The Government of Nepal has commenced its work in Medicinal plants sector with high hopes indeed. The country has also recognized this sector as one of the crucial field for export which may support to revive its failing economy. In order to make this reality, the government with support of other organizations and institution (Private sector, INGO and NGO) is working on cultivation, sustainable collection and export promotion consistently.

In recent years, there has been huge stress on value addition of medicinal plants as well. These organizations are also giving grants and sharing technical expertise for development of these industries.

Value Addition

Value addition to a product means adding value to the product to make it more marketable and incur comparatively higher returns than raw products. It may remain same in physical appearance or change depending on the type of procedure followed. Basically, there are two types of value addition; Low level and high level value addition (B.R. RAIESWARA RAO, Sastry, Kumar, Rajput, Patel, & Reddy, 2009).

Low level value addition comprises of basic activities i.e. Cutting, Drying, Grading, Powdering and Packaging. On the other hand, High level value addition includes procedure like Extract, Formulation, Phytochemical and developing consumer products.

Value Addition status in Nepal

In Nepal, the stakeholders practice very basic value addition procedures. In most of the cases, they adhere to low level value addition.

Distilling essential oil is only high level value addition which stakeholders practice widely in the country. There are few private companies which have dared to begin extract manufacturing and formulations of consumer products. Unfortunately, the number is too low.

Present Scenario

More than 100 medicinal plants are in trade from Nepal. Forestry sector has 15% contribution in GDP of the nation’s economy. Out of this, Medicinal plants accounts of 5%. The government gains income in terms of royalty and taxes both. As per Trade and Export Promotion Centre (TEPC), the exports of Medicinal plants were USD 6 million in value and 6641.88 MT in quantity in 2010 (Sharma & Shrestha, 2011).

The legislation followed for the export of medicinal plants is Forest act 1993 and Forest Rules 1995. The officials abide same law during documentation for value added products as well.

As far as low level value addition is concerned, the trader/manufacturer collects products on behalf of collection permit issued by respective District Forest Office (DFO). Later it is produced before the officials and on behalf of this they get exit permit. This exit permit is mandatory for moving the products from collection area to destination (within Nepal). For exports, they load vehicle and again produce the documents before respective District Forest Office. The responsible officials verify the container/vehicle and mark the seal before the consignments moves. Additionally, the trader needs to get Certificate of Origin (CO), Plant Quarantine and Custom clearance during exports.

Essential Oils

For high level value addition, the manufacturer follows similar procedure (mentioned above) to acquire raw material from collection area. In Nepal, most widely practiced high level value addition is distillation of Essential oils. The nations produce two types of essential oils –

  • Essential oils distilled from cultivated crops i.e. Mentha, Lemongrass, Citronella, Palmarosa and Chamomile.
  • Essential oils distilled from wild collected medicinal plants i.e. Sugandhkokila, Jatamansi, Valerian (Sugandhwal), Timur, Wintergreen.

Essential oils distilled from cultivated crops

To export, the trader/manufacturer needs to get a Certificate of Analysis (CoA) from Department of Plant Resources Office (DPRO). For this analysis, the supplier has to submit entire lot of the product ready for shipment to DPRO, Kathmandu. The DPRO draws sample from this lot and analyze it. On behalf of it, they release COA in 5-7 days approx. They do it to ensure identity of the product, for example, if trader says he/she is exporting Mentha Oil. Then, they follow this procedure to verify if the product ready for shipment is Mentha Oil or not. Primarily, this step shows the lack of trust of Government on its private sector. Secondly, it becomes very tedious for someone staying away from Kathmandu valley.

Essential oils extracted from wild collected medicinal plants

In first hand, they need to have exit permit for collection of the raw material from its origin area. The manufacturer brings raw material in facility  where he distills it and prepares the product. Once the product ready to export, they again go to DFO to get another exit permit. Then DFO provides them permit calculating the yield percentage. DPRO in Nepal is responsible to fix yield percentage. For example if someone has produced initial raw Valerian permit for 500 kg, then, he/she will get 5 kg (suppose fixed percentage is 1%) permit for its essential oil as per the oil percentage fixed by DPRO.


The problem is, for instance, someone installs any advance technology and extracts more than fixed oil percentage. Then, it becomes illegal. For example, a manufacturer holding collection permit of 500 kg of Valerian root and he is able to produce 7.5 kg oil (1.5% Oil Percentage) then it will be considered illegal. Since the oil percentage fixed by DPRO is 1%. Again, these parameters are developed for limited species. So, if any stakeholder comes up with any new raw material like Kachur or Curry Leaves (for example) for essential oils distillation, the government has no legislation and provision for them.

Similarly for other high level of value addition, Government of Nepal (GoN) has no legislation and provision. To be honest, there is no defined set of rules which the stakeholders can abide. The Forest act 1993 and Forest Rules 1995 majorly focuses on Wood and timber. It consists very minor description of Medicinal plants and no remarks for high value added goods like extracts or phytochemical.

Prevailing Irony

As per Country budget of 2017-18, the government has allocated budget of NPR 15.34 billion out of this NPR 6.80 billion is kept for land reform and management. The rest is for forest management, conservation and cultivation/plantation. Besides this, the nation also relies on foreign aid or investment for development in the sector (Budget Speech, 2074-75).

There have been several projects like HIMALI, RISM-FP for promotion of industry based on Medicinal plants. These projects worked with aim of promoting value addition in the sector and improve income of involved stakeholders. The officials, INGO and NGO are raising their concern and putting tremendous effort in the matter every day.

Amid this hue and cry, the obstacle remains in the very basic idea of value addition in Nepal. Question is what kind of the value addition the decision makers expect from the manufacturers or responsible private sector? The truth is they are aware of anticipated outcome; on the contrary, they have no clue of the roadmap to achieve it. This issue is magnified because there is also no effort to comprehend it.

Nepal is a country where a commodity likes Jatamansi which has approx NPR 20 million at stake is banned overnight without concern. The private sector feels mocked when officials or INGO or NGO motivate them to produce high level value addition products like extracts, phytochemicals. Since they may arrange the technology, raw materials, investment and manpower but the legislation proceedings will become major hurdle for them.

Starting from Scratch

For export of extracts or phytochemicals, the manufacturers will have to start his work from scratch. First he will send an application to DPRO for his product. Then, he will submit a sample of the raw material which they will analyze it and develop a parameter. When this parameter will fit their standards, it will be forwarded to Department of Forest (DoF). After getting passed from DOF, it will become law or legal for trade. The fun fact is the time period it may take is uncertain, it may take 6 months, 1 year or how long nobody knows.

For a company or manufacturer, it is huge risk. With their assets rusting in facilities or production in stock, they may not afford this bet where consequences are bleak.

Global Market

The world market for extracts is expected to reach USD 5,833.4 Million by 2022. This is estimated to increase at the rate of 8.8%. In this North America has highest share followed by Europe and Asia pacific (PR Newswire Association LLC, 2017).

For Nepal, this is an opportunity where it can position itself. The trade taking place in the nation is still very traditional. Nepal is surrounded by the two of very powerful economy in the world which gives them easy and sustainable market access provided they move from basic trade to value addition. This will give high competitive edge to medicinal plants sector of the country.


As compared to globalization or other nation’s economy, Nepal is still dwelling in Stone Age. It lacks innovations, technology, infrastructure and legislative structure to shape this sector. As a result, this sector has failed to allure interest of big investors. Hence, the development is mere a dream nothing else. To improve this, the decision makers need to think about certain ground works gravely.

  • They should develop legislation defining Value addition. This should distinctively recognize various methods, parameters, standards and precautions for the production and marketing of the product.
  • The government should also take initiative for recognition of marketable unknown species from the geographical diversity.
  • They should identify right species of medicinal plants for cultivation and trade promotion.
  • The decision makers should think about simplifying the trade rather than making it complicated consecutively.
  • Cultivation methods should develop for all marketable medicinal plants.

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