Bhutan’s agriculture market strategy needs a rethink
Bhutan's agriculture sector, vital to its economy, faces challenges as it imports nearly half of its food despite 60% of its population being engaged in farming.
To ensure food security and boost farmers' incomes, Bhutan must address structural issues in its agriculture marketing ecosystem, including high production costs and reliance on imports, through policy interventions and innovative solutions.
Agriculture remains the backbone of Bhutan’s economy and rural livelihood, with approximately 60 per cent of the population engaged in farming. Yet paradoxically, Bhutan imports nearly half of its total food requirements. This contradiction points to deeper structural issues within the agriculture marketing ecosystem, issues that must be addressed to ensure food security, enhance farmers’ incomes, and holistic sustainable development.
Current landscape of agriculture markets
Across Bhutan’s 20 Dzongkhags (districts), agriculture markets serve as vital nodes where locally grown produce meets consumer demand. Prominent among these are the Centenary Farmers Market in Thimphu, Lobesa Vegetable Markets in Punakha, and the Farmers’ Market in Paro. These markets showcase a mix of locally cultivated fruits and vegetables alongside imported products, primarily from India’s Falakata market in West Bengal. This market, located just across the border, is often cited as the largest supplier of vegetables and fruits to Bhutan.
The coexistence of domestic and imported produce creates a complex dynamic for sellers and buyers alike. Sellers face the challenge of competing against cheaper imported goods, while the cost of producing local crops remains high due to factors such as mountainous terrain, limited mechanisation, and input costs. For instance, onions imported from India cost between 15 to 20 Indian Rupees per kilogram, whereas locally produced onions in Bhutan can exceed 60 Rupees per kilogram, which accounts for their reliance on imports. Similar patterns are evident for potatoes and other staple vegetables. Consequently, consumers sometimes prioritise price over advocating domestically produced items, undermining the market for local farmers.
Another layer of complexity comes from the financial arrangements within these markets. Sellers often rely on credit facilities extended by Indian importers cum traders, who dominate in volume and influence. This credit access enables continuous purchasing of imported products, but it also perpetuates dependence on foreign supply chains. However, some sellers have innovatively turned to drying unsold fresh produce, transforming it into dried products that are then exported to niche markets such as Singapore and Thailand among others. This highlights the latent potential in Bhutan’s agricultural value chain that remains underutilised.
Policy interventions for a sustainable market ecosystem
To address these challenges, Bhutan’s current aggregator models established in various Dzongkhags — which consolidate produce from farmers for further marketing — must be strengthened and expanded to serve as a backward linkage system as well. A single-window approach providing farmers with access to affordable agri-inputs could significantly reduce production costs. Lower input costs would make local produce more competitive in price, reducing the stark difference compared to imports. In order to facilitate agricultural marketing, a network of aggregators is functional for procuring agricultural produce from growers and paying a nominal price. However, such an aggregator network must also extend its scope of services to include the arrangement of agricultural input packages at subsidised rates for farmers. This way, the high production costs can be minimised to a certain extent and also standard practices of production can be ensured.
Additionally, Bhutan’s agriculture market currently operates with minimal price regulation, leaving prices largely to market forces of demand and supply. In markets where imported and local products sell side by side, this can disadvantage local producers whose higher costs cannot be offset by premium prices. Establishing a robust market price information system across Bhutanese markets is crucial. Such a system should also monitor prices in nearby Indian markets to enable better price discovery. Transparency in pricing will protect farmers from exploitation, ensure they receive fair returns, and prevent consumers from paying unnecessarily high prices. Also, the differential pricing mechanism on parameters like nutrition value, proximity and other important factors can be crucial for a sustainable way ahead. The direct procurement by the government under buy-back scheme is only limited to few commodities such as potato, cardamom, maize, paddy. Uncertainty in markets as well as lack of cold chain infrastructure has often resulted in losses.
Value chain mapping is another critical need. It is essential to align Dzongkha-wise production centres (where crops are grown) with the consumption centres (where demand is highest) to enable efficient movement of goods. Without this, efforts to develop agricultural markets risk being superficial and fragmented. Given Bhutan’s mountainous terrain and the proximity of production to consumption centres, innovative solutions like gravity-based ropeway systems could offer a safe, cost-effective, and eco-friendly method to transport produce, reducing spoilage and supply costs.
Investing in the future of Bhutanese agriculture
Bhutan faces a demographic challenge as well — its farmers are aging, with the average age exceeding 50 years. This signals an urgent need to attract younger generations into farming by promoting innovative, high-value crops that promise assured markets and profitability. Developing value-added products like chips, juices, and dried snacks through start-ups could create new income streams and stimulate youth engagement.
Establishing modern processing units will be crucial to this vision. Such units could enable the creation of strong national brands, turning Bhutanese agricultural produce into sought-after commodities both locally and internationally. These initiatives could open doors to export markets, leveraging Bhutan’s reputation for organic and natural products.
Further development of farmer groups with focused commodities, providing a CEO-based framework to local youths for conducting operations of such farmer groups may also be instrumental to attract them towards farming enterprises.
Integration across sectors for holistic development
Achieving these objectives requires integrating agriculture with other key sectors such as health, tourism, education, and industry. For instance, linking organic farming with Bhutan’s burgeoning eco-tourism sector can create unique farm-to-table experiences, generating premium value for local produce. Education and training programs can equip farmers with modern agricultural techniques and entrepreneurial skills. Industry linkages, especially in processing and packaging, can enhance product quality and market reach.
Crucially, a multi-stakeholder approach involving government agencies, private sector players, financial institutions, and farmer cooperatives is vital to create a cohesive ecosystem. With thoughtful policy interventions and cross-sectoral collaboration, Bhutan can transform its agriculture markets into engines of rural growth, food security, and economic diversification. This transformation will not only benefit growers but will also reinforce Bhutan’s journey toward sustainable development and self-reliance.
Mohit Sharma is with Dr Rajendra Prasad Central Agricultural University, Pusa, Bihar
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth