The existing legislation stresses on exploitation of natural 
    resources and, hence, requires some revision in line with the 
    spirit of the new Constitution.  Existing environmental laws 
    related to land use include land reform, preservation of mountain 
    environment, and protection of designated areas in the 
    representative eco-physiographic zones for the protection of 
    bio-diversity. 
 
    Similarly, forest-related Acts include provisions to prohibit 
    deforestation, cultivation and grazing on, and illegal removal of, 
    products from government forest land; protection of demarcated 
    forest and afforested areas; proper management of wildlife and 
    their habitat in national parks and wildlife reserves; management 
    of community forests; and conservation of nature and natural 
    resources.  Likewise, there are Acts that forbid the use of 
    explosives for catching and killing aquatic life, that consider 
    environmental aspects during mineral production, and that allow 
    for cultural heritage conservation.  These Acts will be reviewed 
    and amended as and when necessary to align them with environment 
    and development concepts. 
 
    Nepal is a signatory to Biological and Toxic Weapons (1972), Ocean 
    Dumping (1972), and Law of the Sea (1982), and has ratified the 
    Nuclear Test Ban Treaty (1983), Wetlands Treaty (1971), World 
    Heritage Treaty (1972) and CITES (1973).   At the regional level, 
    Nepal is responding to the environmental initiatives taken by 
    SAARC and ESCAP.  
 
    Several governmental institutions, established since the 1960s, 
    are sectorally involved in environmental issues.  Nepal's National 
    Commission for the Conservation of Natural Resources was 
    established in 1980, to play an advisory role to HMG on matters 
    related to natural resources conservation.  In January 1991, a 
    Council for the Conservation of Natural and Cultural Resources  
    (CCNCR) was formed under the auspices of the National Planning 
    Commission to facilitate the implementation of the National 
    Conservation Strategy for Nepal.  In September 1991, the Ministry 
    of Forests and Soil Conservation was renamed the Ministry of 
    Forests and Environment with a view to implementing and 
    coordinating environmental activities, besides forestry. In recent 
    years, several non-governmental organizations have been 
    established to increase public awareness of the necessity of 
    rational environment management.  Several NGOs are active in 
    conservation awareness programmes at the national and grassroots 
    level.  
 
    Attempts are being made to institutionalize Environmental Impact 
    Assessment (EIA) in all major development sectors.  Currently, 
    national EIA guidelines are being drafted, and environmental 
    planning and impact assessment are being incorporated into 
    economic development planning. 
 
    As poverty is the root cause of environmental degradation, the 
    basic strategy aims to secure a link between economic and 
    environmental policies aimed at poverty alleviation.  Another 
    important aspect is population control.  The strategy for 
    fertility control has encompassed expansion of services, enhancing 
    the role of women and mobilization of local communities and NGOs.  
    Since land is a scarce resource, policies are made to use it more 
    judiciously.  
 
    The strategy for conserving biological diversity focuses on 
    neutralizing the conflict between the people and the parks.  
    Similarly, pressure on traditional energy sources, primarily fuel 
    wood, will be reduced by developing alternative energy sources.  
    The emphasis will be on harnessing the country's immense hydro 
    energy resource.  The strategy for control of pollution will be 
    developed based on minimum allowable standards of air, water, land 
    and noise pollution.  Institutional capabilities are being 
    strengthened to initiate coordinated actions, covering all 
    sectors.  
 
    The present experience in managing protected areas will be 
    utilized to take future initiatives in managing and extending 
    areas for conservation of biological diversity.  The policy of 
    zoning protected areas, with surrounding buffer zones for 
    conservation and allowing access to local users, will be promoted 
    in parks and reserves.  
 
    Expectations from the Conference 
 
    As an active member of the United Nations system in the 
    environmental arena, Nepal will continue to support the efforts of 
    the international community in sustainable development.  But as 
    one of the least developed countries, it has particular concerns 
    and interest in matters relating to the protection and management 
    of land and water resources and improvement of the living 
    conditions of the poor.  Being a mountainous country encompassing  
    a major portion of the Himalayan ecosystem, Nepal proposes that 
    development of mountainous regions be given specific coverage in 
    Agenda 21 of UNCED 92.  
 
    Nepal's areas of interest also include conservation of biological 
    diversity and environmentally sound management of bio-technology.  
    The country includes a territory of immense bio-diversity 
    extending from humid tropics to an alpine temperate ecosystem, 
    which could provide an ideal location for research on biodiversity 
    as well as on land degradation process. HMG welcomes any 
    international cooperation for such scientific ventures. 
 
    Nepal hopes that UNCED 92 will succeed in addressing the common 
    global environmental issues in light of the inter-relationship 
    between the people, resources, environment and development.  The 
    country also calls for resolving some of the cross-sectoral issues 
    such as transfer of technology and increased financial resources 
    critically needed for sustainable development.  This would be 
    essential to strengthen and expand national institutions including 
    training, education, research and management capability.   
 
    UNCED should be a forum to initiate a new international economic 
    order in view of the post cold war era.  This new order should 
    generously support the developing countries in their endeavour to 
    sustainable development without affecting the economic growth 
    currently constrained by debt crisis.  Developing countries, 
    particularly the least developed countries, would need greater 
    support from developed countries on the basis of equity to deal 
    with global environmental issues. 
 
    Poverty is the basic cause of excessive resource exploitation and 
    underdevelopment leading to further degradation of the environment 
    in many developing countries.  These countries need external 
    assistance in their national efforts for poverty alleviation, 
    population control and natural resource management including 
    alternative energy development. 
 
    Restriction on use or overuse of the natural resources of 
    developing countries, in the larger interests of the global 
    community, should be duly compensated to keep pace with economic 
    development.  In addition, the expression of developing countries 
    calling for the support of developed countries for transfer of 
    technology on a preferential and non-commercial basis should be 
    addressed by the conference.  The conference should also focus on 
    the effectiveness of international conventions and treaties 
    brought into force so far, and look into the institutional 
    requirement for the implementation of the proposed "Earth 
    Charter", including Agenda 21. 
 
    It is expected that the UNCED would also recognize the role of the 
    Global Environment Facility (GEF) as an instrument for channelling 
    funds to developing countries for assisting them in resolving 
    global environmental problems.  UNCED should make an effort to 
    expand and further strengthen the GEF and streamline funding  
    mechanisms, recognizing the needs and aspirations of developing 
    countries. 
 
    Nepal also expects UNCED to firmly establish the 'Polluters Pay' 
    principle making adequate provisions to launch the principle of 
    environmentally safe, sound and sustainable development.  
 
    Nepal's ability to adopt the principles of sustainable environment 
    and development are affected by two critical barriers originating 
    from its geographical location.  The first one is the physiography 
    of the country. Two-thirds of the country's area comprises of 
    hills and mountains, limiting rapid expansion of basic 
    infrastructure to support economic development. The high cost of 
    construction and maintenance of physical infrastructures, such as 
    the roads, hydroelectricity and irrigation networks constrain 
    their management.  Secondly, the land-locked status of the 
    country, at times, poses constraints due to transit restrictions 
    affecting overall economic development.  
 
    The country's development efforts and allocation of resources are 
    being continuously threatened by the rising population.  Hence, 
    the global strategy for sustainable development should also stress 
    the need to reduce population growth and other associated 
    problems. 
 
    Nepal's specific concerns relating to development and environment 
    problems that need support in the Rio Conference are as follows:  
 
    _    Development and environment problems associated with the 
         country's physical features which are dominated by one of the 
         highest reliefs of the world. The important and essential 
         resource base of the region like land, vegetation and water 
         which show immense variation among and within micro 
         ecological zones, would get affected by the global changes in 
         environment.  The development of the mountainous areas, 
         therefore, need to be given special considerations. 
 
    _    Global attention, therefore, needs to be drawn towards 
         mountain ecosystems and strategies for developing such areas.  
         These strategies must be long-term and must focus on tackling 
         the problems caused by inaccessibility, fragility and 
         marginality of the regions through studies, and application 
         of technologies that are sensitive and specific to mountains. 
 
    -    The difficulties of Nepal are further expounded by its land- 
         locked geo-physical reality.  As the nearest sea port is more 
         than 700 km away, the country needs guarantees of 
         uninterrupted land access to external markets.  Nepal hopes 
         that UNCED will be able to address this concern of all land- 
         locked nations. 
 
    _    Environmental degradation in Nepal is also on the rise 
         because of continuation of poverty which perpetuates the 
         vicious cycle of destitution.  Poverty alleviation measures  
         must, therefore, form an integral part of the global 
         development strategy. 
 
    _    Nepal seeks to use its water resources for generating 
         electricity, irrigation and other purposes through a series 
         of interventions that are cost effective and environmentally 
         palatable.  The country is committed to preserving the 
         sanctity of her fresh water resources for the benefit of 
         future generations while meeting present demands.  
 
    _    As a land mass located centrally amidst various ecological 
         regions of south and central Asia, Nepal's natural heritage 
         is extremely important and continues to be a source of 
         inspiration to the whole world.  In its continued efforts to 
         improve the quality of life of her people, Nepal seeks 
         cooperation from all agencies in preserving the natural 
         heritage of the country as well as the rich cultural heritage 
         of its people. 
----------------------------------------------------------------------

Part B

DEVELOPMENT TRENDS AND ENVIRONMENTAL IMPACT

B-I RESOURCE ENDOWMENT

    1.  Introduction 
 
    Nepal extends 800 km east-west along the Central Himalayas and 
    covers an area of 147,181 sq.km.  The northern section of the 
    country, adjacent to the Tibet Autonomous Region of China, 
    includes an extensive mountainous terrain (Fig.1).  About 100 to 
    140 km south, adjoining India, the Terai lowlands form an 
    extension of the Gangetic plain.  Some regional order can be 
    discerned despite the rugged relief.  The basic physiographic 
    structure of the country is made up of a succession of east-west 
    ranges that are arranged en echelon from the south to the 
    north and are punctuated by distinctive depressions. Nepal has 
    been divided into five physiographic zones, namely, High Himal 
    (above 4000 m), High Mountain (1000-4000m), Middle Mountain 
    (200-3000m), Siwaliks (120-2000m) and the Terai (100-300m).  These 
    zones separate and confine various depression areas that form the 
    main settlement zones.  South of the Siwaliks range extends the 
    Terai that merges imperceptibly into the Gangetic plain.  Between 
    the Siwaliks range and the Middle Mountains are valleys of varying 
    extent.  The most extensive depression region is represented by a 
    complex of hills between the Middle Mountains and the High 
    Mountains.   West of longitude 85řE, the High Himalayan zone also 
    includes plateaus and elevated valleys. 
 
    One of the important features of the country is the sharp contrast 
    in elevation.  More than a third of the country's land surface 
    lies between 305m and 1524m, and another 22.6 percent lies between 
    1524m and 3048m.  Land over 3048m covers 27.5 percent while 
    lowlands below 305m are only 11.3 percent of the total land 
    surface.  Consequently, there is altitudinal zonation with 
    distinctive climatic types of natural vegetation and cultivated 
    crops.  Thus, the upper limit for double paddy cropping occurs in 
    the sub-tropical zone below 1000m.  The upper limit for paddy 
    growing is at 2000m  and for buckwheat at 3100m in the cool 
    temperate zone.  The tree-line occurs at 4000m and the upper limit 
    for grazing is at about 5000m, above the alpine zone. 
 
    Another distinctive aspect is the steepness of the terrain.  
    According to the dominant slope of major land forms, 58.7 percent 
    of the land is steep to very steep, i.e. it exceeds a slope of 20 
    degrees in the Siwaliks, 30 degrees in the Hills and 35 degrees in 
    the Mountain zone.  Another 21.7 percent of the land surface has 
    moderate to steep slopes.  Land forms defined as very gentle with 
    a slope of less than one degree only represent 13.6 percent, 
    mostly in the Terai.  Dominant slopes categorized as gentle and 
    dissected are 4.6 percent and 1.4 percent respectively. 
 
    The average annual precipitation in the country is about 1600 mm 
    but there is wide regional variation.  In general, the Hills of 
    eastern Nepal receive more rainfall than those in western Nepal.  
    About 80 percent of the total precipitation occurs during the 
    monsoon season (June-September).  
 
    Nepal's economy  depends largely on the use of its natural 
    resources base.  The distribution pattern of resources and their 
    harnessing for the socio-economic development of the country 
    remains uneven.  Hence, it is  important to discuss in brief the 
    following aspects of the natural resources base: 
 
    2.  Land Use 
 
    In Nepal, the major land use categories are: forest 42 percent; 
    agriculture, including non-cultivated inclusion, 27 percent; 
    grassland 12 percent; and others 18 percent (Fig.2).  Land 
    categorized as forest also includes shrubland with less than 10 
    percent crown cover.  Of the total forest land, 35 percent is in 
    the Hills and one-third in the Mountain region.  A quarter of the 
    agricultural land is uncultivated and most of this is in the 
    Hills.  Over 80 percent of the grassland and 90 percent of land in 
    other categories are concentrated in the Mountains.  The regions 
    vary widely in their proportion of land use.  In the Mountains, a 
    third of the area is forest and another 39 percent belong to other 
    categories (Fig.2).  In the Hills, half is forest land and another 
    42 percent agricultural.  In the Siwaliks, 78 percent is forest 
    land, while the Terai has 64 percent agricultural land.  
 
    Land varies considerably in terms of its potential and capability 
    for different uses as a result of the wide variation in the 
    topography, soil composition and climate.  On an average, there 
    are 5.7 persons per net cultivated hectare.  Out of the 75 
    districts in the country, 34 have a higher density than the 
    national average.  Of these, 22 are in the Hill and 6 in the 
    Mountain districts.  Nine districts have an extremely high 
    pressure on cultivated land with over 7.7 persons per net 
    cultivated hectare.  Most of the Terai districts have lesser 
    population pressure on agricultural land than the national 
    average.  The national per capita agriculture land holding is 0.2 
    ha. 
 
    The Terai has four types of soil associations, mostly entric 
    fluvisols, identified with different textural characteristics.  
    The Siwaliks has fine to coarse-grained, loosely structured soil.  
    It consists of dystric regosols, mostly developed from sedimentary 
    rocks, with a loamy sand to sandy loam texture, and is vulnerable 
    to erosion. The Hills are characterized by soils derived from 
    metamorphic and sedimentary rocks, and these are usually erodible 
    and stony in steep and dissected areas.  The Mountain area is 
    characterized by hard rocks.  The soils are lithic and humic 
    cambisols, and generally shallow, stony and rocky.  The geomorphic 
    processes include mass wasting, physical weathering and 
    glaciation. 
 
    More than 90 percent of the people depend on subsistence farming 
    and about 91 percent of the economically active population are 
    engaged in agriculture.  Paddy, maize and wheat are the major 
    crops accounting for 74 percent of the total cropped area and 
    almost 96 percent of the total cereal grain production.  The yield 
    per unit area has not increased to the intended level despite the 
    high priority given to  the development of this sector from the 
    very beginning of planned development in Nepal.  Intensification 
    efforts in recent years have been made through provision of 
    irrigation, improved seeds, use of chemical fertilizers and 
    pesticides, land reform, bank credit, extension services and other 
    facilities. 
 
    Analyzing the agri-production scenario of one and a half decades, 
    the net agri-production has not met the population growth rate of 
    2.6 percent per annum.  Since 1975, the area of cereal production 
    has increased by about  42 percent whereas the productivity 
    increase has been only 9 percent.  Cash crops are grown in 10 
    percent of the total cropped area whereas their share of total 
    crop production amounts to about 24 percent.  Agricultural 
    production, in terms of unit area, has not increased. 
 
    Nepal has 1.6 million ha of potentially irrigable land of which 
    about 1.3 million ha. are located in the Terai while the remaining 
    0.3 million ha are in the Hills.  The total area under irrigation 
    is about 0.94 million ha, out of which 0.27 million ha are agency 
    managed, 0.19 million ha farmer managed but assisted by agencies 
    and 0.49 million ha are managed by the farmers themselves.  Over 
    80 percent of irrigated land is in the Terai area.  Since the 
    mid-1960s, HMG has initiated construction and management of new 
    irrigation schemes by assisting farmer groups in low-cost Farm 
    Managed Irrigation Systems (FMIS).  Government-assisted systems 
    cover some 29 percent of the irrigated land whereas the remaining 
    land receives irrigation facilities from farm-managed systems.  
    The Master Plan for Irrigation Development has recommended 
    efficiency in service delivery, implementation of large Terai 
    projects, institutional efficiency, and planning and design 
    improvement. 

 
 
    3.  Forest and Bio-diversity 
 
    Major forest types in Nepal are tropical, sub-tropical, warm 
    temperate, cool temperate, sub-alpine and alpine.  Of the total 
    6.8 million ha designated as forest area, 37 percent is natural 
    forest, 5 percent shrubland and 4 percent tree-covered land 
    adjacent to farms.  Another 12 percent of the country's area is 
    grassland.  Of the remaining 5.5 million ha natural forest, 59 
    percent is of hardwood, 24 percent is mixed, and 17 percent 
    conifer species.  Hardwoods are dominant in the Terai and lower 
    Hills while conifers occur at higher elevations. 
 
    Another aspect of forest land is its cover type or crown density.  
    Of the 5.5 million ha land with tree cover, 59 percent has medium 
    crown cover, about 40 to 70 percent.  Areas with high crown cover, 
    exceeding 70 percent, constitute only 15 percent of the total 
    forest land.  The rest of the forest land is degraded, with crown 
    cover ranging from 10 to 40 percent.  High density forests are 
    left only in protected forests in the Terai or in inaccessible 
    areas in the Mountains.  More than half of the forests with poor 
    crown cover (10-40%) is in the densely populated Hill region. 
 
    Over 75 percent of the people still depend on fuel wood to meet 
    their energy requirements.  Fuel wood is the only source of energy 
    for cooking and heating in the rural areas.  Its consumption in 
    the Hills is slightly higher than in the Terai. The annual per 
    capita fuel wood consumption in the Hills is about 708 kg whereas 
    it is 689 kg in the Terai.  Out of the total household fuel 
    consumption in the Eastern Development Region, about 30 percent is 
    from dung cakes which could be used for manure if alternate energy 
    sources were available.  There is high pressure on forest 
    resources due to lack of alternate energy sources. 
 
    The livestock sector in Nepal is heavily dependent on forests and 
    grasslands.  About 42 percent of the total TDN (Total Digestible 
    Nutrients) requirement is estimated to be met from the forestry 
    sector.  In 1990-91, the total number of livestock in terms of 
    livestock unit (LU) was estimated to be 9.8 million.  The 
    livestock in terms of LU will reach 11.6 million by the year 2000 
    AD.  The fodder requirement or total digestible nutrients (TDN) is 
    obtained from the accessible forests,  shrublands and grasslands.  
    At present, a total of 1.88 million tons of TDN is supplied from 
    accessible forest areas.  The Hill Region alone supplies nearly 50 
    percent of the total TDN requirements.  The TDN requirement was 
    about 6.08 million tons in 1985 and has reached 6.39 million tons 
    by 1990.  In line with livestock production, the pressure is high 
    in the Hills and in the Central Development Region. 
 
    Annual per capita timber consumption was about 0.07 m3 in 1986 and 
    it has been  projected to increase to 0.11 m3 per capita per annum 
    by the year 2000 AD.  It may reach 0.12 m3 per capita per annum by 
    the 2011.  The timber consumption in 1991 was estimated at 0.04 m3 
    per capita for housing purposes. 
 
    Forest land in Nepal is not well distributed in relation to the 
    population density.  The per capita forest in the Hills and the 
    Terai is only 0.26 and 0.11 ha respectively.  However, other zones 
    have over one hectare per capita.  The western part of the country 
    has more forest than the eastern, and the per capita forest is 
    more in the former areas.  The national per capita of forest and 
    shrubland, on an average, comes to about 0.37 ha.  
 
    If Nepal's forests were uniformly accessible, they could provide 
    the basic needs for forestry products on a sustained yield basis.  
    However, the distribution pattern of forest and population does 
    not meet the growing demand for forest products.  Accessible 
    forests are already overcut and destroyed.  Because  of the lack 
    of a sustainable supply of forestry products, people have 
    difficulty in collecting fuel wood and fodder to meet their 
    requirements.  It  has been estimated that, in specific locations 
    in the Hills, the demand-supply ratio of forest produce ranges 
    from 2.3:1 to 4.1:1. 
 
    Annual tree planting in the country covered only 10,000 ha during 
    1979- 86.  The  present plantation rate is less than the 
    deforestation rate.  At the same time the demand-supply situation 
    of forestry products in the country is not favourable.  For the 
    better management of forestry resources, a 25-year Forestry Sector 
    Master Plan  was implemented  in 1988.  The plan clearly spells 
    out the primary development programmes for community and private 
    forestry, national and leasehold forestry, wood-based industries, 
    medicinal and aromatic plants, soil conservation and watershed 
    management and conservation of the ecosystem and genetic 
    resources.  To accomplish these, some supportive development 
    programmes in the areas of policy, legal and institutional 
    reforms, human resource development, research and extension, 
    resource information and planning, and monitoring and evaluation 
    have been prepared. 
 
    The immense bio-climatic diversity in Nepal supports more than 35 
    forest types.  These forests comprise over 5400 species of 
    vascular plants, including over 245 species of endemic plants and 
    700 species of medicinal plants.  In addition, over 175 species of 
    mammals, 850 species of birds, 600 species of butterflies, 50 
    species of moths, 180 species of dragon flies, 170 species of 
    fishes and other animals inhabit this small country.  Presently, 
    26 species of mammals, 9 species of birds and 3 species of 
    reptiles are declared endangered and are being protected by 
    Nepalese law.  These floral and faunal species are protected in 
    eight national parks, four wildlife reserves and one hunting 
    reserve that cover approximately 12,500 sq.km. or 8.5 percent of 
    the total land area. Two of these National Parks, the Chitwan and 
    the Mount Everest, are listed under the list of UNESCO's World 
    Heritage sites.  There are two protected or conservation areas as 
    well. Considering all the national parks, wildlife reserves and 
    conservation areas, about 12 percent of the Nepal's land mass 
    receives attention for nature conservation.    
 
    The network of parks and protected areas represent almost all the 
    ecological zones, and contains a large number of endemic plants 
    and endangered animals.  The national parks and wildlife reserves 
    are serving as a "natural gene bank".  The conservation areas in 
    Nepal have been implemented with the aim of attaining a balance 
    between the needs of the local people, tourism development and 
    nature conservation.  Flora and fauna are under extreme pressure 
    outside the national parks and protected areas primarily because 
    of poaching and encroachment on forest land. 
 
    4.  Water Resources 
 
    In the region south of the Himalayan ranges, the monsoon 
    contributes to a rich water regime.  As a result, several sources 
    of water in the form of glaciers, snow pack, ground water and 
    river networks exist in Nepal. 
 
    The country is drained by three major river basins; Sapta Kosi in 
    the east, Karnali in the west and Sapta Gandaki which drains the 
    region lying between these two basins. Nepalese rivers are 
    classified into three classes based on their origin.  Rivers in 
    Class I originate in the High Himalayas above the snow line and 
    have a sustained dry season flow due to snow melt.  The Class II 
    rivers originate below the snow line in the slopes of the 
    Mahabharat Mountains which are perennial but have a low dry season 
    flow.  The Class III originate in the Siwalik ranges and southern 
    slopes of the Mahabharat Mountains.  These rivers are ephemeral 
    and flashy with watersheds that are geologically fragile, erodible 
    and are deteriorating fast due to population pressure.  
 
    The rivers drain a total of 191,000 sq.km. area, of which 74 
    percent lies within Nepal.  The Class I rivers altogether occupy 
    about 80 percent of the total drainage area of which 68 percent 
    lies in Nepal.  The total area under snow occupied by the major 
    tributaries of the Class I rivers is 17,920 sq.km. representing 
    about 8 percent of the country's area. There are about 6000 rivers 
    and streams.  Hundreds of these rivers are more than 160 km. long.  
    The combined length of the rivers and streams exceeds 45,000 km.  
    Arun, a tributary of the Sapta Koshi river, is the longest one 
    with its major drainage area in Tibet.  The rivers are 
    characterised by an energetic hydraulic regime that simultaneously 
    degrades and deposits, transporting high sediment mass. 
 
    The annual run-off from the total drainage area, including that in 
    Tibet, is estimated to be 202 billion cu.m.  The contribution from 
    the Nepalese territory accounts to an annual run-off of 170 
    billion cu. m.  The estimated annual mean run-off of all rivers is 
    about 6396 cu. m/sec.  About 72 percent of the total surface run- 
    off occurs as instantaneous flow, while the rest is conserved as 
    snow pack and ground water.  About 4063 sq.km. area is estimated 
    to be covered by surface water.  This represents 97.3 percent 
    under the larger rivers, followed by natural lakes (1.2 %), ponds 
    (1.2 %), and reservoirs (0.3 %).  Only 9 percent of the total run- 
    off occurs through Class II rivers while 3 percent flows out of 
    the Class III rivers. 
 
    Nepal's Terai belt has rechargeable ground water potential which 
    occurs in both artesian and non-artesian aquifers.  Studies show 
    that ground water table occurs at a depth of 5 m. in the plains 
    while artesian aquifers yield about 100 cu. m./hr.  Ground water 
    is used for irrigation, and for meeting drinking water needs 
    through shallow tube wells at individual levels.  Deep tube wells 
    at several district centres meet drinking water requirements.  Use 
    of deep tube wells is yet to be carried out for irrigation.  This 
    aspect calls for further studies. 
 
    In the inner valleys and Hills, ground water occurrence is limited 
    and, wherever it occurs, the recharge characteristics are not 
    understood but generally low.  In Kathmandu, the use of ground 
    water at its current rate appears to be unsustainable as the 
    recharge properties are unknown.  
 
    The steep topography and the high run-off offer opportunities of 
    generating hydro power in the corridors of Nepal Himalayas.  The 
    theoretical potential on the basis of average flow is estimated to 
    be 83,000 MW out of which 44,600 MW (53.5 %) has been assessed to 
    be technically feasible while 42,130 MW (50.6 %) could be 
    economically harnessed.  Several sites to generate hydro power 
    through large and medium schemes have been identified.  Scope 
    exists for development of several run-off river power as well as 
    storage projects. Investigations have been undertaken up to pre- 
    feasibility, feasibility and detailed feasibility levels.  Large- 
    scale hydro power projects have been contemplated to export energy 
    thus produced to regional countries.  In addition to these large- 
    scale hydro power projects, efforts are also being made to develop 
    small and micro-hydro projects. The preparation of a Master Plan 
    for Small Hydro Power Development Projects is in its initial 
    stage. 
 
    Several sites for developing surface water irrigation run-off 
    river schemes have been identified in the Terai.  These projects 
    are at different study levels which reveal potential of irrigating 
    some 190,950 ha of land under different schemes.  Some of the 
    contemplated large hydro power projects have also irrigation as 
    one of the benefits.  
 
    The southern stretches of the three rivers could be developed for 
    some form of inland navigation.  This could be further extended to 
    link Nepal with Calcutta port in India through waterways.  
    However, infrastructure facilities for inland navigation are yet 
    to be developed after duly considering every aspect of taming 
    rivers for navigation. 
 
    The installed hydro power capacity by the end of 1990 was only 238 
    MW. This is about 0.29 percent of the theoretical power potential 
    and 0.55 percent of the economically usable power potential.  By 
    the year 2000, the installed capacity is expected to reach 654 MW 
    with the help of planned projects when the peak power demand is 
    expected to be 396 MW.  With such a high potential for hydro power 
    development, Nepal can play an important role in providing clean 
    energy for domestic needs as well as to its neighbouring 
    countries. 
 
    Electricity thus generated is used mainly for lighting and heating 
    purposes which meets only 0.66 percent of the country's total 
    energy needs.  About 44 percent of the generated energy in 1985 
    was consumed by the domestic sector, 34 percent by the industrial 
    sector, 6 percent by the commercial sector and the remaining 16 
    percent by other sectors such as irrigation, drinking water, 
    transport and street lighting.  In 1989, however,  domestic 
    electricity consumption went down to 40.63 percent while 
    industrial sector demand increased to 36.86 percent.  The 
    consumption in the commercial sector was 9.75 percent while the 
    remaining uses accounted for 12.76 percent.  The 6.2 percent of 
    the total population served by electricity reached 8.0 percent in 
    1989 and further went up to 9 percent by July 1991.  Power 
    consumption in 1990 was estimated to be 39 kw/hr/individual as 
    compared to 27 kw/hr/individual in 1985.  This is expected to go 
    up in the coming years. 
 
    At present, irrigation is provided to about 0.943 million ha of 
    cultivated land.  Out of this, 0.267, 0.186 and 0.490 million ha 
    are under irrigation systems that are agency managed, agency- 
    assisted farmer managed or exclusively farmer managed.  
 
    Current efforts for major irrigation development are concentrated 
    mainly in the Terai.  In the Hills, irrigation is provided in the 
    lower terraces the majority of which are already irrigated by 
    systems developed by farmers.  Extension to remaining areas would 
    need major interventions to tackle the complex physical, technical 
    as well as financial constraints.  Feasibility and pre-feasibility 
    studies of irrigation projects with large command areas reveal the 
    expansion on a further 190,950 ha. of land, indicating that little 
    scope for horizontal expansion exists.  To meet the agriculture 
    production target set out by the Basic Needs Programme, irrigation 
    has to be provided, at the rate of some 60,000 ha. per year in 
    order to irrigate 1.25 million ha. of land by the year 2000 A.D. 
    from systems built by the Government.   
 
    Cage fishery for fish production has been introduced in lakes and 
    reservoirs whose production trend indicates a high potential for 
    expansion.  In 1975/76, the total fish production was 2600 M.T. 
    which increased to about 8750 M.T. in 1984/85.  Fishery activities 
    have already been introduced in Terai ponds while cold water 
    fishery activities in the hill rivers and streams are under 
    consideration.  The annual growth rate of fish production during
    1975 to 1985 was about 8.9 percent which is planned to increase to
    14.8 percent by the year 2000 AD. 
 
    Water sports in the form of white water rafting, canoeing and 
    boating has been gaining popularity.  River rafting in an 
    organized form was introduced in 1985/86 in Trisuli River.  In the 
    beginning, a total of 2500 river rafters were involved and this 
    increased to 5000 by 1990/91.  The rafting season lasts generally 
    from November to March.  Potential also exist for using other 
    river stretches for rafting to attract more tourists. 
 
    5.  Minerals 
 
    Different types of minerals occur in different parts of the 
    country, but because of the lack of scientific and extensive 
    geological survey, the actual statistics of the mineral resources 
    are not available.  However, based on preliminary surveys, iron, 
    copper, mica, gold, lead, zinc, limestone, marble, slate, mineral 
    oil and gas, coal, nickel, sulphur, graphite and dolomite exist in 
    the country.  The economic exploitation of these minerals has been 
    limited till now because of lack of capital, technical know-how, 
    and transportation, etc.  Copper is known to occur in more than 65 
    places, lead and zinc deposits in over 30 places and iron ores are 
    reported from about 40 places.  Their potential based on 
    cost/benefit analysis are not yet known.  The chemical analysis of 
    the Mahabharat limestone indicates that it is highly siliceous, 
    and some bands are good for cement production. 
 
    Mineral exploration in Nepal shows good deposits of cement grade 
    limestone for local consumption and of sub-economic mineral 
    deposits of copper, iron, tin, tungsten, lead and zinc, glass sand 
    and construction materials.  Economic feasibility of other known 
    minerals has yet to be studied in detail.  Present mineral 
    explorations show 11.9 million tons of sand suitable for glass 
    industry, 47 million m3 of natural gas and 3.6 million tons of 
    iron.  At present, cement factories produce about 1200 tons of 
    cement per day.  This will increase to 2000 t/day after the 
    Udayapur Cement Factory comes in operation.  Similarly, magnesite, 
    marble and agri-lime industries are under production.  A lead and 
    zinc industry has been established at some 4000m with a production 
    rate of 20,000 t/day.  At present, the contribution of mineral- 
    based industries to GDP is estimated at 2.3 percent. 
 
    Mountainous terrain and poor accessibility have hindered 
    large-scale exploration of minerals.  Out of the explored 
    deposits, most are not economically feasible for large-scale 
    mining operations.  However, there may be potential to utilize 
    some mineral deposits at the local level.  
 
    The Minerals Act of 1987 incorporates provision for environmental 
    considerations during mineral exploitation.  However, 
    environmental aspects have not been adequately considered in 
    mineral production activities and none of them have so far 
    prepared reclamation plans.  In  addition, stone quarries are 
    extensively operated in Kathmandu Valley in an unorganized manner.  
    In recent years, a number of environmental complaints have been 
    registered on deforestation, disposal of wastes, soil erosion and 
    diversion of hill streams, and damage of aesthetic beauty.  A 
    Mineral Resources Master Plan with environmental consideration is 
    under preparation. 
 
 
 

B-II SUMMARY OF SECTORAL ANALYSIS

 
    1.   Agriculture, Livestock and Fishery 
 
    1.1  Agriculture 
 
    Nepal's national economy is dominated by the agricultural sector.  
    It has a 54 percent share of GDP and accounts for 75 percent of 
    the total exports.  Over 90 percent of the total population 
    depends on this sector for subsistence living.  Although there has 
    been an increase in agricultural production, there is a declining 
    trend in crop yields per unit area due to deforestation, loss of 
    top soil, shortage of chemical fertilizers,  lack of irrigation 
    facilities and other inputs.  There is  high potential for its 
    expansion through the management of land and water resources, and 
    the formulation of a rational agricultural land use plan.  With a 
    view to develop these sectors in a planned way, the Horticulture 
    Master Plan has been completed and the Livestock Master Plan is 
    under preparation. 
 
    The environmental problems faced by the agricultural sector are 
    the loss of soil fertility leading to marginal agricultural land 
    in the Hills and high sedimentation in the Terai.  To arrest soil 
    erosion, afforestation and management of natural forests are under 
    way.  Research on hill farming systems and their expansion are 
    considered important in sustaining the Hill agricultural systems.  
    High-yielding and pest-resistant varieties are being introduced in 
    order to increase per unit area production.  Although the 
    agricultural sector has been getting topmost priority since the 
    beginning of the First Five Year Plan, the achievements envisaged 
    have not been attained so far. 
 
    1.2  Livestock 
 
    Nepal's land resource is under pressure due to the high number of 
    unproductive livestock.  In 1988-89, the population of cattle, 
    goat and buffalo was 6.3 million, 5.3 million and 3.0 million 
    respectively.  The Middle Mountains have the highest concentration 
    of livestock.  Feed for livestock is derived from forest, 
    agricultural and pasture lands.  About 42 percent of the TDN 
    requirement is met from forest land.  Because of the high 
    livestock numbers and inadequate grazing land, livestock are 
    nutritionally stressed.  People in the High Mountains also 
    practice transhumance grazing. 
 
    Livestock density per hectare is roughly 7.6 on grazing land, 4.4 
    on gross cultivated land and 2.1 on forest land (Table B-1).  In 
    the Terai and Siwaliks, livestock density is high at 73 per 
    hectare of grazing land.  It is only 1.4 per hectare in the High 
    Mountains.  Livestock density on cultivated land is high in the 
    High Mountains and Middle Mountains, while it is low on forest 
    land. 
 
 
 
    1.3  Fishery 
 
    Total fish and fingerlings production in 1990 amounted to 14,550 
    M.T. and 32.5 millions respectively, with the average production 
    of 1.82 M.T./ha.  Fish production activities have covered 60 out 
    of 75 districts and integrated fishery development programmes are 
    planned in 21 districts.  
 
             Table B-1 : Livestock Density by Elevation Zones 
    _______________________________________________________________ 
 
    Geographic Region    Cultivated Land  Grazing Land  Forest Land  
    _______________________________________________________________ 
 
    1. High Mountain          6.5            1.4          1.1 
    2. Middle Mountain        5.4           11.7          2.2 
    3. Siwalik                5.2           73.0          3.2 
    4. Terai                  3.1           73.0          3.2 
    _______________________________________________________________ 
 
    Average for Nepal         4.4            7.6          2.1 
    _______________________________________________________________ 
 
    The periodic plans have laid down policies to develop and expand 
    this sector, emphasizing the utilization of potential water 
    resources, encouraging the private sector in aqua-culture 
    production and cage fishery, and providing technical services to 
    increase per unit production.  Integrated fish culture in ponds 
    and cage fish culture programmes in lakes and reservoirs are being 
    encouraged by providing loans to the private sector.  Aqua-culture 
    development shows the potential for expansion.  Production trends 
    for warm water fisheries indicate the attainment of sustainable 
    development. 
 
    Some of the environmental problems are the high rate of sediment 
    deposition in rivers, streams, lakes and reservoirs, degradation 
    of water quality, prevalence of UDS (ulcerative disease syndrome), 
    drying-up of Terai ponds and occasional washing away of pond 
    fishes due to flooding. 
 
    Biological and limnological studies have been carried out in areas 
    of intensive fish production on feed and fertilizer, fish disease 
    and parasite, and growth techniques for fish rearing.  They have 
    identified the problems, and suggested corrective measures such as 
    the addition of quick lime, potassium permanganate and 
    trichloroform in fish farms.  Similarly, the Aquatic Life 
    (Conservation) Act 1961 and Rule (1962) have been enacted to 
    prohibit the use of explosives and poison in killing fresh water 
    fish. 
 
    2.  Forestry 
 
    There is a high rate of deforestation and forest degradation due 
    to encroachment, past resettlement, shifting cultivation, and  
    illicit felling and overgrazing.  The present rate of 
    deforestation exceeds the rate of plantation and natural 
    regeneration.  In order to mitigate such problems, conservation 
    prescriptions of the Master Plan are under implementation.  In 
    high capital-intensive projects, environmental impact studies have 
    been conducted, planning capabilities are being strengthened, 
    environmental guidelines have been drafted, community forestry 
    activities have been prioritized, and NGOs and private sectors are 
    being encouraged. 
 
    In order to meet the basic needs of forest products without 
    permanently damaging the resource base, the Master Plan for the 
    Forestry Sector (MPFS) is being implemented.  Management of forest 
    resources has been directed to augment supply and reduce the 
    demand for forest products.  And in order to achieve this, the 
    MPFS emphasizes the expansion of activities for community and 
    private forestry, national and leasehold forestry, medicinal and 
    aromatic plants, soil conservation and watershed management, and 
    conservation of the ecosystem and genetic resources with some 
    supportive programmes on policy, legal and institutional reforms, 
    human resources development, R&D, forest resources information, 
    and monitoring and evaluation.  In addition, there is also 
    potential to expand 15.7 percent, out of the total area, for 
    forestry development.  Local interest toward private planting and 
    participation in community forestry activities is an additional 
    potential for expansion.  The network of national parks, wildlife 
    reserves and conservation areas corresponding to about 12 percent 
    of the total area of the country, attempts to protect 
    representative biological diversity and genetic resources.  
 
    To implement MPFS programmes, government funding will reach US $ 
    18.62 million during 1995 to 2000 A.D., and external assistance 
    will reach an average of US $ 21.63 million during the same 
    period.  As women are the direct beneficiaries of environmental 
    management and the victims of related problems, they have been 
    greatly encouraged to participate in forestry activities.   
 
    There is need to categorize the total area under different systems 
    of management, to increase the level of peoples' participation in 
    community forestry, and to promote private forestry and upgrade 
    its capability. 
 
    3.  Social Services  
 
    3.1  Education 
 
    By 1990, the literacy rate had reached 38.9 percent and about 87 
    percent of the children in the 6-10 year age group had received 
    primary education.  The aim is to provide primary education for 
    all 6-10 year old children by the year 2000 AD.  In this regard, 
    primary education had been made free up to grade 6 in 1991.  In 
    addition, the Nepal Education and Human Resources Sector 
    Assessment Study adopted 5 sub-goals and 18 action recommendations 
    including better administration to enhance employment  
    opportunities.  Steps have been taken to include conservation 
    education in school curricula, teacher training, in-service 
    training and extension services.  
 
    In this regard, attempts are being made to review the existing 
    curricula of formal education in order to identify gaps and 
    constraints to integrate environment issues into the educational 
    system.  Non-formal extension activities of governmental and 
    non-governmental organizations have made efforts to create public 
    awareness.  
 
    3.2  Health 
 
    The health sector is severely affected by the lack of sanitation 
    facilities.  The pollution level in several rivers is showing an 
    increasing trend and pollution-related diseases have become more 
    frequent.  Some legislative measures are being taken to mitigate 
    the pollution problems more effectively. 
 
    There is a need to quadruple the existing number of trained 
    manpower to assist in the adequate incorporation of environmental 
    consideration in this sector.  External assistance has been used 
    in supporting the training of environmental health personnel, and 
    water and sanitary engineers.  Similarly, special waste problems 
    have been identified in municipalities, and attempts are under way 
    to train municipal staff in order to clean up urban areas, and 
    improve the health status of the people. 
 
    3.3  Water Supply 
 
    Most drinking water systems in the Hills use spring sources while 
    ground water is used in the Terai.  In the absence of springs, 
    stream water is used which generally gets contaminated with 
    suspended sediment during the monsoon.  In many cases, human and 
    animal encroachment leads to contamination of these sources, 
    necessitating water treatment.  Only in certain urban pockets is 
    water treatment carried out in the form of chlorination.  In 
    Kathmandu and in certain Terai towns, the quality of drinking 
    water has been impaired due to suspended and biological 
    impurities.  Water testing laboratories have been planned in all 
    the five centres of the development regions. 
 
    Efforts are being made to integrate environmental concerns such as 
    health and sanitation improvement in the water supply improvement 
    programmes.  The role of women in water supply improvement has 
    been recognized and the approach is to bring about their 
    participation in these efforts by encouraging them to participate 
    in community water supply projects, under specifically designed 
    production credit programmes. 
 
    By the end of the Seventh Plan in 1990, the population served by 
    piped water supply had reached 7.2 million, representing 38 
    percent of the total population.  About 1.3 and 5.9 million of the 
    urban and rural population had respectively benefitted.  The plan  
    is to provide access to improved water supply to all by the year 
    2000 AD. 
 
    The water supply improvement programme will also include water 
    source protection and simple chlorination in rural areas, 
    rehabilitation of treatment plants and improvement of the 
    distribution system.  In rural water supply projects, efforts are 
    being made to share costs by involving the local community in the 
    development.  The voluntary contribution is about 10 percent of 
    the project cost in terms of labour while a water users' committee 
    operates and maintains the project, including minor repairs.  The 
    investment cost, estimated to extend water supply to the rest of 
    the population by the end of the decade, is about US $ 735 million 
    at the 1990 price level. 
 
    4.   Urban Sector 
 
    4.1  Urbanization 
 
    In Nepal, the urban sector had a 30 percent share of GDP and about 
    a 7 percent share of employment in 1988.  Major environmental 
    problems in this sector is created by the concentrated and 
    haphazard growth of a few urban centres only, resulting in air, 
    water, soil and noise pollution, loss of prime farm land, lack of 
    open spaces and services, and a high frequency of 
    pollution-related diseases.  
 
    Studies are being carried out to identify urban environmental 
    problems, which may result in major decisions and in formulating 
    appropriate policies and programmes.  In addition, EIA guidelines 
    have been drafted: pollution-prone industries are to be prohibited 
    from operating in urban centres, and municipalities will be 
    strengthened for dealing with pollution problems. 
 
    Policy components include decentralization of urban planning, 
    programming and management, expansion of urban jobs/skills, 
    development of investment strategies, provision of services to 
    rural hinterland, mobilization of urban resources, and promotion 
    of the private sector in improving services.  It is envisaged that 
    expansion in urbanization would be sustainable only through the 
    implementation of a realistic urban development policy, by 
    developing the institutional capabilities of the municipalities, 
    facilitating bottom-up planning processes and by incorporating 
    social cost/benefit schemes. 
 
    4.2  Infrastructure  
 
    Urban environmental problems are generated through poor 
    sanitation, laying of parallel drinking water and sewerage pipes, 
    incorrect disposal of domestic wastes without specifying proper 
    disposal sites, discharge of industrial effluents and sewage, and 
    loss of prime farm land as a result of haphazard settlement and 
    industrial establishment. 
 
    Infrastructural services in urban areas are substandard and 
    inadequate.  HMG has given due recognition and attention to the 
    development of this sector.  Recently, several donor agencies were 
    actively involved in infrastructure development projects.  To meet 
    these needs, urban roads, water connections, storm water drainage 
    and solid waste collection are to be extended and increased by 
    1.8, 2.7, 9.0 and 17.0 times respectively between 1987-2002, 
    requiring a total investment of US $ 405 million.  It is necessary 
    to expand the infrastructural facilities in urban areas but the 
    municipalities, at present, lack the investments, trained manpower 
    and institutional capability to maintain existing infrastructures. 
 
    4.3  Housing  
 
    Housing investment is directly associated with the level of per 
    capita GDP.  In Nepal, 93.6 percent of the households possess 
    their own dwellings (96% in rural and 76% in urban areas).  There 
    are 2.8 million dwelling units: 2.6 million in rural areas and 0.2 
    million units in urban areas.  The share of the households living 
    in rented dwelling units accounts for 19.7 percent in urban areas 
    and 1.6 percent in rural areas.  At present, a sample household 
    survey is under way with a view to formulating a National Shelter 
    Strategy for Nepal.  In meeting the ambitious target of the Basic 
    Needs Programme, HMG proposed programmes on service-centered 
    development in rural areas, involving the private sector in 
    low-income housing, using cost recovery criteria, promoting 
    municipalities involved in services projects, and implementing 
    guided land development programmes.  
 
    A structural plan for each municipality has been prepared.  There 
    is high potential for urban development in the Terai area along 
    the strategic locations of the East-West Highway.  In the Hills, 
    urban development is expected to decline because of depletion of 
    the resource base.  It is assumed that expansion in the housing 
    sector would be sustainable through  developing an appropriate and 
    realistic national housing strategy, implementing national urban 
    development policy with provision of utility services, giving due 
    attention to urban environmental planning, financing low to middle 
    income households with long-term and soft loan provision, 
    providing technical assistance, revising conventional accounting 
    procedures and emphasizing social cost/benefit analysis with 
    consideration to environmental aspects. 
 
    Attempts have been made to identify the pollution problems 
    resulting from the rapid increase in housing units and industrial 
    establishments.  Domestic air pollution problems occur in rural 
    areas because of the lack of chimneys, the design of high altitude 
    houses, and the burning of moist wood to cook and heat the houses 
    in cold areas.  National EIA guidelines have to be finalised, and 
    pollution-prone industries in some municipalities have to be 
    restricted.  However, there is no specific monitoring authority 
    for environmental pollution and even the existing legislative 
    provisions have not been enforced strictly.  As the construction 
    of houses is increasing at a rapid rate, it is essential to  
    consider environmental aspects at an early stage of urban 
    development.  The concerned agencies have already outlined 
    specific policies for orderly and efficient development of urban 
    settlement. 
 
    5.   Industry and Tourism 
 
    5.1  Manufacturing 
 
    Industrial development in Nepal is still at an early stage and its 
    share of GDP is only 10.5 percent.  The findings of past studies 
    at policy and macro-level as to feasibility and studies at the 
    company level on management capability, productivity improvement 
    and energy efficiency revealed the need and potentiality of 
    expansion of this sector, especially for providing impetus to 
    economic growth.  There is need to allocate scarce resources 
    efficiently, to promote the sector so that there is additional 
    income and greater employment, and to set environmental standards 
    and enact legislation with incentive provisions that adequately 
    consider the environment management of this sector.  
 
    At present industrial pollution problems have been identified in 
    leather and tanning, paper, magnesite, cement and brick factories.  
    With a view to initiating mitigation and precautionary measures, 
    some attempts were made at minimizing environmental pollution in 
    the Industrial Policy and Enterprises Act (1987).  In addition, 
    some air pollution-prone industries such as cement factories have 
    been contemplating installation of electrostatic precipitators 
    (ESP), wet scrubbers and bag filters.  The Ministry of Industry is 
    drafting Environmental Impact and Risk Assessment Guidelines that 
    incorporate environmental considerations in industrial 
    development.  The Ministry is also establishing an environmental 
    unit, introducing EIA both in public and private sector 
    industries, introducing a procedure for the submission of 
    environmental protection plans, enacting the Environmental Quality 
    Act, developing guidelines for the zoning and siting of industries 
    and the handling of toxic wastes, and developing a comprehensive 
    industrial environmental information system to help achieve 
    sustainable industrial development in the country.  
 
    5.2  Mining 
 
    The mining sector has a three percent share of GDP.  This activity 
    has been regulated by the Nepal Mines and Minerals Act (1985), 
    Forest Act (1961) and the Forest Protection (Special Arrangement) 
    Act (1968). 
 
    HMG is planning to develop a geological data bank, formulate 
    appropriate policy and mining codes, conduct field-oriented 
    training, and coordinate marketing efforts.  About half of the 
    total area of the country has been covered by geological mapping.  
    HMG is planning to develop a mineral master plan. 
 
    The environmental concerns noticed in mining operations are 
    primarily related to deforestation, disposal of over-burden 
    materials, soil erosion and diversion of mountain streams.  Though 
    consideration of the environment is incorporated in the Mineral 
    Act of 1987, because of the absence of a specific monitoring and 
    law enforcing agency concerning environment, the issues still 
    remain.  HMG has also formed a technical committee to study the 
    problem of stone and boulders excavation, and has suggested 
    mitigation measures. 
 
    5.3  Tourism  
 
    Nepal's rich natural environment and cultural diversity provide 
    good opportunity for developing the tourism sector.  Tourists 
    visit Nepal mainly for pleasure, sight-seeing, white-river 
    rafting, trekking, mountaineering and other adventure sports.  In 
    spite of the Gulf crisis, tourist arrivals in mid-December 1990, 
    was 0.26 million, an increase of 6.23 percent on last year's 
    figures.  Tourism has been a major foreign exchange earner that 
    accounts for 23.9 percent of the total foreign exchange earnings 
    of the country.  Tourism has been introduced in this country with 
    the basic objective of generating foreign exchange as well as a 
    means of accelerating economic development.  The growth of tourism 
    in urban areas is handicapped by the lack of financial resources 
    to develop the infrastructure and superstructure, whereas rural 
    tourism development has not picked up because of its limited 
    visitor-carrying capacity.  However, tourism development 
    programmes in the past have been initiated without careful 
    examination of the availability of resources and the likely impact 
    on the socioculture and environment.  Expansion in the number of 
    visitors in rural and mountainous areas could be sometimes 
    detrimental if adequate environmental considerations are not taken 
    into account.  Environmental problems are more or less confined to 
    adventure tourism.  Increasing numbers of trekking/mountaineering 
    tourists, and their concentration in some specified areas, have 
    exerted pressure on mountain forests for fuel wood and timber.  
    Some other adverse impacts noticed are inadequate disposal of 
    solid wastes and increasing contamination of drinking water.  
    There are also some adverse social and cultural influences. 
 
    Attempts are being made to minimise such adverse impacts through 
    education, occasional mountain clean-up campaigns, providing 
    alternative sources of energy such as kerosene, enforcing 
    legislative provisions of the Tourism Act (1978), and developing 
    and implementing a multi-conceptual park management system with 
    local people participation. 
 
    Seasonal and regional dispersion of tourist flow, provision of 
    alternative sources of  energy and consumption of locally produced 
    goods and services make the sector sustainable.  Nepal's 
    unexplored areas and rich geo-cultural diversity provides 
    certainly a basis for expansion for tourism if it is well planned.  
    Keeping these in mind, some of the remote areas closed to 
    foreigners so far, have now been opened for soft tourism.  The  
    regulations on visiting the heretofore restricted areas 
    specifically provide for a strict environmental code of conduct to 
    be followed and every organized package trip to be accompanied by 
    a liaison officer. 
 
    In recent years, tourism as a means of economic development in 
    Nepal has become a subject of debate.  However, if properly 
    planned, regulated and coordinated, tourism can be an useful agent 
    of economic development, but if allowed to develop in a haphazard 
    manner, tourism can well turn out to be a negative factor 
    resulting in minimal economic benefit at a very high social and 
    environmental cost.  These concerns are being fully considered in 
    the future tourism plan of the country. 
 
    6.   Water Resources 
 
    6.1  Irrigation 
 
    At present, irrigation is provided to some 0.943 million ha of 
    cultivated land.  To meet the agriculture production target set 
    out by the Basic Needs Programme, irrigation has to be provided at 
    the rate of some 60,000 ha per year in order to irrigate 1.25 
    million ha of land by the year 2000 AD.   The irrigation command 
    area is under expansion by government,  agency-assisted farmer 
    managed and exclusively farmer managed irrigation schemes.  
    Feasibility and pre-feasibility studies of irrigation projects 
    with large command areas reveal the expansion potential on a 
    further 190,950 ha of land. 
 
    The high rate of sediment deposition in dams, channels and even on 
    farm land is one of the major environmental problems.  The 
    recently established Environment Section in the Department of 
    Irrigation plans to start the incorporation of environment aspects 
    both in the Hills and in the large-scale irrigation schemes.  
    Recently, major irrigation projects have undergone EIA in order to 
    identify major environmental impact and prepare mitigation plans 
    to minimize irrigation-related environmental problems. 
 
    6.2  Hydroelectricity  
 
    The hydro power installed capacity in Nepal is only 238 MW out of 
    the 83,000 MW of theoretical potential, providing electricity to 
    only 9 percent of the total population.  After the commissioning 
    of the Arun III Hydro Project, the total installed capacity would 
    reach 654 MW by the year 2000 AD while the peak power demand at 
    that time is estimated to be 396 MW.  There is much scope and 
    potential to operate run-off river power projects.  
    Pre-feasibility, feasibility and detailed feasibility studies have 
    been carried out on several rivers, including large ones.  The 
    preparation of a master plan for small hydro power development 
    projects is in its initial stage.  The major environmental problem 
    in this sector is the high rate of sediment deposition in the dams 
    and reservoirs.  To assess potential environmental impacts, 
    environmental studies have been carried out or are under way in  
    the Trisuli Devighat Upgrading Project, the Marsyangdi Hydro Power 
    Project, the Karnali (Chisapani), Arun-III, Upper Arun and Sapta 
    Gandaki Hydro Power projects.  These studies are assisted by the 
    environmental unit of the Nepal Electricity Authority with a 
    provision to consider environmental aspects of water resource 
    development.  
 
 
 

B-III. DEVELOPMENT TREND

 
    1.  Economic Growth 
 
    Nepal has not been able to achieve much economic growth despite a 
    series of development plans since 1956 and an increasing trend in 
    foreign aid.  The poor performance of the agricultural sector has 
    been further accentuated by rising population pressure on land and 
    limited resources.  With little sectoral shift, the pervasive 
    dependence on land has led to the deterioration of the 
    environment.  Nepal had a per capita income of US$ 180 per annum 
    in 1988.  The appreciation of the dollar by about 14 percent 
    during the last year and the recent devaluation of the rupee by 
    about 20 percent has lowered per capita income to US$ 113 at 
    current exchange rates.  The per capita GDP of Rs. 5241 in 1990/91 
    at the current exchange rate of Rs. 42.70 to a US dollar is 
    equivalent to about US$ 123 per annum. 
 
    In 1990/91, the gross domestic product of Nepal was estimated to 
    have reached US$ 3230.4 million at current prices.  GDP by origin, 
    at two points in time, shows that agriculture continues to be the 
    dominant sector in the economy (Fig.4) although its share since 
    1978/79 fell by about 11 percent in 1988/89.  There has been a 
    substantial increase in community and social services while the 
    contributions of other sectors have been marginal.  There has been 
    no significant growth in the economy mainly because of stagnant 
    agriculture and a weak industrial base. 
 
    GDP growth was 2.31 and 2.01 percent respectively in 1988/89 and 
    1989/90.  This implies a decline in economic growth, especially 
    since the population has been growing at a sustained rate of 2.6 
    percent per annum.  From a surplus producer of foodgrains in the 
    1960s, Nepal has now become a net importer of food, producing only 
    80-85 percent of her needs.  There was some improvement during 
    1990/91 with GDP registering a growth of 4.01 percent.  
 
    The Gross National Product (GNP) grew at a rate of 8 percent in 
    1974/75 to 11.7 percent at current prices in 1988/89.  This growth 
    is insignificant when discounted for inflation.  The gross factor 
    income and transfer income are two major sources influencing GNP 
    growth.  Foreign savings have been mainly responsible for keeping 
    GNP (US$ 3156 million in 1989/90) higher than GDP (US$ 3113 
    million).  During the last couple of years, gross factor incomes 
    have been increasing while transfer incomes have been falling.  
    The per capita national income in 1989/90 was US$ 170 at current 
    prices. 
 
    Total investment increased from 14.5 percent of GDP in 1974/75 to 
    18.2 percent in 1989/90, with marked fluctuations.  A large part 
    of the investment was financed from external sources as internal 
    savings were quite low.  In 1988/89, gross capital formation 
    amounted to US$ 493 million, a slight decline (0.75%) over the 
    previous year due to increased consumption.  The performance of  
    the public sector in Nepal has not been very encouraging with a 
    large part of the investment providing only marginal returns. 
 
    The consumption pattern in Nepal is typical of a low income 
    country where the major part of the income is spent on food and 
    other essentials.   There has been no change in the extent of 
    consumption over the last 16 years.  Total consumption in 1989/90 
    was 90.7 percent of GDP as compared to 90 percent in 1974/75 and 
    85.9 percent in 1984/85.  It not only shows a low savings rate but 
    also an unstable pattern.  Another factor which is not conducive 
    to sustained economic growth is the rising trend in public 
    consumption, which increased from 8 percent in 1974/75 to 11.7 
    percent in 1989/90. 
 
    The gross domestic savings record is also quite erratic.  Average 
    annual savings increased at the rate of 12.3 percent between 
    1979/80 and 1989/90 compared to only 7.1 percent between 1974/75 
    and 1982/83.  Gross domestic savings as a proportion of GDP has, 
    however, declined over the last 16 years from 10 percent in 
    1974/75 to 9.3 percent in 1989/90 with fluctuations in between due 
    mainly to high liquidity in the economy and lack of alternative 
    investment opportunities.  To encourage past shortcomings and to 
    boost the economy, the country, in its forthcoming Eighth Five 
    Year Plan, will initiate new policy directives. 
 
    2.  Finance 
 
    The discrepancies between investment and savings, trade and 
    balance of payments, and revenue and expenditure have made the 
    country's financial position precarious.  Government expenditure 
    has been growing at an unsustainable rate in view of the weak 
    productive base and fragile revenue system.  Expenditure grew at 
    an average annual rate of 18.6 percent during the period 1974/75 - 
    1989/90.  Regular and development expenditures in 1974/75 were US$ 
    54.7 million and US$ 96.7 million respectively.  The absolute 
    amounts increased by 12.2 times and 12.9 times in rupee terms by 
    1989/90.  The rising trend has continued since 1981/82, when total 
    government expenditure increased by 31 percent over the previous 
    year. 
 
    Resource allocation in the public sector had been very inefficient 
    during the previous regime.  Investments were made without due 
    consideration of the financial or economic viability of the 
    projects and the economy's capacity to sustain them.  The rapid 
    increase in regular expenditure and  share of consumption in 
    development expenditure (68% of the development budget in 1989/90 
    went for consumption purposes) have created many distortions in 
    the economy.  There has been minimal trickle-down effect because 
    of the extremely high consumption component in government 
    expenditure. 
 
    The country depends heavily on imports for revenue, over half of 
    the total revenue collection.  However, the majority of the people 
    still remain outside the tax net including high-income individuals 
    and businesses who benefit most from government facilities.  Thus, 
    government revenue does not relate to the volume of economic 
    activity while fiscal policies remain ineffective in directing the 
    course of economic development.  In spite of the many revenue 
    facilities enjoyed by the industrial sector, its contribution to 
    government revenue has been insignificant.  Without effective 
    fiscal instruments, the government has had to depend increasingly 
    on the more accessible foreign assistance and loans to finance its 
    increasing expenditure. 
 
    The total outstanding debt reached US$ 1914 million at the end of 
    the first nine months of 1990/91, out of which 77 percent was 
    external loans and the remaining 23 percent, internal.  The total 
    outstanding debt was 57.2 percent of GDP, with external debt 
    accounting for 41.5 percent and internal loans, 15.7 percent.  The 
    government's increasing dependence on loans to finance its 
    deficits has put a great strain on the current account balance.  
    This strain has been disguised  by the flow of external finance.  
    Foreign outstanding debt increased by 21.1 times in 1989/90 over 
    1979/80.  The problem has been further aggravated with the private 
    sector being increasingly squeezed out of the money market as the 
    government takes recourse to financing deficits through loans from 
    the banking system and consequently also putting pressure on the 
    balance of payments position. 
 
    The ratio of expenditures to GDP in Nepal which was 22.2% in 
    1989/90, has been growing continuously over the years although it 
    is relatively less than the neighbouring countries of Pakistan 
    (26%) and Sri Lanka (over 30%).  Of the total government 
    expenditure in 1988/89, 65 percent was spent on consumption goods.  
    Regular expenditure accounted for about 38 percent of total 
    expenditure during the first nine months of 1990/91.  As a result 
    of the mistakes in the past, the major part of regular expenditure 
    goes as payment of salaries and allowances, subsidies to public 
    enterprises and debt servicing.  Debt servicing was 34.2 percent 
    of the regular expenditure budget in the fiscal year 1989/90, an 
    increase of 25.4 percent over 1974/75. 
 
    Resource mobilization in Nepal has been among the lowest in the 
    world.  Total revenue in 1989/90 accounted for 10.1 percent of 
    GDP.  The tax base is presently extremely narrow with import- 
    related taxes being the major source of revenue.  Revenue from 
    custom and sale of goods and services accounted for about 80 
    percent of total tax revenue in 1988/89 without any appreciable 
    shift from the condition prevailing in 1978/79 (Fig. 5).  The 
    positive correlation between imports and revenue is documented by 
    the following statistics: imports during 1984/85-1988/89 
    registered an increase of 16.3 percent annually while revenue 
    collection grew at an annual rate of 15.7 percent.  Imports 
    recorded 8.2 times higher rate of increase during the period while 
    revenue increased only by 7.7 times.  About one-fifth of total 
    revenue was derived from non-tax sources, including a major 
    contribution from license fees, import licenses and auctions.  
 
    External dependence has increased substantially.  In 1974/75, 
    external assistance was 25.5 percent of total government 
    expenditure and 40 percent of development expenditure.  By 
    1988/89, the share of foreign aid had increased to 40.8 percent 
    and 59.6 percent of total and development expenditure 
    respectively.  The volume of foreign aid increased substantially 
    during 1984/85-1988/89 with commitments and disbursements 
    increasing at an annual rate of 27.4 percent and 23.6 percent 
    respectively, at current prices.  The implementation of the 
    Structural Adjustment Programme in 1986/87 brought even greater 
    increases in foreign assistance.  The level of foreign aid 
    commitment increased by 36.1 times in rupee terms, between 1974/75 
    and 1989/90.  In terms of US dollars, however, foreign aid 
    commitment increased only by 9.2 times from US$ 43.8 million in 
    1974/75 to US$ 403.2 million in 1988/89 at current prices, 
    indicating a substantial erosion in the value of the rupee as 
    compared to the US dollar.  While 73.1 percent of aid 
    disbursements was in the form of grants in 1979/80, it declined to 
    22.9 percent in 1988/89 due to substantial increase in the loan 
    component.  Debt servicing commitments are already taking up a 
    major share of the government's regular expenditure. 
 
    Bilateral aid constituted 30.1 percent of total aid disbursement 
    of  US$ 219.6 million in 1988/89.  The annual growth rates of 
    bilateral and multilateral aid during the 1978/79 - 1988/89 period 
    were 12.2 percent and 24.3 percent respectively.  A larger part of 
    the bilateral aid was in the form of grants while multilateral aid 
    comprised mainly of loans.  More than half of the aid 
    disbursements (55.1%) went into infrastructure development (power, 
    transport and communication) while agriculture, irrigation and 
    forestry were allocated 25.9 percent of the total.  The sources of 
    finance for 1979/80 and 1989/90 show that while the proportion of 
    foreign loans and internal borrowing had doubled while the foreign 
    grant component had declined, indicating a greater debt burden on 
    the economy. 
 
    Between 1974/75 and 1982/83, the major part of foreign aid 
    commitments were to   the agricultural, power and transport 
    sectors.  In recent years, priority has shifted to the power, 
    communications, irrigation and education sectors.  In 1989/90, 
    18.8 percent of aid commitment was made to the agricultural, 
    irrigation and forestry sectors.  Transport and communications 
    received 19.4 percent, power 20.1 percent, education 4.4 percent, 
    and health, social services and other sectors, 37.3 percent.  
    Foreign aid commitment for 1989/90 was US$ 529.5 million, out of 
    which the Nepal Aid Group, comprising the World Bank, UNDP and ADB 
    member countries, committed 82.6 percent.  The protection and 
    conservation of the environment in developmental activities has 
    been receiving increased emphasis in recent years. 
 
    The resource gap has increased especially since 1981/82 when the 
    deficit stood at 54.2 percent.  In 1988/89, expenditure was US$ 
    697.8 million and revenue only US$ 301.4 million, with a deficit 
    of 56.6 percent.  Many distortions have thus crept into the 
    economy like spiralling prices, heavy imports and low savings. 
 
    The reliance of the budget on foreign assistance during 
    1974/75-1988/89 increased by 17 times.  Internal borrowing 
    increased by 23.3 times in 1988/89 over 1974/75.  External 
    assistance and internal borrowing increased to 9.5 percent and 3.7 
    percent of GDP respectively in 1988/89 from the 1974/75 figures of 
    2.3 percent and 0.7 percent.  The Structural Adjustment Programme 
    (SAP) failed to curb the fiscal deficit as expected over the 
    three-year period beginning 1986/87.  The deficit was 37.4 times 
    greater in absolute terms in 1988/89 than in 1974/75.  This has 
    had a strong negative impact, especially on prices, the brunt of 
    which is borne by the common person. 
 
    Internal loans have also become an integral part of deficit 
    financing, with the banking sector owning 72 percent of the total 
    outstanding government bonds, which accounted for 15.8 percent of 
    GDP in 1988/89.  The heavy reliance on the banking system has 
    increased money supply which in turn has greatly affected prices 
    and resulted in high inflation.  
 
    Foreign debt has increased at the rate of 33 percent per annum 
    between 1974/75 and 1988/89.  From Rs. 34.1 million (US$ 3.4 
    million) in 1974/75, the net outstanding foreign debt increased to 
    Rs. 33,691 million (US$ 1186.3 million) at the end of the first 
    nine months of 1989/90, which is equivalent to 39.7 percent of 
    GDP.  The increase in foreign debt has been especially significant 
    after the implementation of the SAP. 
 
    Nepal does not need to restructure its debts in the immediate 
    future as almost 99 percent of its loans carry interest rates of 
    less than 3 percent and a maturity period of 20 to 40 years.  The 
    debt servicing burden has, however, been rising fast in terms of 
    amortization and interest payments and also in the depreciation of 
    the Nepali rupee compared to the US dollar.  Although Nepal's debt 
    service ratio is low compared to neighbouring countries, the 
    strain on its economy is apparent from the fact that debt 
    servicing accounted for 30.3 percent of the country's regular 
    expenditure in 1988/89 and this increased further to 34.2 percent 
    in 1989/90.  The situation calls for the urgent attention of the 
    international community on debt relief for poorer countries. 
 
    3.  Trade 
 
    During the last 16 years, Nepal's trade deficit has been growing 
    with exports increasing at the rate of 12.5 percent per annum and 
    imports registering a 18 percent growth rate.  The country's 
    exports amounted to US$ 176.5 million during the first nine months 
    of 1990/91 while imports were valued at US$ 541.8 million.  
    Although trade with India declined from 82.2 percent in 1974/75 to 
    30.8 percent in 1991, through trade diversification incentives, it 
    is still the major source of imports of essential commodities and 
    exports of primary products.  Trade diversification occurred 
    mainly from the import of petroleum  products, fertilizer and 
    construction material aid and other goods from third countries and 
    the export of carpets and ready-made garments.  The liberal trade 
    policy with India following the recent Trade Treaty is expected to 
    increase trade transactions in the coming years. 
 
    India is still, however, the most important trading partner of 
    Nepal as clearly experienced during the trade and transit deadlock 
    of 1988/89.  The trade deficit with India has been increasing at 
    the rate of 11.1 percent per year during the last 15 years.  
    During the first nine months of 1990/91, trade deficit with India 
    increased by 35.2 percent (amounting to US$ 137 million) while 
    third country deficit recorded a growth of 14.9 percent (US$ 228.3 
    million) during the same period.  The  composition of foreign 
    trade has undergone some structural changes with a shift from 
    export of primary products to manufactured items.  While the share 
    of primary products was 82.4 percent of total exports in 1974/75, 
    it had fallen to 26.4 percent by 1987/88, mainly due to 
    insufficient production at home and unfavourable prices in India.  
    About 72 percent of Nepal's total exports to India, during the 
    first nine months of 1990/91, was based on natural resources.  
    Major items included jute goods, rice bran oil, pulses, oil cakes, 
    ginger, live animals, mustard and linseed.  Natural resource-based 
    products accounted for only a negligible portion of exports to 
    third countries and comprised mainly of hides and skins.  Exports 
    of finished products increased from 8.7 percent to 63.1 percent 
    during the same period.  However, exports are dominated by woollen 
    carpets and ready-made garments mainly to German and US markets.  
    Without diversification of exports, both in terms of products and 
    markets, it will be difficult for Nepal to maintain sustained 
    exports. 
 
    Although the trade deficit, calculated in US dollars, had 
    increased to 17.4 percent per annum by the end of 1987/88 relative 
    to 1982/83, the balance of payments position continues to remain 
    favourable.  This has been made possible mainly due to the flow of 
    external assistance.  The impact of the unfavourable terms of 
    trade is, however, already reflected in the rapid increase in the 
    current account deficit, which rose by 2.4 times (US$ 342.5 
    million) in 1987/88 over 1983/84.  The current account deficit is 
    being met mainly from loans. 
 
    Nepal's external trade position continues to be highly 
    unfavourable in spite of the many reforms introduced by the 
    government from time to time.  There has been substantial 
    diversification in trade over the years with India.  Nepal's 
    dependence on India for essentials, however, continues unabated.  
    Because of the highly unfavourable trade balance, the overall 
    deficit has been growing at the rate of 20.1 percent during the 
    last 15 years.  Various distortions have also surfaced in the 
    economy due to the highly unfavourable balance of trade.  Trade 
    reforms have been implemented under the SAP using such measures as 
    the licensing system, the OGL/passbook system and auctioning of 
    import licenses for commercial items.  In March 1989, the 
    government introduced cash incentives on the export of certain 
    items to third countries.  
 
    4.  Demographic Trend 
 
    Rapid population growth has become the main constraint to 
    sustainable economic development in Nepal.  The intercensal 
    population growth rate was 2.66 percent per annum during the 
    1971-81 period.  The momentum of growth has remained unchecked and 
    the country today has an estimated population of 18.4 million.  
    About 40 percent of the total population is below 15 years with 
    the median age at 19.9 years.  This signifies a great potential 
    for rapid growth in the ensuing years. 
 
    Even with the implementation of various population control 
    measures, vital rates indicate that the growth rate will remain 
    consistently high at least up to 2000.  Without control 
    mechanisms, a substantial rise in population will continue as the 
    crude birth rate remains consistently high (39.7 per thousand in 
    1981) and the death rate continues to decline (13.5 per thousand 
    in 1981).  The high infant mortality rate (108 to 144 per thousand 
    live births) has kept the total fertility rate as high as 5.58 to 
    6.02.  
 
    About 80 percent of the total migration in Nepal is rural based.  
    The intercensal decade added about 397,000 net lifetime migrants 
    to the Terai population by 1981.  Only about 6.4 percent of the 
    country's population lived in the 23 designated urban centres in 
    1981.  The country had 33 designated urban areas with an estimated 
    population of 1.57 million in 1987.  The urban growth rate of 7.6 
    percent was about three times higher than the national average.  
    Almost 40 percent of urban growth is attributed to migration. 
 
    Although literacy rate  has increased over the years, it was 
    estimated at only 34.8 percent in 1986.  While 51.8 percent of the 
    male population was literate, the literacy rate among females was 
    only 18 percent.  Literacy among the urban population was found to 
    be almost double (62.7%) that of the rural population (32.5%). 
 
    The intercensal growth of the economically active population 
    averaged 3.51 percent annually, with the population 10 years and 
    above growing at 2.55 percent.  The labour force increased by 2.3 
    million between 1971 and 1981 of which 2 million were economically 
    active.  This has led to increased underemployment in the rural 
    sector as there is very little intersectoral mobility.  The 
    agriculture sector continues to absorb the vast majority of 
    entrants who join the labour force every year.  This phenomenon 
    has created extreme pressure on the natural resource base, 
    especially as productivity remains stagnant and land holdings grow 
    smaller and more fragmented. 
 
    There has been no significant change in the pattern of employment 
    over the last four decades, with over 90 percent of the population 
    still engaged in primary activities.  According to a recent survey 
    conducted by the Nepal Rastra Bank, agriculture and related 
    activities account for 82.2 percent rural and 34.4 percent urban 
    employment.  The labour force participation ratios have been 
    estimated at over 80 percent for males and less than 50 percent 
    for females. 
 
    The intense pressure on land has contributed significantly to 
    increasing absolute poverty in Nepal.  Growing desperation for 
    mere survival has prompted the poor farmer to exploit the natural 
    resource base beyond its capacity to regenerate.  Increasing 
    marginalization of agriculture has occurred, especially in the 
    Hills where resources are severely strained, as the number of 
    dependents on a piece of land grows and productivity continues to 
    decline. 
 
    Future demographic prospects are even more daunting.  Even if 
    Nepal is successful in curbing fertility over the next decade, the 
    country's population will rise to 24 million by the year 2000 AD 
    and will double by the year 2015.  Current efforts to combat 
    population growth will have some impact only by the year 2030.  In 
    Nepal today, 4.1 million girls are approaching reproductive age, a 
    figure which is 50 percent higher than all women currently 
    fertile.  Population dynamics indicate that although efforts at 
    curbing fertility and growth will have no impact during this 
    generation, the next generation will benefit tremendously from the 
    initiatives that are taken now.  As population control becomes the 
    long- term objective, short and medium-term efforts should be 
    directed toward increasing general employment levels (through 
    capital widening and deepening); expanding  rural-based 
    development and employment (to avoid influx to urban areas); 
    investing in health and family planning, education, housing and 
    infrastructure; improving accessibility and flow of information on 
    contraception and related fertility curbing methods, and food 
    supply.  
 
    5.  Income Distribution 
 
    A predominantly agricultural economy, with over 90 percent of the 
    population dependent on agriculture and related activities for its 
    livelihood, land is the most important resource in Nepal.  In a 
    country where only one-fifth of the total land is cultivated, the 
    pressure on land has become extremely high.  Fragmentation of 
    already minuscule holdings has resulted in increasing 
    marginalization of agriculture, pressuring the very poor to 
    exploit the environment beyond its regenerative capacity.  All 
    these have contributed in declining agricultural productivity and 
    creating a vicious circle of want and malnutrition. 
 
    The dominance of agriculture as the major source of income and 
    livelihood directly relates it to income distribution.  Half of 
    about 2.2 million farms in the country are less than 0.5 ha in 
    size, the average land holding being a mere 0.15 ha and this too 
    undergoes an average of three fragmentations.  On the other hand, 
    16.1 percent of the farmers own 62.8 percent of the land, 
    indicating a highly skewed ownership pattern.  The proportion of 
    landless households had progressively increased to 20 percent by 
    1981/82. 
 
    The poor performance of the agricultural sector is a major factor 
    in contributing to increasing poverty in Nepal.  Grain production 
    increased at the rate of 1.5 percent during the period 1975/76 to 
    1985/86 with productivity falling by 0.5 percent and population 
    recording a growth of 2.6 percent.  Per capita production thus 
    fell from 92 percent of requirements in 1976 to 80-85 percent in 
    1988.  The natural resource base has been severely damaged during 
    the last 16-17 years with the forest crown cover being reduced by 
    more than 25 percent.  This has increased soil erosion in the 
    Hills, created fuel wood shortages and compelled households to 
    burn dung and thus rob the land of valuable soil nutrients. 
 
    According to a National Planning Commission (NPC) estimate, 42.5 
    percent of the country's population is below the poverty line.  
    The NPC estimated a poverty line income of Rs. 1,971 (US$ 110) per 
    person per annum at 1984/85 prices, basing it on minimum caloric 
    requirement.  Even in view of the NPC estimate, 40-60 percent of 
    the country's population live at levels below minimum caloric 
    intake, with 97 percent of the absolute poor living in rural 
    areas.  It is estimated that the majority of the population living 
    in the Hills and Mountains and a quarter of the Terai population 
    fall below the poverty line.  The environmental implication of the 
    increasingly marginalized farming system of the Hills has become 
    quite serious. 
 
    A sample survey conducted by the NPC in 1976/77 showed that the 
    bottom 40 percent of households in the country received only 8.7 
    percent of incomes whereas the share of the top 10 percent was 
    46.8 percent.  Another survey conducted by ARTEP (Asian Regional 
    Team for Employment Promotion) found that the bottom 40 percent 
    shared 13.9 percent and 10.7 percent of the Hills and Terai 
    incomes respectively.  The top 10 percent on the other hand 
    received 32.1 percent and 38.5 percent of incomes in the Terai and 
    Hills respectively.  The relatively high Gini coefficients of 0.59 
    in the NPC survey and 0.43 (Hills) and 0.51 (Terai) in the ARTEP 
    study indicate the incidence of inequality between the two groups.  
    The Multi-Purpose Household Budget Survey conducted by the Nepal 
    Rastra Bank in 1987, estimated the Gini coefficient at 0.57, 
    corroborating the results of earlier studies. 
 
    The Gini coefficient of per capita income is, however, a more 
    appropriate measure of income distribution than total income, 
    especially in Nepal where wealthier households support 
    increasingly larger numbers than the poor households.  The per 
    capita measure shows that with a Gini coefficient of 0.25, income 
    distribution in Nepal is fairly even.  The bottom 40 percent share 
    23 percent of total income with the top 10 percent receiving the 
    same proportion (Table B-2).  Except for the Mountains where the 
    distribution of poverty is almost uniform, area and rural/urban 
    income distribution depict almost the same pattern as income 
    distribution for  the whole of Nepal. 
 
    The almost flat income distribution in the country precludes the 
    possibility of any meaningful redistribution measures.  The heavy 
    population pressure on land, the country's major resource, has put 
    a severe strain on its availability.  Without a substantial 
    increase in farm productivity and commensurate compensatory 
    off-farm income earning opportunities, poverty cannot be 
    effectively tackled.  To achieve these goals, economic growth has 
    to be accelerated along with population control.  
 
            Table B-2 : Per Capita Income Distribution in Nepal 
                       (Percentage Share of Income) 
    _________________________________________________________________ 
                             Rural                     Urban*  
                      ____________________  ________________________ 
    Income Group      Nepal  Terai   Hills  Mountain   Terai   Hills 
    _________________________________________________________________ 
 
    Bottom 40%         23     24      23       33        27     24 
    Middle 50%         54     53      56       54        52     56 
    Top 10%            23     23      21       13        21     20 
    ________________________________________________________________ 
 
    Note : * No urban areas in the Mountains 
 
    The Land Administration and Land Act (1964) attempted to bring 
    changes in the agrarian structure.  Available information 
    indicates that the land ownership pattern is highly skewed with 9 
    percent of households owning nearly 53 percent of the cultivated 
    land.  The Agricultural Statistics of Nepal (1983) estimated 1.93 
    ha as the average operational land holding size.  It is lower in 
    the Hills (1.12 ha) than in the Terai (2.31 ha).  In the Hills, 
    more than 60 percent of the farm households own less than one 
    hectare of land, the average being less than 0.5 ha.  This 
    disparity in land holding has encouraged cultivation of more and 
    more marginal land and shifting cultivation on steep land leading 
    to more soil erosion.  Uneven distribution of assets and income 
    opportunities have also put extra pressure on land 
    resources-marginal land, adjoining forest land or grazing areas.  
    In order to address the problems of land resources, the Fifth Plan 
    introduced a land use planning concept in 1975.  The Sixth Plan 
    (1985-90) adopted a land use policy that prescribed restricting 
    the cultivation of unproductive and marginal land, afforesting 
    degraded land and implementing soil conservation measures. 
 
 
 

B-IV ENVIRONMENTAL ISSUES

 
    1.  Introduction 
 
    The major environmental problems in Nepal are land degradation, 
    deforestation and pollution.  Poverty is the root cause of 
    environmental degradation as land and forest resources are over- 
    exploited because of heavy dependency in the natural resource 
    base.  However, water and mineral resources are under-utilized 
    because of lack of financial resources and infrastructure due to 
    the low level of economic development.  Recently, pollution 
    problems have also emerged, though limited to urban areas. 
 
    2.  Land Degradation 
 
    In Nepal, the Siwaliks and Middle Mountain zone are more 
    susceptible to erosion.  The former has erodible soil and poor 
    geological formation while the latter has high population pressure 
    with limited productive areas.  An increasing rate of soil erosion 
    accompanied by the loss of nutrients, inadequate water management 
    and increased dependence on the monsoons are the primary causes of 
    declining agricultural productivity.  A rough estimate of surface 
    soil loss in the Mountains/Hills ranges from 5-10 tons/ha/yr in 
    well-managed land to 40-200 tons/ha/yr in degraded land.  
    Cultivation on sloping land causes high nutrient loss and as a 
    result land degradation is severe.  
 
    Also, overgrazing, overuse of marginal land followed in the past 
    and shifting cultivation practices are contributing to the loss of 
    fertility.  The absence of a national land use policy and 
    programmes, and a narrow sectorial approach have further led to 
    land use conflicts, particularly between forestry and agriculture. 
 
    One of the causes of decline in soil fertility is the uneven and 
    inappropriate use of chemical fertilizers which are used without 
    understanding soil fertility status, nutrient availability and 
    crop requirements.  In Nepal, the average use of chemical 
    fertilizers is only 19 kg/ha which is the lowest among the South 
    Asian countries.  Out of the total consumption, about 72, 7, 19 
    and 2 percent of the chemical fertilizers are consumed in the 
    Terai, Kathmandu Valley, Middle Mountains and High Mountains 
    respectively.  The consumption of pesticides in Nepal is only 
    about 0.25 kg/ha.  In spite of the use of chemical fertilizers 
    including improved seeds, productivity has improved very slightly. 
 
    About 20 percent of the cattle population in Nepal are 
    unproductive which exert heavy pressure on forest, agriculture and 
    grazing lands.  The increasing number of livestock further 
    contributes to accelerate forest degradation, compaction of soil 
    leading to the suppression of vegetation growth, and also to soil 
    erosion. 
 
    High erosion rate, landslides and river bank cutting have 
    increased sedimentation and flood hazards in the plains, including 
    river beds and agricultural land.  Nepal is estimated to lose 240 
    million m3 of sediment annually through its river system.  The 
    Karnali, Sapta Gandaki and Sapta Kosi rivers respectively carry an 
    estimated 60, 73 and 142 million m3 of suspended load 
    annually.  As the sediment load carried by the major rivers is 
    high, any storage projects in these corridors have a high 
    siltation rate.  
 
    Most rivers of Nepal are subject to changing courses in the Terai 
    during the flood season while in the Hills, bank cutting is a 
    serious threat.  Generally, at the debouching point in the Terai, 
    the rivers are braided which change to meandering form at 
    downstream stretches.  The Sapta Kosi river in the last 250 years 
    (1729-1979) has shifted about 125 km westward in India and about 
    40 km westward in Nepal.  Similarly, the rivers lying east of 
    Butwal in West Nepal are shifting eastward.  It has been estimated 
    that floods incur a loss of about 30 percent of revenue in the 
    Terai and 2 percent in the Hills. 
 
    The problem of flooding in the Terai is also high due to the high 
    bed load carried by the rivers in addition to the suspended load.  
    In the plains, almost all the rivers are widening and cutting 
    their banks each year.  River beds of some Terai rivers are rising 
    at an annual rate of 15-30 cm, due to high sedimentation. 
 
    Although no systematic information on slope failure due to 
    construction activities such as roads and canals have been 
    collected, some studies  have shown that 5 percent of landslides 
    were associated with roads and trails.  With the opening of more 
    hill roads and trails,  the landslide events triggered by these 
    activities could go up.  Similarly, some of the farmer-built 
    irrigation canals have been found to induce mass wasting. 
 
    3.  Deforestation 
 
    Encroachment of forest areas occur through the expansion of 
    agricultural and grazing land.  As forest distribution in the 
    country is uneven in relation to population, accessible forests 
    are over-used.  Consequently, forests are