Introduction

Nepal, primarily an agricultural country, is geographically divided into three distinct regions: mountains, hills, and terai, each offering a diverse array of climatic conditions. These regions provide extensive opportunities for cultivating various crops such as vegetables, fruits, spices, flowers, and other plantation crops, holding immense potential for the production and improvement of agricultural subsectors. Agriculture has played a vital role in the livelihoods of the Nepalese people, and any efforts directed toward the development of the agricultural sector contribute significantly to the country's economic growth. It constitutes 36% of the GDP and employs 65.5% of the total Nepalese population (Nepal’s Agricultural Landscape, n.d.), making agriculture the backbone of the nation. Despite the vast agro-ecological zone in the country, conducive to the production of diverse agricultural commodities, only 21% of the total land is available for cultivation (MoALD, 2020, n.d.). Out of the total cultivated area of 3,091,000 hectares in Nepal, the area dedicated to fruit production is 164,623 hectares (Agriculture & Livestock Diary, 2079, n.d.). Over the years, there has been a continuous increase in the area covered by horticultural crops and their production. The area covered and the production of fruits increased by 123% and 142%, respectively, in FY 201819 compared to 20001; however, productivity still hovers around 9-10 MTha (STATISTICAL-INFORMATION-ON-NEPALESE-AGRICULTURE-2077-78.Pdf, n.d.). The increase in area and production is more pronounced for summer fruits, followed by citrus and then winter fruits. For vegetables, potatoes, and spices during the same period (FY20001 to FY 201819), the increase is 89%, 158%, and 37% for vegetables; 50%, 137%, and 58% for potatoes; and 151%, 337%, and 74%, respectively (MoALD, 202021, n.d.). Analyzing the increase in the area and production of plantation crops in the same period, there is a 139% increase for tea and a 280% increase for coffee, with a remarkable 551% and 498% increase, respectively (Atreya and Manandhar, 2016). Despite the increasing trend in the area under horticultural crops, the rate of increase remains considerably lower than its potential. Research, education, and development partners must collaborate at all levels (federal, provincial, and local) for the optimal development of horticultural crops in the country. Horticulture contributes to 15% of the Agricultural Gross Domestic Product (AGDP), comprising 7.04% of the fruit and spice crop, with apples specifically contributing 0.42% (Atreya and Manandhar, 2016). With the rising levels of education, Nepalese citizens are becoming more conscious of their nutritional requirements, leading to an increased demand for vegetables and fruits.

Apples (Malus domestica) are a significant temperate fruit produced in the mountainous regions of Nepal (Gayak et al., 2020). Originating in southwest Asia, east Europe, and southwest Siberia, the history of apples is nearly as ancient as that of Western civilization. The apple is native to central Asia, tropical America, and various parts of Africa and America. Apple farming in Nepal commenced in the Kaligandaki Valley before 1960. However, the first commercial apple farming venture took root in 1965 at Marpha, Mustang, when a Horticultural Farm was established, introducing new apple varieties and production methods (Commercial Apple Farming in Nepal, 2013). According to official statistics from the Ministry of Agriculture and Livestock Development in 2020, apples are cultivated in 55 out of the 77 districts in Nepal, with a production of 31,386 tons and a yield of 7.22 tons per hectare. Major apple-growing districts include Mustang, Darchula, Solukhumbu, Kalikot, Humla, and Jumla (Shrestha et al., 2017). Despite recent increases in the acreage under apple cultivation and overall production, the domestic demand has not been met, leading to a rise in imports.

Kalikot, located in the remote Karnali province of Nepal, is a secluded district surrounded by hills and mountains to the east, Achham to the west, Bajura and Mugu to the north, and Jajarkot and Dailekh to the south. Positioned at 290° 5' 12" north latitude and 810° 35' 23" east longitude, Kalikot spans elevations ranging from 738 m to 4,790 m above sea level. Serving as the district headquarters, Manma Bazaar is situated at an elevation between 1,500 m and 84,790 m (Kalikot: An Epitome of Karnali Region, n.d.). Approximately 90% of the population in Kalikot is engaged in agriculture. The climatic conditions vary from subtropical to alpine, with the elevated hills proving to be climatically suitable for apple production. Kalikot is administratively divided into three municipalities and six rural municipalities. Notably, Raskot Municipality, situated in Siuna and equipped with nine wards, is well-suited for apple cultivation. It earned the designation of an apple zone in the fiscal years 2075-76. Subsequently, in 2077, it merged with PMAMP and PIU Jumla to enhance apple production. Productivity in Kalikot for apple cultivation falls below the global average but surpasses the national average. To comprehensively understand the strengths and weaknesses associated with this situation, an investigation into the production and marketing of apples in Kalikot was conducted.

1 Materials and Methods 

1.1 Selection of the study area

This study was conducted in the Kalikot district of Nepal. Raskot Municipality was purposively selected because it was the major area of apple production. Similarly, it was also the command area of Prime Minister Agriculture Modernization Project (PMAMP), Project Implementation Unit, Apple Zone, Jumla/Kalikot.

1.2 Sample size and sampling procedure

Respondents include two categories: farmers and traders. Altogether, 78 farmers were selected from the study site using simple random sampling techniques out of 400 registered farmers. Similarly, to collect information related to marketing practices, 10 traders were selected through the snowball sampling techniques. Traders are the contractors, middlemen, wholesalers, and retailers who acquire apples directly or indirectly from the procedures. 

The sample size was calculated by using Raosoft software at a confidence level of 95% and a margin of error 10%, sample size 78 was calculated. 

1.3 Research designInstruments 

1.3.1 Preliminary field study 

Preliminary survey field visits were conducted to gather information regarding the geographical, institutional, and socio-economic characteristics of the study area.

1.3.2 Household survey 

A household survey was conducted with the help of a pre-tested and structured interview schedule. Both qualitative and quantitative in-depth information regarding the various aspects of apple cultivation was collected using the face-to-face interview technique. A total of 78 samples were taken for the household survey using the personal interview schedule (PIS).

1.3.3 Key informant survey (KIS)

Key informants such as experienced leaders of the village who have lived in the village for years, the zoning officer, the rural municipality's technicians, and the zoning officer were asked a series of questions about the present scenario of apple cultivation and its economics of production.

1.3.4 Focus group discussion 

A focus group discussion was conducted among farmers, local leaders, the head of PIU, Kalikot, and all ethnic groups, including both male and female, to verify the results obtained from the household survey with the help of a checklist. They provided valuable information about challenges faced by farmers and discussions on the benefits of apple farming that helped to create awareness among farmers and helped develop strategies for solving problems. 

1.4 Data and data types 

1.4.1 Primary data 

The primary data for this research was collected from farmers who were engaged in apple farming for years. The primary method was used to collect information and take actual information on apples and figure out the problem faced by apple growers in a real scenario. Household surveys through interview schedules, key informant interviews, and focus group discussions were conducted to collect the primary data.

1.4.2 Secondary data 

The secondary data were obtained through different publications of the Prime Minister Agriculture Modernization Project (MAMP), Department of Agriculture, Ministry of Agriculture and Livestock Development (MOALD), Central Bureau of Statistics (CBS), Statistical Information on Nepalese Agriculture, Annual Report of Program Implementation Unit, Jumla, relevant articles, etc. 

2 Analysis Techniques

The necessary data obtained from both the primary and secondary sources were coded and entered into the computer for analysis. The data analysis was done by using MS-Excel and SPSS.

SPSS was used for both the qualitative and quantitative data analysis. Different analytical tools like descriptive statistics and inferential statistics such as frequency distribution, trend analysis, etc are used. The following analysis was performed.

2.1 Descriptive analysis

For descriptive analysis of the study area, the socioeconomic and farm characteristics of the respondents like age group, gender distribution, educational level, family size, total land holding, years of farming, etc. were described using statistics like frequency, percentage, mean, standard deviation, etc.

2.2 Analysis of economic data

2.2.1 Cost of production

Cost of production was categorized into; cost of initial investment (cost incurred during the gestation period of 4 years) and operating cost (cost from 5^th - 20^th year; period of realization of output). Both the variable cost and fixed cost were taken into account for the calculation of the cost of production. Cost was calculated for one hectare of land from years 1^st to 20^th. The time value of money was considered during the calculation procedure.

Where, Variable cost includes cost that is incurred on variable inputs such as labor, fertilizers (FYM), plant protection measures (Roger, Servo oil and Bordeaux paste) and tiller use. All variable costs are calculated on per year per hectare basis; Fixed cost is the cost of input that has life of more than one year. The fixed cost for land preparation and layout, pit digging and sampling establishment, fencing, irrigation canal installation and tools and equipment were included. Similarly cost incurred for land rent, land tax and water charge was calculated for every year.

2.2.2 Return per hectare

To calculate the return per ha, the average production per tree was first determined. Then it was multiplied by 426 to obtain the production for 1ha of land because l ha of land would accumulate about 426 trees following the farmer's practice in the study site.

Mathematically, Return per hectare = Quantity of apples produced per ha (kg) x Farm gate price (NRs). For the study purpose farm gate price was kept Rs 40 per kg as it was the most common price received by apple growers.

2.2.3 Cost-benefit analysis

The data obtained from the survey were analyzed using cost-benefit analysis. Economic performance indicators such as the BC ratio, NPV, IRR, and payback period were calculated in the Cost-benefit analysis.

The B: C Ratio (BC ratio) comprises the present value of all benefits generated to the present value of all costs incurred during the apple production period of 20 years. The formula for the benefit-cost ratio is outlined below:

Where, Bt = Benefit in each year; Ct = Cost in each year; n = Number of years; i=Discount rate 

The net present value (NPV) indicates the present value of expected returns of the project or net cash flow over the life period of a project when discounted at the opportunity cost of capital. In this study, the opportunity cost of capital was considered 12.00 percent per annum. The positive NV indicates the worthiness of investment in an apple orchard. It is simply the net present worth of the cash flow stream.

Where, Bt = Benefits from each year; C = Costs in each year; t = Numbers of years; i = Discount rate

Internal Rate of Return (IRR) represents the average earning capacity of an investment over the economic life period of the project. It is that discount rate that makes the net present value of the project benefits equal to zero. The trial and error method is usually used to determine IRR, and the same was used to compute in this study too. When the calculated IRR is greater than the market rate of interest, then the investment is considered viable. For the calculation of IRR, the formula given below was used:

Where, LDR = Lower discount rate; UDR = Upper discount rate 

2.3 Payback period

The payback period of the apple production indicates the number of years required to recover the investment made in establishing and maintaining the orchard. An Un-discounting technique was used to determine the PBP. The method followed is to successively add the net returns from each production year until the investments are completely recovered. Since the cash flows are not uniform, the payback period was calculated by successively reducing the net cash flows from outstanding investments.

2.4 Analysis of market margin and producer share

Prevailing marketing practices and marketing channels were studied for estimating the marketing margin and producer share of apple produced in the study area. Marketing margin was calculated as follows: 

2.5 Indexing

Problems related to production and marketing alone were ranked with the use of the index. Scaling techniques, which provide the direction and extremity attitude of the respondent towards any preposition (Miah, 1993) were used to construct an index. The intensity of production and marketing problems being faced by apple producers was identified by using five five-point scaling techniques comparing the most severe, most serious, moderate problems, low problem, and least problems using scores of 1.0, 0.8, 0.6, 0.4, and 0.2. The index for the intensity of production and marketing problems faced by respondents was computed by using the formula: 

Where, IS = index value for intensity of problems; S = Scale value for i^th intensity; Fi = frequency of i^th response; N = total number of respondents

2.6 SWOT analysis of apple production in Kalikot district

SWOT stands for Strength, Weakness, Opportunity, and Threat. Strength and weakness are the internal factors, whereas opportunity and threats are the external factors affecting Apple production. The strength, weaknesses, opportunities, and threats of apple production in Kalikot districts were analyzed to track the potentiality of adopting an apple production system in the Kalikot district.

3 Results and Discussion

3.1 Socio-economic and demographic characteristics of the respondents

3.1.1 Gender distribution of respondents of the surveyed area

The total sampled population was 78. Out of the total sample, 83.3% of the respondents were male and only 16.7% were female (Table 1). This revealed that most of the households had males as decision-makers. Moreover, it also shows that most of the males are involved in apple farming compared to females.

3.1.2 Age of respondents

The mean and standard deviation of the age of the respondents in the surveyed area were found to be 47.5 and 11.805, 51 respectively. The respondents were within the range of 27 to 72 years (Table 2). The age of respondents was categorized into three categories: < 40 years, 40 to 60 years, and > 60 years (Figure 1). The age distribution of respondents revealed that the majority of the respondents (53.8) were between the age ranges of 40 to 60 years, 33.3% of the respondents were below 40 years of age and 12.8 % were above 60 years of age.

3.1.3 Education status of the respondent

Education is the pillar of development. The educational status of farmers would play a significant role in socio-cultural and economic change in a society aiding the adoption of modern technology in the agriculture sector. For the study, the educational status of the respondents has been grouped into five categories: illiterate, primary, and lower secondary, secondary, higher secondary, and graduate. From the study, it was found (Table 3; Figure 2) that most of the respondents had a primary level of education (48.7%) followed by illiterate (24.4%), secondary (15.4%), higher secondary (9%), and graduate (2.6%). It shows that the majority of the apple growers in the study area were educated.

3.1.4 Ethnicity of the respondent's household

Caste is regarded as an important social structure in Nepalese society with its long historical and religious roots. Ethnic groups were categorized as Janjati, Dalit, Chhetri, Brahmin and others. In the study area, the majority of the respondents were Brahmin (55.1%) followed by Chhetri (38.5%) and Dalit (6.4%) (Table 4).

3.2 Distribution of economically active population 

The total population of sampled households was categorized into three classes, namely, less than 15 years, 15 to 59 years, and more than 59 years as considered by the government of Nepal. Whereas, the age group of less than 15 and greater than 60 were considered as an economically inactive group who depend on economically active groups for their living. The distribution of the economically active population in the household is presented below in Table. It indicated that 58.77% of the population was economically active whereas, 41.21% of the total population lies in the economically inactive age group (Table 5). 

3.3 Primary occupation of the household 

Primary source of household income was categorized as agriculture, services and business and others. Study revealed that, Agriculture (55.12) was the major source of household income followed by service (23.07) (Table 6; Figure 3).Thus making it clear that, economy of Kalikot's household mainly depends on agriculture.

3.4 Source of credit 

The study revealed that the majority of the respondent were pretty much reliant on their fund (75.64%) for farming operations (Table 7). However, 15.38% of the respondents reported banks as the sources of credit while 8.97% of the respondents reported local moneylenders as their major source of credit.

3.5 Years of apple farming 

Apple farming in the study area was done for many years. Years of apple farming were categorized into four categories (Table 8). The majority of respondents have done apple farming for 1 to 10 years (44.9%) followed by 10 to 20 years (42.3%), 20 to 30 years (11.5%), and 30 to 40 years (1.3%). It revealed that apple farming in the study area was carried out for decades and has been passed down from one generation to another.

3.6 Farm characteristics 

3.6.1 Landholding of the respondents

According to the data obtained from the surveyed area, the average land holding of the respondent's household was found to be 12.15 ropani out of which 6.28 ropani of land was found on an average was used for apple cultivation (Table 9). Maximum apple cultivation was done in 20 ropani and a minimum of 1 ropani was used for apple cultivation. Hence it indicates that a major portion of agricultural land in the surveyed area is occupied by apple orchards.

3.6.2 Bearing and nonbearing trees in the study area

The total number of bearing and nonbearing trees in the studied area was found to be 10,645 and 2,596, respectively (Table 10). Households having 550 bearing trees were noted to be the maximum in the figure. In the study area total number of maximum trees was 900. 

3.7 Household access to various service

3.7.1 Involvement in cooperatives 

Respondent's involvement in any agriculture-related cooperatives is presented below (Table 11). The study revealed that 83.3% of the respondents were members of agriculture cooperatives.

3.7.2 Training status 

The study revealed that only 55.1% of the respondents had received training related to apple production and management practices in the study area (Table 12).

3.7.3 Subsidy status

The majority of the respondents (64.1%) had received subsidies on apple production from service providers like PMAMP, PIU, AKC, Municipality, etc (Table 13). These subsidies were mainly related to the nursery plants, tools and equipment, and plant protection measures.

3.8 Economics of production 

In the study area, apple cultivation was mostly conducted traditionally. For this study, production cost was calculated based on interviews and FGD.

3.8.1 Cost of production 

Initial investment cost: Based on our findings, the cost of initial investment for the years 1^st - 4^th is summarized (Table 14). The cost was calculated by taking the account of both variable and fixed cost. From the study, it was found that apple cultivation required high investment for the very first year (Rs 501049/ha) as compared to the following years of the gestation period (Figure 4). The cost of fencing, irrigation canal installation, tools and equipment, sapling, land preparation, and pit digging that accounts for the major share in the cost of initial investment was incurred in 1st year of apple cultivation resulting in a high establishment cost of apple orchard. Farmer perceive that their orchards will bear fruit only after 5th year of operation.

Operating cost: The average cost of production was Rs 112122.1211 /ha, Rs 113303.757/ha, and Rs 50657.60626/ha for operating years 5^th to 9^th, 10^th to 14^th, and 15^th to 20^th, respectively (Table 15). The operating cost goes on increasing till the 15^th year and then decreases from the 15^th to the 20^th (Figure 5).

3.8.2 Returns from apple 

The study revealed that apples started fruiting from the fourth year, however, the economic returns from the apple were witnessed only from the 5^th year of orchard establishment (Table 16). According to the findings, the returns from the apple increased with increasing years and were highest in the 13^th, 14^th, and 15^th years. It was reported that 15^th year onwards the production decreased. 

Similarly, the line graph below shows the trend of apple production per plant up to the 20^th year. The production per plant increased up to 15 years and was found to be decreased after 15 years (Figure 6).

3.9 Cost-benefit analysis 

The cost and benefit for apple production were calculated for 20 years and the benefit-cost ratio for an overall period of 20 years was found to be 1.90.BC ratio observed within the different years of apple cultivation is shown in the figure. The benefit-cost ratio showed that apple cultivation was profitable with the B: C ratio being greater than 1 i.e.1.90. A similar result was found by Kafle (2017) in Jumla with a B: C ratio of 1.96. Detailed information on cost and benefit for the estimation of the benefit-cost ratio is shown in the Appendix (Figure 7).

3.10 Financial evaluation techniques 

Apple plant once established, continues to give production for up to twenty years. The plant starts giving returns economically only from the 5^th year onwards. It needs large resources, and income spread over a period. Hence, costs and returns have to be analyzed carefully to assess the worthiness of the investment in the Apple enterprise. Therefore, techniques of project evaluation such as net present value, benefit-cost ratio, payback period, and internal rate of returns are employed in assessing the feasibility of apple orchard. In an analysis of the financial feasibility, the cost and returns from the sweet orange production were estimated using a 12% discount rate.

3.11 Net present value 

Net Present Value gives an idea about surplus money that would be generated from Apple at a given discount rate. It varies with the discount rates and the level of investment. In the study, NPV, calculated by discounting the net cash flow at a 12% discount rate for 20 years of apple production was 2,111,002. A positive NPV represents that the apple cultivation in the study area was profitable.

3.12 Internal rate of returns 

IRR for apple production was calculated to be 33.3% which was greater than the discount factor of 12%.IRR being greater than the discount factor/opportunity cost indicates that apple cultivation is a profitable business in the study area.

3.13 Payback period 

The time value of money was not considered for the calculation payback period. The payback period for the apple production was calculated to be 7.3 years in the study area.

3.14 Marketing system 

Agricultural marketing involves several activities and processes through which harvested products from widely scattered products move to the ultimate consumers. Producers, traders, wholesalers, retailers, and consumers are the main agents involved in the production-consumption chain in the marketing system. The marketing system of Apple was studied in the study area of Kalikot district.

The majority of the respondents reported selling their produce directly to the contractor/middleman while few of them were found to sell their produce on their own to the retailers. Kalikot apples were mostly collected by middlemen who could be village traders or individual large contractors who make contracts with farmers before harvesting time. As the majority of the farmers sell their produce directly to contractors, postharvest practices like grading and packaging were rare in the study area. However, 2% of the respondents reported following grading practices before selling their apples to the retailers and stated getting higher prices for their produce through grading.

3.15 Marketing channel

In the marketing of Apple, major intermediaries involved were contractors, wholesalers, and retailers. The apple produced in the study area ultimately reached the consumers through these intermediaries. Primarily two types of marketing channels were identified in the study area. Channel-1: Producer > Middlemen > Wholesalers> Retailer >Consumer; Channel-2: Producer > Retailer > Consumer.

Channel-1 was involved in the marketing of apples in bulk to the distance market (Kathmandu, Pokhara, Chitwan, etc) while channel-2 was used to sell produce in smaller quantities within the local market. Out of these two channels, Channel -1 was found to be most prevalent in the study area as 94% sell their produce in bulk to the contractors.

3.16 Market margin and producer share 

Market margin and producer share reflect the efficiency of the marketing system. Out of the two marketing channels, Channel-1 had a greater percentage of producer share (37.5%) and farm gate price of Rs 60 /kg. Higher retail of 220/ kg accounts for a greater market margin in Channel-1 (Table 17).

3.17 The major problem associated with apple production

3.17.1 Problems in apple production

Five different problems were identified based preliminary study and included in the interview schedule (Table 18). The farmers were asked to rank these problems based on their perceptions. Most of the farmers responded that the problem of insect pests and disease was the major problem associated with apple production. The index value of this problem was highest (0.946) and was ranked as the most serious problem of the study site. Scab and papery bark were the major diseases while wooly aphid and tent caterpillar were the most problematic insect pests hampering the production in apple farming. The second major problem was the environmental constraints mainly erratic rainfall, with the index value of 0.638. Lack of extension services was the third most serious problem with an index value of 0.607. Lack of irrigation was ranked fourth and lack of unavailability of inputs was ranked fifth with the index value of 0.458 and 0.333, respectively.

3.17.2 Problems in the marketing of apple

Responses regarding various constraints in the marketing of apple were recorded and analyzed (Table 19). Respondents were asked to rank the problems associated with the marketing of apple. From the study, it was found that price variation (0.74) was the major problem faced by the actors involved in marketing Lack of cold storage which accounts for higher postharvest loss was ranked second most important problem with an index value of 0.70. Similarly, difficulty in transportation and lack of grading facilities were ranked 3rd and 4th most severe problems respectively. The low volume of production was the least problematic factor associated with marketing's Apple.

4 Conclusion 

Some conclusions are made based on the study conducted on the economics of the production of apples in the Kalikot district of Nepal. A higher benefit-cost ratio, shorter payback period, positive NPV, and IRR greater than opportunity cost ascertain the feasibility of Apple enterprise in Kalikot, Nepal. Insect pests and diseases are ranked as the major problems for the production of apples in the study area of Kalikot district, while price variation and lack of storage and transportation facilities are the major problems for apple marketing. 

Authors’ contributions

AC: Contribution to design and implementation of the survey, data collection, interpretation and analysis of the results, writing the manuscript. SA, KPU: analysis of data, interpretation of the results, writing the manuscript. PA, NB, SS, SKK: data collection and manuscript preparation. All authors read and approved the final manuscript.

Acknowledgements

We would like to acknowledgement Agriculture and Forestry University, Rampur, Chitwan, Nepal and Prime Minister Agriculture Modernization Project, Project Implementation Unit, Apple Zone, Jumla/Kalikot for this constant support and guidance during the research period.

Conflict of Interest Disclosure

The authors affirm that this research was conducted without any commercial or financial relationships that could be construed as a potential conflict of interest.

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