New Distillation Units for Sustainable Management and Processing of NTFP Project, Dolakha

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New Distillation Units for Sustainable Management and Processing of Non Timber Forest Products (NTFPs) Projects, Dolakha

A Report Submitted To Global Environment Facility (GEF)/Small Grants Program (SGP) Ekantakuna, Lalitpur Report Submitted By Khilendra Gurung Deudhunga Multipurpose Cooperative Limited Charikot, Dolakha 2006

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lights Project number NEP/04/11 Project name New Distillation Units for Sustainable

Management and Processing of Non Timber Forest Products (NTFPs) Project, Dolakha

Focal area and operational programme Biodiversity Conservation; Forest

ecosystem (OP#3) Grant recipient Rs. 23, 58,156.00 equivalents to US$ 33,378.00 Location of project Cluster‐1: Lakuri VDC; Cluster‐2: Shyama

VDC and Cluster‐3: Suri VDC, Dolakha Project start and end dates Start date: April 01, 2005; End date: March

31, 2006.

Project Highlights

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Collaborators of the project 1. Ecology, Agriculture and Rural Development

Society (ECARDS), Dolakha,

2. Himalayan Bio Trade Pvt. Ltd. (HBTL),

3. Nepal Swiss Community Forestry Project (NSCFP),

4. Asia Network for Sustainable Agriculture and Bioresources (ANSAB),

5. Action Aid Nepal (AAN),

6. Community Forestry User Groups (CFUGs) of Dolakha,

7. Federation of Community Forest User Groups (FECOFUN), Dolakha,

8. Everest Gateway Herbs Pvt. Ltd. (EGHPL), Dolakha

9. Bhimeshwor NTFP Processing and Production Pvt. Ltd. (BNPPL), Dolakha and

10. District Forest Office (DFO), Dolakha

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Abbreviations and acronyms

AAN : Action Aid Nepal

ANSAB : Asia Network for Sustainable Agriculture and Bioresources

CAR : Corrective Action Request

CBOs : Community Based Organizations

CFUGs : Community Forest User Groups

CITES : Convention on International Trade of Endangered Species

CoC : Chain of Custody

CoO : Certificate of Origin

DDC : District Development Committee

DMC : Deudhunga Multipurpose Cooperative

DoC : Department of Custom

DoF : Department of Forest

DoN : Department of Narcotic

DPR : Department of Plant Resources

ECARDS : Ecology, Agriculture and Rural Development Society

EEC : European Community's Regulation

FECOFUN : Federation of Community Forest User Groups Nepal

FSC : Forest Stewardship Council

GC-MS : Gas Chromatography-Mass Spectrometry

GEF : Global Environment Facility

ha : Hectare

HBTL : Himalayan Bio Trade Pvt. Ltd.

HMG/N : His Majesty's Government of Nepal

HPPCL : Herbs Production and Processing Company Limited

hr : Hour

HS : Harmonized System

INGOs : International Non Governmental Organizations

Kg : Kilogram

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LDO : Local Development Officer

Ltd. : Limited

Lts. : Litres

m : Meter

MAPs : Medicinal and Aromatic Plants

mm : Millimeter

MoU : Memorandum of Understanding

M/S : Mild Steel

NEHHPA : Nepal Herbs and Herbal Products Association

NPR : Nepalese Rupees

NSCFP : Nepal Swiss Community Forestry Project

NTFPs : Non Timber Forest Products

NTV : Nepal Television

PPA : Public Private Alliance

Pvt. : Private

Qty. : Quantity

SBTG : Sustainable Bio Trade Group

SGP : Small Grants Program

SGS : Societe Generale de Surveillance

S/S : Stainless Steel

SW : Smart Wood

UK : United Kingdom

USD : United States Dollars

VAT : Value Added Tax

VDC : Village Development Committees

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Table of Contents 1. Background 1 2. Introduction 2 3. Project objectives 2 4. Justification of the project 3 5. National and global significance of the project 3 6. Activities performed 5 6.1 Selection of location for the distillation unit 5 6.1.1 Location selected for distillation unit establishment 5 6.2 Identification of Community forest user groups 5 6.2.1 Identified CFUGs 5 6.2.2 Coordination with CFUGs 5 6.2.3 Prioritization of available aromatic plants according to market demand 6 6.3 Marketing study of essential oils and supplier sourcing of distillation unit 6 6.3.1 India visit 6 6.3.2 Quotations obtained 6 6.4 Social mobilization 6 6.4.1 Networking among CFUGs 7 6.4.2 Identification of pro‐poor 8 6.4.3 Memorandum of understanding 8 6.4.4 Capacity building/Awareness program 8 6.4.4.1 Time of training of chain of custody certification 9 6.4.4.2 Participants in CoC certification 9 6.4.4.3 Time of training of FSC and organic certification 9 6.4.4.4 Participants of FSC and organic certification 10 6.4.4.5 Time of training of FSC and organic certification 10 6.4.4.6 Participants of training of FSC and organic certification 10 6.4.5 Increment of shareholders of DMC 11 6.4.5.1 Cluster‐1 Land of Napkeyanmara CFUG, Lakuri Danda VDC 11

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6.4.5.2 Cluster‐2 Land of Pathibhara CFUG, Shyama VDC 12 6.4.5.3 Cluster‐3 Land of Deurali Pakha CFUG, Suri VDC 12 6.4.6 Formation of co‐ordination committee 13 6.4.7 Persons involved in social mobilization activities 13 7. Collaboration with other enterprises 14 8. Market linkage activities 14 9. Visit to various processing unit sites 15 9.1 Visited processing units 15 10. Organic certification 15 11. Quotation bidding of distillation units 18 12. Preparation of the working and storage area 18 13. Receiving distillation units and other equipments 19 14. Installation of distillation units 24 15. Collection of raw materials, processing and packing 25 16. Difficulties in project implementation 27 16.1 How have these difficulties been addressed? 28 16.1.1 Current action/Policies adopted 28 17. Achievements after project implementation 28 18. Comparison between the efficiency of M/S and S/S units 29 19. Future Strategy 30 19.1. Expected production of essential oils for 2006 30 19.2. Search for new items of essential oils 30 19.3 Value addition/product design and development 31 19.4 Herbal extraction from medicinal herbs 31 19.5 DMC as a service provider 31 19.6 Replication of social inclusive model enterprise in other districts 31 19.7 Simplifying techno‐legal hurdles for essential oils export 31 20. Financial report 33 20.1. Co‐funding 33 20.2. Expenditure from GEF/SGP fund 34 Annexes 35

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1. Background

Nepal with its peculiar convergence of topographic, climatic and edaphic factors has high floral diversity as well as unique ecosystem diversity. Variation in the topography and land aspects harbors varieties of Non Timber Forest Products (NTFPs). Dolakha is one of the districts where natural herbs and NTFPs are found in abundance.

In spite of such abundance, the locals were not able to reap rich rewards from these herbs and NTFPs. Several problems associated with these precious herbs and NTFPs were lack of data on the quantity of herbs available and scientific research on the weather, growing conditions and life cycle of these herbs. There were no systematic and sustainable practices regarding the management, conservation and marketing of these herbs.

Against the backdrop of these problems, Deudhunga Multipurpose Cooperative (DMC) came into existence in 1995 AD (2051 BS), coordinating with Community Forest User Groups (CFUGs) who depend on NTFPs for their livelihoods. The cooperative started its activities by obtaining raw materials from the CFUGs and by distilling Wintergreen oil. The cooperative now runs 4 locally made Mild Steel (M/S) distillation units and distils various essential oils like Abies, Anthopogon, Artemisia, Calamus, Juniper, Wintergreen, Zanthoxylum essential oils. These distillation units were established with individual cash contribution and raw materials provided by CFUGs.

The cooperative has established itself as an ideal NTFPs based enterprise. Nepal Television (NTV) (in documentary program ‘Aankhijhyal’) and Radio Nepal (in community forest program) also broadcasted about DMC. Furthermore, the representatives from various International Non Governmental Organizations (INGOs) like Nepal Swiss Community Forestry Project (NSCFP), Nepal Australian Community Forestry Project; members of parliament and foreigners have visited this cooperative and appreciated its efforts. Such exposure has helped the cooperative in meeting its goal of rural development.

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The core objectives of the cooperative are: • Management, production and marketing of NTFPs. • Employment opportunities for people living below the poverty

line. • Environmental conservation and promotion of sustainable

agricultural practices. • Carrying out all activities with focus on rural development.

The cooperative employs 10 permanent distillation unit workers and about 250 collectors whose livelihood is dependent on the distillation units. The members of Napke Yanmara CFUG and 25 individuals are the major shareholders of this enterprise.

Activities of the Cooperative are: • Coordination with CFUGs and collectors for raw materials

supply. • Identification of potential essential oils yielding herbs and

assessment of their benefits to cooperative members. • Arrangements and contacts with various organizations for

training of the employees. • Site selection for distillation units. • Creating public awareness about biodiversity conservation and

sustainable harvesting practices.

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2. Introduction

In order to utilize the abundant raw materials and to provide employment opportunities to locals, DMC started its operation of distillation units in 1999 as a trial to produce essential oils like Abies, Anthopogon, Artemisia, Calamus, Juniper and Wintergreen etc. which are obtained by the steam distillation of leaves/needles, sprouts, rhizomes of plants found in high altitudes (1,200‐4,000 m) in Dolakha.

The trial runs were successful because it provided employment opportunities to local level manpower and supported about 250 households living below the poverty line. These trial runs also produced high quality essential oils which in turn were demanded in the international markets. It also developed local technical manpower that could handle and troubleshoot technical problems that came up with distillation units. They were able to understand the technical aspects of essential oil distillation and were successful in setting up systems for quality production.

The trial runs also created awareness among locals that the environment and bio‐ diversity of the area should be conserved and is the precious natural resource which will ensure their livelihood. This awareness has promoted sustainable agricultural practices among the cooperative members. Furthermore, the products of the cooperative had been certified by ECOCERT as ‘organic’. The international demand and price of organic essential oils is greater than non‐organic ones. Hence, the trial runs were successful in every sense. Against this backdrop, a project of setting up new distillation units arose.

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3. Project objectives

The objectives of the project are as follows:

• To contribute towards community growth by encouraging community participation, good governance of natural resources, and conservation of biodiversity by adopting environment friendly methods/approaches and sustainable harvesting practices.

• Proper utilization of abundant raw material resource and production of high quality essential oils by steam distillation of various Medicinal and Aromatic Plants (MAPs).

• To provide better employment opportunities for low income class people like herbs collectors, distillation unit workers, especially for women and deprived people living below the poverty line and ensure their economic sustainability.

• To maintain a steady flow of production activities throughout the year, reinvest part of the income generated from the project to make it financially sustainable.

• To sell the products directly to the buyers by cutting out the intermediaries and thus providing better pay for the low income class people.

• To ensure domestic and international market share of the products manufactured by adopting total quality approach in every step of production.

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4. Justification of the project

Previously, unprocessed raw materials from Nepal were sold to Indian processing units at very low rates. These Indian processing units would in turn sell the processed products as Indian products. There were several layers of intermediaries involved in the transaction as well and that the low income class people like collectors were not benefiting from the high price of final products. Hence, there is the need to establish processing units to facilitate direct contacts between collectors and processing units. Though the existing distillation unit has been supporting low income class cooperative members, it cannot fully meet their needs. The project aims at establishing new distillation units to fulfill the growing needs of poverty stricken houses, to increase their income and to promote environmental friendly practices. Furthermore, the existing distillation unit is made of Mild Steel (M/S) which did not provide a satisfactory output and is prone to corrosive action of some essential oils. Experts also pointed out that the reddish tint in the essential oil of Wintergreen (Gaultheria fragrantissima) that the unit has been distilling was due to this M/S distillation unit. Hence, it was realized that the cooperative needs high quality Stainless Steel (S/S) distillation units for quality enhancement of essential oils as well as for longevity of the unit. It has been proved that the yield of essential oil is greater when a S/S distillation unit is used. Such distillation unit will directly influence the lifestyle of cooperative members since higher quality and quantity of oil coupled with its organic nature commands higher price in the international market, which means higher income for the members. Longevity of the unit means that they rely on the income generating source for a longer period. The international market, especially for organic essential oils, has been growing. The demand for essential oil like Juniper (Juniperus communis) leaf and berry oil has been growing. Juniper is found in abundance near the area where a new distillation unit will be located. In order to utilize this opportunity of selling its products, the cooperative needs to be expanded with new distillation units.

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5. National and global significance of the project

Dolakha district is rich in biodiversity and is home to many species of plants. The altitudinal variation of the district ranges from 700 m. to more than 7,000 m. Accordingly, the district encompasses tropical forests to alpine scrub lands, which boast both nationally and globally significant biodiversity. The commercially important plants of this region are Dhasingre (Gaultheria fragrantissima), Dhupi(Juniperus communis/J. indica), Jatamansi (Nardostachys grandiflora), Bojho(Acorus calamus), Talispatra(Abies spectabilis), Sunpati (Rhododendron anthopogon), Titepati (Artemisia vulgaris), Timur (Zanthoxylum armatum), Kutki (Neopicrorhiza scrophulariiflora), Argeli (Edgeworthia gardneri), Lokta (Daphne bholua/D. papyracea), Chirayito (Swertia chirayita), Lauth Salla (Taxus wallichiana), Kurilo (Asparagus racemosus), Allo (Girardinia diversifolia) etc. Among these plants, the project focuses on sustainable harvesting, processing and sales of MAPs like Dhasingre, Bojho, Talispatra, Sunpati, Titepati, Dhupi, Timur. Dhasingre is indigenous to Nepal, most abundant in Dolakha, and usually found at altitudes of around 2000 m. Leaves of Dhasingre are used for essential oil processing. Bojho are distributed 700m‐2000m and rhizomes are used for processing essential oils. Talispatra is naturally distributed between 2400m‐3600m and needles/leaves are used for processing essential oils. Sunpati is found around 3000m‐4200m and leaves are used for processing essential oils. Titepati is found at around 1000m‐2500m and leaves are used for processing essential oils. Dhupi trees/shrubs are found in sub‐alpine regions (3000‐4000 m). Both berries and needles/leaves of Dhupi are used for essential oil processing. Similarly, Timur is found between 1200m‐2600m and berries are used for processing essential oils. It is a known fact that MAPs are being diminished along with the world’s plant resources due to lack of serious attempt on conservation. In general, collection of medicinal plants for traditional local use is not a problem, since this use has usually developed gradually and in harmony with nearby natural ecosystem. However, when commercial gathering of selected species in large quantities for national and international trade is established due to increased demand, then pressure can quickly mount and cases of overexploitation is common. Some of the species are in the

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verge of extinction, due to either limited geographical distribution or habitat destruction or over‐exploitation. Wintergreen, Juniper, Anthopogon, Zanthoxylum, Abies, Artemisia essential oils, which have valuable therapeutic and medicinal uses, are gaining popularity in international markets and are being gradually commercialized. Result of such commercialization could be the over‐exploitation of these plants, driving them towards extinction or making them threatened and vulnerable from biodiversity point of view. It has also been established through various research works and studies that if proper mechanisms exist, increased commercial use of the forest resources will contribute to conservation rather than depletion of natural resources. DMC strives to establish such mechanisms. In order to ensure the biodiversity conservation, both in national and global levels, of these valuable plants, sustainable harvesting practices should be encouraged. This project intends to promote such practices, which will on one hand conserve the biodiversity and will provide sustainable means of income for the poor. The cooperative has already initiated the establishment of demonstrations plots to demonstrate the life cycle of the raw material, regeneration periods and sustainable management of the raw materials. The project will create awareness among collectors that these plants are the reliable source which will ensure their sustainable income and that they should conserve them and follow systematic and sustainable collecting methods instead of destroying the possibility of their re‐generation. The project, along with a monitoring provision, has a provision of contracting the collectors for harvesting practices which allows re‐growth and which prevent over harvesting in a particular area. Hence, the project is geared towards maximizing the potential of forests and its resources to improve local people’s economic, social and environmental conditions while ensuring that the resources are conserved to meet the needs of future generations. Efforts towards the sustainable management of forests and rural livelihood are key elements, in maintaining forest biodiversity conservation, of this project. The project is a demonstrative one which will encourage other community based organizations (CBOs) to follow its footprints. So that, the newly established and existing CBOs can take a leap forward towards biodiversity conservation and poverty reduction simultaneously. The project utilizes any opportunity to publicize its beneficial outcomes across the national borders, so that CBOs of neighboring countries can also learn from it.

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6. Activities performed

6.1 Selection of location for the distillation unit The objective for the selection of location for the distillation units was, • To select the location where there is easy availability of raw

materials, manpower and potential CFUGs.

6.1.1 Location selected for distillation unit establishment Marbu, Shyama and Lakuri VDCs were visited. The resource availability of those locations was studied. The possibility of distilling the herbs as Wintergreen, Juniper, Anthopogon, Silver fir, Artemisia and Calamus were analyzed.

6.2 Identification of community forest user groups (CFUGs) The objective for the identification of CFUGs was,

• To identify potential CFUGs in the selected locations willing to work with DMC in supplying the raw materials and managing the resources in sustainable way.

6.2.1 Identified CFUGs: The CFUGs selected were: Balemdamji CFUG, Marbu VDC; Dortipakha

lukharka CFUG, Chankhu VDC; Deurali Pakha CFUG, Suri VDC; Basa Pandit CFUG, Jhyaku VDC; and Pathibhara CFUG, Shyama VDC in the first phase.

6.2.2 Coordination with CFUGs:

Interaction/discussion programs/workshop was held with five user groups of above identified CFUGs, forest products based entrepreneurs with financial support of Nepal Swiss Community Forestry Project (NSCFP). The agenda were; the scope for enterprise establishment, participating CFUGs and interested user groups, share holding of pro‐poor user group in the cooperative. Altogether 27 persons were participated in the interaction program held on Charikot, Dolakha from May 11‐13, 2005.

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Altogether 4 groups were formed for discussion and assessment in the interaction program.

6.2.3 Prioritization of available aromatic plants according to market

demand: 1. Dhasingre (Wintergreen; Gaultheria fragrantissima) 2. Dhupi (Juniper; Juniperus communis/J. indica) 3. Sunpati (Anthopogon; Rhododendron anthopogon) 4. Gobresalla (Silver fir; Abies spectabilis) 5. Bojho (Calamus; Acorus calamus) 6. Titepati (Mugwort; Artemisia spp) 7. Timur (Nepalese Pepper; Zanthoxylum armatum)

6.3 Marketing study of essential oils and supplier sourcing of

distillation unit 6.3.1 India visit

The purpose of India visit was, • To assess essential oil market study and to locate the most

competent suppliers of the distillation unit equipments at most competent price and quality.

6.3.2 Quotations obtained

Distillation unit equipment items along with price quotation were obtained from three different suppliers company of Lucknow, India. Quotations were obtained from the distillation unit manufacturer as well.

6.4 Social mobilization

The objective of social mobilization were, • To motivate the CFUGs and pro‐poor user groups towards

entrepreneurship. • To develop network among CFUGs and entrepreneurs. • To increase the shareholders of DMC. The entire social mobilization process was conducted in three clusters. They are as follows:

Table 1: Project implemented VDCs were divided into three clusters SN Cluster 1 Cluster 2 Cluster 3 1 Lakuri danda VDC Shyama VDC Jhyaku VDC 2 Bonch VDC Marbu VDC Suri VDC 3 Bhimeshwor Municipality Jiri VDC 4 Mali VDC

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6.4.1 Networking among Community forest user groups (CFUGs) Social mobilization was conducted to establish the network among

CFUGs and between the selected CFUGs and the entrepreneurs. The CFUGs selected for implementing the project are given in table 2.

Table 2: Selected CFUGs along with their address, area and identified raw materials

SN Name of CFUGs Address Acreage (ha) Raw Materials for Essential Oils Cluster ‐1 1 Bhitteripakha Bonch‐ 2 362.31 Wintergreen, Artemisia, Calamus

2 Botle Setidevi Bonch‐ 5

171 Wintergreen, Calamus, Artemisia, Valerian

3 Dhande Singhadevi Bonch‐ 7,8

346.25 Wintergreen, Calamus, Artemisia, Valerian

4 Napke Yanmara Lakuri Danda‐1


5 Sangkhadevi Lakuri Danda 301.1 Wintergreen, Artemisia, Valerian 6 Jharani

Chhamawoti‐ 4 208.85 Wintergreen, Calamus, Artemisia,

Valerian 7 Suspa

Chhamawoti‐ 9 635.36 Wintergreen, Calamus, Artemisia,

Valerian 8 Khorthali Vi. Na. Pa.‐10 168.40 Wintergreen, Artemisia, Valerian

9 Charnawoti Vi. Na. Pa.‐13


10 Majhkharka Lisepani Vi. Na. Pa.‐13


11 Thansa Deurali Vi. Na. Pa.‐12,13


Cluster ‐2 1 Kalobhir

Jiri‐7 545.25 Wintergreen, Artemisia, Valerian,

Abies, Juniper, Zanthoxylum 2 Thulonagi

Jiri‐8 239.53 Wintergreen, Artemisia, Valerian,

Abies, Juniper, Zanthoxylum 3 Pathibhara

Shyama‐1,2 710 Wintergreen, Abies, Artemisia,

Valerian, Zanthoxylum 4 Kyangse Setep

Jiri 180.25 Wintergreen, Abies, Juniper

Artemisia, Valerian, Zanthoxylum 5 Balemdamji

Marbu‐3,4,5,6 495 Abies, Anthopogon, Juniper,

Zanthoxylum Cluster ‐3

1 Basa Pandit

Jhyaku‐1

508.5 Abies, Anthopogon, Juniper, Wintergreen, Artemisia, Valerian, Zanthoxylum

2 Bhatekhola Kamalamai Jhyaku‐9

746 Abies, Anthopogon, Juniper, Wintergreen, Artemisia, Valerian

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3 Ramite Phungling

Suri‐1

72 Abies, Anthopogon, Juniper, Wintergreen, Artemisia, Valerian, Zanthoxylum

4 Deurali Pakha Suri‐2

79.5 Abies, Anthopogon, Juniper, Wintergreen, Artemisia, Valerian

5 Kukur Dayale Suri‐3,4


6 Kosh Nidhi Suri‐3,4,5,6


7 Kobutar Yarpang Suri‐6 Abies, Anthopogon, Juniper

8 Bajre Danda Suri‐3,4,5,6

570

Abies, Anthopogon, Juniper, Wintergreen, Artemisia, Valerian

6.4.2 Identification of pro-poor The pro‐poor forest user groups were identified on the basis of social

well being ranking process. Capacity building activities were performed for the identified pro‐poor so as to motivate and participate them in the enterprise that process the essential oils. The share for the identified pro‐poor user groups to the cooperative is requested from Nepal Swiss Community Forestry Project (NSCFP).

6.4.3 Memorandum of understanding Memorandums of understanding (MOU) were made with the local

herb collectors on the basis of sustainable harvesting practice. Similarly, MOU were made with CFUGs for the permit and the sustainable supply of raw materials as per the operational plan. While, MOU were made with Everest Gateway Herbs Pvt. Ltd. and Bhimeshwor NTFP Processing and Production Pvt. Ltd. to work in collaboration for including FUGs, pro‐poor forest user groups and other disadvantaged users in operating the processing units. The details of the MOU with the herbs collectors, CFUGs and with socially inclusive model enterprises are presented in annexes: 1‐4.

6.4.4 Capacity building/Awareness program Training program was conducted for the executive member and users

of the selected CFUGs in order to aware them about principles and criteria of FSC (Forest Stewardship Council) Certification which includes environmental, economic and social management of forests.

Similarly, training program on COC (Chain of Custody) Certification and Organic Certification were performed with CFUGs members, herbs collectors, DMC staffs, staffs of Bhimeshwor NTFP Processing and

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Production Pvt. Ltd. and staffs of Everest Gateway Herbs Pvt. Ltd. in different phases. The training program includes: FSC logo use, proper documentation and handling procedure from raw materials collection, production, storage, marking/labeling to the market place.

The main objective was to prepare for chain of custody certification and organic certification during the collection, processing, handling and storage of raw materials and essential oils at the selected locations and processing unit site. The aim is to add value to the essential oils by certifying them and obtain premium prices from the buyers.

6.4.4.1 Time of training

The training on Chain of Custody (COC) Certification and Organic Certification was organized at the hall of ECARDS‐Dolakha in Charikot for two days starting from July 31, 2005 to August 1, 2005.

6.4.4.2 Participants

Altogether there are 10 participants representing from CFUGs, herbs collectors, DMC from different processing unit sites, Bhimeshwor NTFP Processing and Production Pvt. Ltd. and Everest Gateway Herbs Pvt. Ltd. The subject matter of the training are: 1. Principles of COC Certification and Organic Certification 2. Policy and guidelines of COC and Organic Certification 3. Proper documentation system 4. Handling procedure from raw materials collection, production,

storage, labeling to market place. Table 3: The lists of participants in the training were as follows:

SN Name of participants Designation/Organization1 Ms. Ganga D. Gurung Store/sales officer, Deudhunga Cooperative Ltd. 2 Mr. Arun Shrestha Account officer, Deudhunga Cooperative Ltd. 3 Mr. Ramesh Lama Production manager, Processing unit of DMC at Suspa,

Chhamawoti VDC 4 Mr. Bal B. Shrestha Production manager, Processing unit of DMC at Lakuri danda

VDC 5 Mr. Krishna B. Khatri Production manager, Processing unit of DMC at Jhyaku VDC 6 Mr. Mitra B. Jirel Manager, Deudhunga Cooperative Ltd. 7 Mr. Hasta B. Bhujel Chairman, Bhimeswor NTFP Processing and Production Pvt. Ltd. 8 Mr. Dhan B. Tamang Managing Director, Bhimeswor NTFP Processing and Production

Pvt. Ltd. 9 Mr. Indra B. Khadka Chairman, Everest Gateway Herbs Pvt. Ltd. 10 Mr. Naike Jirel Secretary, Thulonagi CFUG, Jiri

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The following record keeping/documentation system was developed for implementing the principles of Chain of Custody (COC) Certification to the practice. 1. FSC Certified raw materials/ products purchase order 2. FSC Certified raw materials store record 3. FSC Certified raw materials production record 4. FSC Certified products store record 5. FSC Certified products sales record 6. Invoice for selling FSC Certified products

6.4.4.3 Time of training

The training on Chain of Custody (COC) Certification and Organic Certification was organized at the hall of ECARDS‐Dolakha in Charikot for two days starting from December 7, 2005 to December 8, 2005.

6.4.4.4 Participants Altogether there are 14 participants representing from CFUGs, herbs

collectors, DMC from different processing unit sites, Bhimeshwor NTFP Processing and Production Pvt. Ltd. and Everest Gateway Herbs Pvt. Ltd. The subject matter of the training are: 1. Preparation of record keeping and documentation system which

includes: a. FSC Certified and Organic Certified raw materials/ products

purchase order b. FSC Certified and Organic Certified raw materials store

record c. FSC Certified and Organic Certified raw materials

production record d. FSC Certified and Organic Certified products store record e. FSC Certified and Organic Certified products sales record f. Invoice for selling FSC Certified products and Organic

Certified Products

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2. FSC and Organic Certification logo use Table 4: The lists of participants in the training were as follows:

SN Name of participants Designation/Organization1 Ms. Ganga D. Gurung Store/sales officer, Deudhunga Cooperative Ltd. 2 Mr. Ramesh Lama Production manager, Processing unit of DMC at Suspa,

Chhamawoti VDC 3 Mr. Bal B. Shrestha Production manager, Processing unit of DMC at Lakuri

danda VDC 4 Mr. Krishna B. Khatri Production manager, Processing unit of DMC at Jhyaku VDC 5 Mr. Dhan B. Tamang Managing Director, Bhimeswor NTFP Processing and

Production Pvt. Ltd. 6 Mr. Indra B. Khadka Chairman, Everest Gateway Herbs Pvt. Ltd. 7 Mr. Naike Jirel Secretary, Thulonagi CFUG, Jiri VDC 8 Mr. Govinda Gurung Herbs collector 9 Mr. Puspal Gurung Herbs collector 10 Mr. Mingma Sherpa Production unit manager, Processing unit of DMC at Marbu

VDC 11 Ms. Tara Lama FECOFUN, Dolakha 12 Mr. Binti B. Shrestha Herbs traders 13 Mr. Bhuban KC Chairman, Bhitteri CFUG, Bonch VDC 14 Mr. Tenzi Sherpa Representative, Pathibhara CFUG, Shyama VDC

6.4.4.5 Time of training Training program on FSC Certification and Organic Certification was conducted on December 9, 2005 at Charikot, Dolakha.

6.4.4.6 Participants of training

The participants of the training were the executive member and users of FSC certified CFUGs and propose CFUGs for Organic certification of Dolakha. Altogether there are 18 participants participated during the certifications awareness training. The subject matter for the training was;

1. Principles and criteria of FSC Certification. 2. Guidelines of Organic Certification

Table 5: List of participants of the training was as follows:

SN Participants Address1 Hasta B. Bhujel Bhitteri CFUG; Bonch‐ 2 2 Kumar Basnet Botle Setidevi CFUG; Bonch‐ 5 3 Bhimsen K.C. Dhade Singhadevi CFUG; Bonch‐ 7,8 4 Naba Raj Karki Napke Yanmara CFUG; Lakuridanda ‐1 5 Phurba Tamang Sankhadevi CFUG; Lakuridanda 6 Ganesh B. Khadka Jharani CFUG; Chhamawoti‐4

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7 Pastemba Sherpa Suspa CFUG; Chhamawoti‐9 8 Arjun Basnet Charnawati CFUG; Vi. Na. Pa.‐13 9 Tara Tamang Majkharka Lisepani CFUG; Vi.Na.Pa.‐ 13 10 Naike Jirel Thulonagi CFUG; Jiri ‐ 8 11 Nar B. Jirel Kalobhir CFUG; Jiri ‐ 7 12 Hem B. Khadka Pathibhara CFUG; Shyama‐ 1,2 13 Mingma Sherpa Balem Damji CFUG; Marbu‐ 3,4,5,6 14 Ang Tendi Sherpa Pandit CFUG; Jhyanku‐ 1 15 Chhiri Namgel Sherpa Bhate Khola Kamalamai CFUG; Jhyanku‐ 9 16 Bife Sherpa Ramite Phungling CFUG; Suri‐ 1 17 Puspal Gurung Deurali Pakha CFUG; Suri‐ 2 18 Man Das Shrestha Bajre Danda CFUG; Suri‐ 3,4,5,6

The following checklists were prepared after completion of trainings, for the Cooperative and CFUGs, for the internal audit and for the annual audit by both the CoC and Organic Certifiers. 1. Transportation inspection log 2. Internal audit checklist (Production–wild collection of plants

from Community forests and internal control system and monitoring)

3. Certified company complaint log 4. DMC internal audit record 2006 5. DMC corrective action request (CAR) form 6. Instructions for certified CFUGs and their members

6.4.5 Increment of shareholders of DMC The entire effort was made for the involvement of CFUGs, pro‐poor

forest user groups and other companies as a shareholder of DMC. For the same purpose a series of workshops/meetings were conducted as how to involve CFUGs and pro‐poor forest user groups as a shareholder of the cooperative.

The following CFUGs/company decided to involve in the processing unit as a shareholder of DMC:

6.4.5.1 Cluster-1 (Land of Napkeyanmara CFUG, Lakuri Danda VDC;

GEF/SGP supported distillation unit) 1. Bhitteripakha CFUG, Bonch VDC‐ 2 2. Botle Setidevi CFUG, Bonch VDC‐ 5 3. Dhande Singhadevi CFUG, Bonch VDC‐ 7, 8 4. Napke Yanmara CFUG, Lakuri Danda VDC‐1 5. Sangkhadevi CFUG, Lakuri Danda VDC

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6. Identified pro‐poor (75 identified pro‐poor) The shareholding system for this distillation unit can be summarized as

follows: 1. The total asset of the distillation unit: Rs. 9, 25,000.00

2. Deudhunga Cooperative: 40% (Rs. 3, 70,000.00) 3. Community Forest User Groups: 30% (Rs. 2, 77,500.00) 4. Pro‐poor user groups: 30% (Rs. 2, 77,500.00)

The total amount for purchasing the share for pro‐poor will be contributed by Nepal Swiss Community Forestry Project.

Similarly, for the M/S distillation units (Capacity: 2400 Lts.) owned by DMC, located at Suspa CFUG, in Chhamawoti VDC, the process is ongoing for converting into social inclusion model.

6.4.5.2 Cluster-2 (Land of Pathibhara CFUG, Shyama VDC; GEF/SGP

supported distillation unit) 1. Pathibhara CFUG, Shyama‐1, 2 2. Balemdamji CFUG, Marbu‐3, 4, 5, 6 3. Everest Gateway Herbs P. Ltd., Jiri (Network of 7 CFUGs, 126

pro‐poor including Pathibhara and Balemdamji CFUGs, 96 local entrepreneurs and 3 private sector entrepreneurs)

The shareholding system for this distillation unit can be summarized as follows:

1. The total asset of the distillation unit: Rs. 6, 95,400.00 2. Deudhunga Cooperative: 35% (Rs. 2, 43,390.00) 3. Everest Gateway Herbs P. Ltd.: 35% (Rs. 2, 43,390.00) 4. Pro‐poor user groups: 30% (Rs. 2, 08,620 .00)

The total amount for purchasing the share for pro‐poor will be contributed by Nepal Swiss Community Forestry Project. Similarly, for the M/S distillation units (Capacity: 2400 Lts.) owned by DMC, located at Basa Pandit CFUG, in Jhyanku VDC, the process is ongoing for converting into social inclusion model.

6.4.5.3 Cluster-3 (Land of Deurali Pakha CFUG, Suri VDC; GEF/SGP

supported distillation unit) 1. Bajre Danda CFUG, Suri‐3, 4, 5, 6 2. Kobutar Yarpang, CFUG, Suri‐6 3. Kukur Dayale CFUG, Suri‐3, 4 4. Deurali Pakha CFUG, Suri‐2

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5. Ramite Phungling CFUG, Suri‐1 6. Identified pro‐poor (85 identified pro‐poor)

The shareholding system for this distillation unit can be summarized as follows:

1. The total asset of the distillation unit: Rs. 5, 59,000.00 2. Deudhunga Cooperative: 40% (Rs. 2, 23,600.00) 3. Community Forest User Groups: 30% (Rs. 1, 67,700.00)

4. Pro‐poor user groups: 30% (Rs. 1, 67,700.00) The total amount for purchasing the share for pro‐poor will be contributed by Nepal Swiss Community Forestry Project.

6.4.6 Formation of co-ordination committee

Coordination committees were formed in all distillation units located at 3 clusters, including the representatives from DMC, concerned CFUGs, and pro‐poor. Members of the coordination committee are as follows:

Table 6a: Members of the coordination committee in Cluster‐1

SN Name and representation Designation 1. Bhimsen KC; Dhade Singhadevi CFUG Coordinator 2. Gorakh B. Basnet; Bhitteri CFUG Member 3. Phurba Tamang; Sangkhadevi CFUG Member 4. Ram B. Karki; Napke Yanmara CFUG Member 5. Ramesh Lama; DMC Member 6. Netra K. Shrestha; Pro‐poor Member

Table 6b: Members of the coordination committee in Cluster‐2 SN Name and representation Designation 1. Indra B. Khadka; Everest Gateway Herbs Coordinator 2. Hem B. Khadka; Pathibhara CFUG Member 3. Mingma Sherpa; Balemdamji CFUG Member 4. Mitra Jirel; DMC Member 5. Kaji Sherpa; Pro‐poor Member

Table 6c: Members of the coordination committee in Cluster‐3 SN Name and representation Designation 1. Bhakta B. Gurung; Deurali Pakha CFUG Coordinator 2. Gane Biswakarma; Ramite Phungling CFUG Member 3. Puspal Gurung; Ramite Phungling CFUG Member 4. Govinda Gurung; DMC Member 5. Jagat Darji; Pro‐poor Member

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The overall tasks of the coordination committee are as follows: • Coordination with concerned stakeholders • Planning and organizing meeting • Work division among the committee members • Mitigation of the conflict that arise within CFUGs and other

shareholders • Overall management of the distillation units.

6.4.7 Persons involved in social mobilization activities

The following persons were involved in the social mobilization activities as follows:

Table 7: Manpower involved in the social mobilization activities SN Cluster 1 Cluster 2 Cluster 3 1. Mr. Dharmendra Moktan Mr. Pritha Jirel Mr. Mingma Sherpa 2. Mr. Navaraj Khadka Mr. Tenzi Sherpa Mr. Govinda Gurung 3. Mr. Pradhyumna Pokhrel Mr. Naike Jirel Mr. Krishna B. Khatri 4. Ms. Parbati Karki (Ranger) Mr. Sundar Biswokarma 5. Mr. Bin Kumar Thami 6. Mr. Krishna Shrestha

The above mentioned manpower to conduct the social mobilization activities in cluster‐1 was provided by Ecology, Agriculture and Rural Development Society (ECARDS), Dolakha with financial support from Asia Network for Sustainable Agriculture and Bioresources (ANSAB). Whereas, the manpower performing social mobilization activities in cluster‐2 was provided by Himalayan Bio Trade Pvt. Ltd. (HBTL) and ECARDS; financially supported by Nepal Swiss Community Forestry Project (NSCFP) and Action Aid Nepal (AAN). Similarly, the manpower to conduct the social mobilization activities in cluster‐3 was provided by HBTL with financial support from NSCFP.

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7. Collaboration with other enterprises

DMC has been working in collaboration with enterprises established as socially inclusive model (CFUGs, entrepreneurs, women, disadvantaged groups and pro‐poor forest user groups); Bhimeshwor NTFP Processing and Production Pvt. Ltd. in cluster ‐1 and Everest Gateway Herbs Pvt. Ltd. in cluster‐ 2. Similar model of enterprise has been proposed in cluster‐ 3.

8. Market linkage activities The marketing linkage part has been coordinated by Himalayan Bio Trade Pvt. Ltd. (HBTL), Male International Pvt. Ltd. and Sustainable Bio Trade Group (SBTG), in which DMC is also the shareholder of HBTL. Both DMC and HBTL are Forest Stewardship Council (FSC) accredited Chain of Custody (CoC) certified company and a member of Sustainable Bio Trade Group (SBTG) which was formed as the umbrella organization in the group certification process for obtaining the CoC Certification, in which HBTL is the group manager and DMC is a member. The CoC certification code for HBTL and DMC are: SW‐COC‐1465 A and SW‐COC‐1465 E respectively. The agreements, for purchasing the essential oils that are produced by the cooperative, were made with the following companies in Nepal:

1. Herbs Production and Processing Company Limited (HPPCL), Koteshwor, Kathmandu; and undertaking of HMG/N;

2. Male International Pvt. Ltd., Sinchahity, Lalitpur and 3. Mahavir Shree International Pvt. Ltd. Purano Baneshwor,

Kathmandu 4. Siddhartha Herbal Industry, Naya Baneswor, Kathmandu 5. Unique Himalayan Herbs Pvt. Ltd., Boudha, Kathmandu

The letter of intent had been prepared and agreed by HBTL and S&D Aroma Ltd. UK, in which S&D will market/ and represent HBTL in the

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natural product expo for the FSC and Organic Certified essential oils that are produced by DMC. DMCʹs annual product (both FSC and Organic certified essential oils) inventory projections for 2006 was prepared and sent to S&D Aroma Ltd. as agreed in the letter of intent for partnership. Furthermore, Organic certified essential oil production information of DMC had been prepared and sent to the other potential buyers of Scotland, France, Italy and Australia.

9. Visit to various processing unit sites The objectives of processing unit sites visit were: • To overview the model and technology of processing unit operating

in Nepal. • To assess the number and location of processing unit manufacturer in

Nepal. • To find out the price quotation of various models of processing unit

manufactured in Nepal.

9.1 Visited processing units: 1. Processing unit located at Tarhara, Sunsari (owned by HPPCL) 2. Processing unit located at Belbari, Morang (owned by HPPCL) 3. Processing unit located at Tamagadhi, Bara (owned by HPPCL) 4. Processing unit located at Sagarnath, Sarlahi (owned by Male

International) The processing unit manufacturers located in Biratnagar, Morang was visited at the same time. The price quotations from different processing unit manufacturers were collected.

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10. Organic certification The Organic Certification process was carried out with SGS India Pvt. Ltd., a member group of SGS Group (Societe Generale de Surveillance) based in the Netherlands. Founded in 1878, SGS is one of the worldʹs largest auditing, inspection, testing and verification organization with unique network of over 1,180 offices, 321 laboratories and over 30,000 full time staffs providing a range of services in more than 145 countries. SGS has no manufacturing, trading or financial interests which could compromise its independence. Its reputation for professionalism, integrity and impartiality as well as its remarkable international network place the SGS in a unique position to provide Organic Certification. SGS standard is produced with reference to: • The European Communityʹs Regulation (EEC) No. 2092/91 on

Organic production of agricultural foodstuffs and indications referring thereto on agricultural products and foodstuffs and all subsequent amendments.

• The United States Department of Agricultureʹs National Standards on Organic Agricultural Production and Handling.

• Japanese Agricultural Standards of Organic Agriculture Products, Notification No.59 of the Ministry of Agriculture, Forestry and Fisheries.

• The Codex Alimentarius Guidelines for the Production, Processing, Labeling and Marketing of Organically Produced Foods and

• The International Federation of Organic Agriculture Movement, Basic Standards for Organic Production and Processing.

Altogether, 18 CFUGs with areas of 6545.13 ha. were organically certified for Deudhunga Cooperative, Everest Gateway Herbs and Himalayan Bio Trade in Dolakha. The CFUGs to be organically certified were divided in 3 clusters and given in the table‐8.

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The Organic Certification Management Plan was prepared for Deudhunga Cooperative, Himalayan Bio Trade and Everest Gateway Herbs with support from ANSAB in partnership with S&D Aroma India Pvt. Ltd. and submitted to SGS India Pvt. Ltd. The CFUGs proposed for the Organic Certification and processing unit sites of Deudhunga Cooperative were inspected by the auditor/organic inspector during the first week of October, 2005. Soil samples were collected from the lands of CFUGs proposed for Organic Certification, for testing the heavy metals (Lead, Arsenic and Mercury). All the necessary documentations required by the auditor/inspector were prepared and provided. Altogether, 17 items of essential oils and 44 items of crude NTFPs that are in trade were organically certified from Dolakha. The list of crude NTFPs and essential oils items are given in the table: 9 and 10. The Organic certification was obtained in June, 2006. Therefore, the essential oils that will be produced by the cooperative will have the following marketing access: • European Union market access • United States market access

Table 8: CFUGs for Organic certification with Area

SN Name of CFUGs and address Area (ha) Cluster‐1 1 Bhitteri CFUG; Bonch‐ 2 362.31 2 Botle Setidevi CFUG; Bonch‐5 171 3 Dhande Singhadevi CFUG; Bonch‐7,8 346.25 4 Napke Yanmara CFUG; Lakuri Danda‐1 160.88 5 Sangkhadevi CFUG; Lakuri Danda 301.1 6 Jharani CFUG; Chhamawoti‐4 208.85 7 Suspa CFUG; Chhamawoti‐9 635.36 8 Charnawoti CFUG; Vi. Na. Pa.‐13 247 9 Majhkharka Lisepani CFUG; Vi. Na. Pa.‐13 146.6 Cluster‐2 1 Kalobhir CFUG; Jiri‐7 545.25 2 Thulonagi CFUG; Jiri‐8 239.53 3 Pathibhara CFUG; Shyama‐1,2 710 Cluster‐3 1 Balemdamji CFUG; Marbu‐3,4,5,6 495 2 Pandit CFUG; Jhyaku‐1 508.5 3 Bhatekhola Kamalamai CFUG; Jhyanku‐9 746 4 Ramite Phungling CFUG; Suri‐1 72 5 Deurali Pakha CFUG; Suri‐2 79.5

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6 Bajre Danda CFUG; Suri‐3,4,5,6 570 Total land area 6545.13 ha. Table 9: List of NTFPs for Organic certification SN Local Name Botanical Name Qty. in kg

1 Allo Girardinia diversifolia/Girardinia palmata 10,000 2 Amala Emblica officinalis 5,000 3 Amalbed Rheum australe 1,000 4 Argeli Edgeworthia gardneri 20,000 5 Atis Aconitum heterophyllum 1,000 6 Bajradanti Potentilla fulgens 3,000 7 Bhojpatra Betula utilis 1,000 8 Bhorla Bokra Bauhinia vahlii 5,00 9 Bhutkesh Selinum tenuifolium 3,000 10 Bhyakur Dioscorea deltoidea 5,000 11 Bishjara Aconitum laciniatum/Aconitum ferox 4,000 12 Bisfej Polypodium vulgare 3,000 13 Bikhma Aconitum bisma 5,000 14 Chiraito Swertia chirayita 15,000 15 Chutro Berberis asiatica/ Berberis aristata 5,000 16 Dalchini Cinnamomum tamala/Cinnamomum zeylanica 2,000 17 Guchi chyau Morchella esculenta/Morchella conica ‐ 18 Jhyau Parmelia spp 7,000 19 Kachur Curcuma zedoaria 1,000 20 Kakarsingi Pistacia spp ‐ 21 Ketuke Agave americana 5,000 22 Kutki Neopicrorhiza scrophulariiflora/P. scrophulariiflora 5,000 23 Louth salla Taxus wallichiana 10,000 24 Lokta Daphne bholua/ D. papyracea 20,000 25 Majitho Rubia manjith 10,000 26 Musali Curculigo orchioides 2,000 27 Nagbeli powder Lycopodium clavatum 5,000 28 Nirmasi Delphinum denudatum 1,000 29 Padamchal Rheum australe 7,000 30 Pakhanbed Bergenia ciliata 10,000 31 Satawari/kurilo Asparagus racemosus 5,000 32 Satuwa Paris polyphylla 4,000 33 Silajit Rock exudate 1,000 34 Sisno jara Urtica dioica 8,000 35 Somlata Ephedra gerardiana/Ephedra intermedia 5,000 36 Tuki phul Taraxacum officinalis 2,000 37 Yarshagumba Cordyceps sinensis ‐ 38 Honey Honey & Beeswax 5,000 39 Bayo Jadi ‐ 40 Rato Jadi ‐

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41 Lali gurans Rhododendron arboreum 5,000 42 Timur Zanthoxylum armatum 1,500 43 Totalo Oroxylum indicum 5,00 44 Seabuckthorn Hippophae tibetana/Hippophae salicifolia ‐

Table 10: Essential oils items SN Local Name Botanical Name Qty. (Kg) 1 Talispatra Abies spectabilis 80,000 2 Sunpati Rhododendron anthopogon 1,05,000 3 Titepati Artemisia spp 40,000 4 Bojho Acorus calamus 10,000 5 Jatamansi Nardostachys grandiflora 5,000 6 Dhasingare Gaultheria fragrantissima 2,50,000 7 Dhupi Juniperus spp (berries) 50,000 8 Dhupi Juniperus spp (needles) 1,50,000 9 Sugandhawal Valeriana jatamansii 3,000 10 Beshar Curcuma longa 5,000 11 Kachur Curcuma zedoaria 1,000 12 Gobre salla Pinus wallichiana 60,000 13 Khote salla Pinus roxburghii 1,50,000 14 Sayapatri Tagetes minuta 7,000 15 Aduwa Zingiber officinale 10,000 16 Chamomile Matricaria chamomilla 10,000 17 Alaichi Amomum subulatum 20,000

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11. Quotation bidding of distillation units Quotations along with the copy of valid firm registration certificate and latest audit report were invited from the registered, experienced and genuine fabricators and manufacturers for the supply of the steam field Stainless Steel (S/S) distillation units along with the boilers for the installation at various locations of Dolakha district for the purpose of distillation of different aromatic plants. The specification and quantity of the S/S distillation units with attached boilers are as follows:

Table 11: Specification and quantity of S/S distillation unit Items & Quantity DescriptionA. S/S Steam Distillation Units 1. Capacity: 2400 Lts. with attached boiler (M/S) ‐ 1 No.2. Capacity: 2000 Lts. with attached boiler (M/S) ‐ 2 No 3. Capacity: 1000 Lts. (Portable/Testing type)‐ 1 No.

a. Vessel: S/S (304 grade) b. Condenser: Cylindrical Shell and Tube type c. Receiver: S/S (304 grade) d. Steam pipe line with valves, fitting & S/S vapor line

B. S/S Containers 1. Capacity: 50 Lts. ‐ 1 No. 2. Capacity: 200 Lts.‐ 1 No.

2 mm thick

The quotation was announced in Kantipur daily published on November 1, 2005. The following fabricators/manufacturers/suppliers submitted the quotations with the prices of each items:

1. General Mechanical Workshop, Thaiba, Lalitpur. 2. Thapa Mold and Dye, Gwarkhu, Lalitpur. 3. New Neha Enterprises, Koteshwor, Kathmandu and 4. Mahabir Shree International Pvt. Ltd., Purano Baneshwor,

Kathmandu Among the manufacturers/suppliers, General Mechanical Workshop, Thaiba, Lalitpur was selected to fabricate and supply the above mentioned items and quantity of S/S distillation units and S/S containers, on the basis of the experiences, competent price, reasonable quality and access in Kathmandu, by the executive committee of DMC (dated December 5, 2005).

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12. Preparation of the working and storage area Shade houses for storing raw materials and space for drying the distilled raw materials were completed in various locations of distillation unit establishment sites of Dolakha as follows:

Cluster ‐1 Shade house and store house were completed in the land of Napke Yanmara CFUG located at Lakuri Danda VDC‐1.

Cluster ‐2

Shade house and store house were completed in the land of Pathibhara located Shyama VDC‐1. The M/S distillation unit owned by the Cooperative is still in operation at Basa Pandit CFUG at Jhyanku VDC‐ 1.

Cluster ‐3

Shade house and store house were completed in the land of Deurali Pakha CFUG located at Suri VDC‐2. Deudhunga Cooperative has decided to install the prototype/testing S/S distillation unit at Kathmandu for the research of new items of essential oils. Similarly, S/S containers were installed at the ware house of Himalayan Bio Trade, a marketing wing of DMC in Kathmandu.

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13. Receiving distillation units and other equipments

Altogether 4 distillation units along with the boiler and attached boilers and 2 S/S containers, of the following specifications were received from General Mechanical Workshop, Thaiba.

A. Capacity: 2400 Lts.‐1 1. Vessel a. Tank

‐ Thickness: 3mm ‐ Diameter: 56ʹ ‐ Height: 60ʹ

b. Water logged cover ‐ Thickness: 1.5mm ‐ Diameter: 61ʹ ‐ Height: 12ʹ

c. Lid

‐ Thickness: 1.5mm ‐ Diameter: 59ʹ

d. Neck ‐ Thickness: 1.5mm ‐ Diameter: 4ʹ x 1.5ʹ ‐ Length: 5 ft.

Chain pulley system vessel's cover

Transportation of distillation unit to processing site

Filter Net

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e. Net ‐ Thickness: 2mm ‐ Diameter: 55ʹ ‐ Hole size: 8‐10mm

f. Steam cross pipe

‐ Thickness: 2mm ‐ Diameter: 8ʹ ‐ Pipe: 22ʹ; fixed; No.: 4 pieces

g. Stand fixed to net


2. Condenser a. Lid


b. Condenser

‐ Height: 6ʹ ‐ No. of pipe: 49 pieces; size: 1.5ʹ

c. Base


d. Drain

‐ Pipe size: 1.5ʹ ‐ Knot bolt: 64 pieces

3. Oil separator

‐ Thickness: 2mm ‐ Diameter: 16ʹ ‐ Height: 29ʹ ‐ With funnel pipe fixed

Oil separator

Steam boiler

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4. Boiler a. Height: 23ʹ

b. Base

‐ Plate thickness: 8mm ‐ Length: 65ʹ ‐ Breadth: 49ʹ

c. Side

‐ Thickness: 6mm

d. Smoking pipe ‐ Thickness: 5mm ‐ Diameter: 3.5ʹ ‐ No. of pipe: 19 pieces

e. Smoking adjust gate

f. Steam pipeline

‐ Diameter: 1.5ʹ

B. Capacity: 2000 Lts. with attached boiler‐ 2 1. Vessel a. Steel tank


b. Water logged cover

‐ Thickness: 1.5 mm ‐ Diameter: 53ʹ ‐ Height: 12ʹ

c. Base plate boiler type tank M/S

‐ Base thickness: 8mm ‐ Side thickness: 3mm ‐ Diameter: 48ʹ ‐ Tank height: 2ft.

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‐ Fixed to steel tank

d. Lid ‐ Thickness: 1.5 mm ‐ Diameter: 51ʹ ‐ Height: 12ʹ

e. Neck

‐ Thickness: 1.5 mm ‐ Diameter: 4ʹ x 1.5ʹ ‐ Length: 5ft.

f. Net

‐ Thickness: 2mm ‐ Diameter: 47.5ʹ ‐ Hole size: 8‐10mm ‐ Stand fixed

g. Stand fixed to net

‐ Thickness: 3mm ‐ Diameter: 47.5ʹ ‐ Height: 12ʹ

2. Condenser a. Lid


b. Condenser ‐ Height: 6ʹ ‐ No. of pipe: 49 pieces; size: 1.5ʹ

c. Base


d. Drain

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3. Oil separator


C. Capacity: 1000 Lts. with attached boiler (Testing/Portable type)‐1 1. Vessel a. Steel tank


b. Water logged cover

‐ Thickness: 1.5mm ‐ Diameter: 43ʹ ‐ Height: 10ʹ

c. Base plate boiler type tank S/S

‐ Base thickness: 3mm ‐ Side thickness: 2mm ‐ Diameter: 38ʹ ‐ Fixed to steel tank

d. Lid

‐ Thickness: 1.5mm ‐ Diameter: 43ʹ ‐ Height: 10ʹ

e. Neck ‐ Thickness: 1.5mm ‐ Diameter: 3ʹ x 1.5ʹ ‐ Length: 5ft.

f. Net

‐ Thickness: 2mm ‐ Diameter: 37ʹ

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‐ Hole size: 8‐10 mm ‐ Stand size: 10ʹ

With folding system


2. Condenser a. Lid


b. Condenser

‐ Thickness: 2mm ‐ Diameter: 14ʹ ‐ Height: 36ʹ ‐ No. of pipe: 31 pieces; size: 0.5ʹ

c. Base


d. Drain pipe


3. Oil separator


D. S/S Containers: 2 1. 50 Lit. Capacity a. Container

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b. Lid

‐ Thickness: 2mm ‐ Diameter: 16ʹ ‐ Height: 1.5ʹ ‐ Socket fixed to container ‐ Valve with pipe size of 0.5ʹ

2. 200 Lit. Capacity a. Container


b. Lid

‐ Thickness: 2mm ‐ Diameter: 20ʹ ‐ Height: 1.5ʹ ‐ Socket fixed to container ‐ Valve with 0.5ʹ pipe

E. Weighing Machine

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14. Installation of distillation units

After receiving the above stated S/S distillation units and S/S containers, they were transported to the units installation sites of Dolakha and marketing centre in Kathmandu respectively. The distillation units were installed in the following locations of Dolakha.

1. S/S Distillation unit with capacity: 2000 Lts. was installed in the land of Deurali Pakha CFUG in Suri VDC of Dolakha.

2. S/S Distillation units with capacity: 2400 Lts. with attached boiler was installed in the land of Napke Yanmara CFUG in Lakuri Danda VDC of Dolakha.

3. S/S Distillation units with capacity: 2400 Lts. with attached boiler was installed in the land of Pathibhara CFUG in Shyama VDC of Dolakha.

4. S/S Distillation units with capacity: 1000 Lts. (Testing/Portable Type) with attached boiler was installed in Kathmandu for testing the new items of essential oils.

5. S/S containers with 50 Lt. and 200 Lt. capacity each was installed in the ware house of Himalayan Bio Trade, a marketing wing of DMC for the storage of essential oils thus produced.

6. Weighing machines were installed in each processing units located at different clusters of Dolakha for weighing of essential oils.

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Wintergreen leaf ready to collect

Weighing Wintergreen leaves in the processing unit

i

Collectors getting money by selling Wintergreen leaves

15. Collection of raw materials, processing and packing

The raw materials such as Silver fir needles, Juniper needles and Wintergreen leaves were collected from the community forests (in which agreements were made between the CFUGs and DMC earlier) were collected. Other raw materials such as Anthopogon leaves, Artemisia leaves, Calamus roots and Zanthoxylum berries will be harvested in appropriate season. The newly installed S/S distillation units and the previous M/S distillation units, owned by the cooperative, are now operating to process Abies oil, Juniper oil and Wintergreen oil.

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Putting Wintergreen leaves in vessel

Putting Wintergreen leaves in vessel

Closing the cover of vessel

Firing in the boiler for distillation

Taking Wintergreen oil from separator

Separating Wintergreen oil and water

Packaging Wintergreen oil

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The essential oils will be packed in epoxy coated metal containers (capacity: 5 kg, 10 kg, 20 kg, 30 kg, 50 kg and 100 kg) or HDPE food grade plastic containers (capacity: 30 kg, 50 kg and 100 kg) and transported to HBTL within a week for marketing. The essential oils thus produced will be both FSC and Organic certified.

16. Difficulties in project implementation

The following are the major difficulties posed to DMC during the project implementation: • Difficulty to perform the field based activities due to current

armed political conflict. The process of getting permit from the rebels is a time consuming process.

• The social motivation factor is lengthy and difficult to convince and motivate.

• The coordination with various stakeholders (CFUGs, pro‐poor, local entrepreneurs, Government offices and partners NGOs) is a difficult task.

• The decision of the partner NGOs and other stakeholders are ever changing as per the frequent changes in policy of the rebels.

16.1 How have these difficulties been addressed? 16.1.1 Current action/Policies adopted

• Information flow to Government and line agencies. • Conduction of program via consumer level. • The programs and budget of DMC are transparent. • Coordination with former elected and present VDC and DDC

members, VDC secretary and VDC level other CBOs and local people.

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17. Achievements after project implementation

The following are the achievements after implementing the project:

1. The operational plans of identified CFUGs were reviewed and amended thereby incorporating the collection and processing of the resources.

2. After the interaction/workshop with identified CFUGs, the network between CFUGs and between the CFUGs and entrepreneurs were formed.

3. The CFUGs executive, raw material collectors and staffs of cooperative, Himalayan Bio Trade, Everest Gateway Herbs, Bhimeshwor NTFP Production Pvt. Ltd. were trained on the principles and criteria of FSC and CoC which resulted the responsible buying and marketing practice of the forest based products coming from the sustainably managed forest. It is also, expected that the premium quality essential oils will be produced from the FSC certified raw materials collected from the certified forests.

4. Organic certification for Deudhunga Cooperative, Himalayan Bio Trade and Everest Gateway Herbs obtained.

5. The agreements were made with the essential oil exporters of Nepal for purchasing the oils that will be produced by the cooperative. Furthermore, the proposed letter of intent for partnership made between Himalayan Bio Trade and S&D Aroma Ltd. for purchasing the oils produced by the cooperative.

6. After the long social mobilization process, community forest user groups (CFUGs) were convinced and they decided to be a shareholder of DMC.

7. Identified pro‐poor user groups were also included as the shareholder of DMC. NSCFP is contributing the amount for purchasing the share of DMC on behalf of pro‐poor user groups.

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8. The processing units are turned out to be a common property of CFUGs, pro‐poor users and members of cooperatives which were owned by the members of cooperative only before.

9. The local people received an opportunity to learn essential oil processing technology. Now, they are able to run distillation units independently and can distill various essential oils items. Therefore, the locals do not have to go to far off places in search of jobs.

10. Co‐funders of the project (ANSAB and NSCFP) are in the stage of implementing other social inclusive model of essential oil based enterprises and are seeking for the other possible options for processing of NTFPs in Dolakha, after their participation in this project.

11. CFUGs and local entrepreneurs are discussing about replicating the same model of essential oils based enterprises in other parts of the district. This has created a new movement for the CFUGs to be an entrepreneur entity. Furthermore, the proprietorship forest based enterprises of the district are on the way of transferring themselves to community based enterprises.

12. Research activities are ongoing for domestication, cultivation and processing of other aromatic herbs for processing them to new items of essential oils for their commercial production and marketing.

13. The cooperative has provided following direct and indirect benefits to the people living below the poverty line:

- Establishment of S/S distillation units coupled with previous M/S distillation units have created awareness among locals regarding the financial benefits they could obtain from aromatic herbs, environment conservation and sustainable agricultural practices. This distillation unit supported low income class people, specially deprived classes like Tamang, Sherpa, Thami, Newar, Gurung and Dalits. The distillation units provided direct employment to about 50 people while 500 people received opportunities for alternative employment.

- The cooperative has been spending part of its income in community development works. The cooperative has

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planned to spend 5% of the income from newly installed S/S distillation units in conservation and sustainable management of raw material resources.

18. Comparison between the efficiency of former M/S

and newly installed S/S units The following table shows the comparative efficiency between former M/S and newly installed S/S distillation units

SN Efficiency measured for

M/S distillation units S/S distillation units

1 Fuel wood consumption

High fuel wood consumption (150 kg fuel wood for distilling 300 kg of raw materials) per batch

Comparatively low fuel wood consumption (160 kg of fuel wood for distilling 500 kg of raw materials) per batch

2 Distillation time

Takes more time for distillation (8 hours in the morning and 4 hours in the evening) of 300 kg of raw materials per batch

Takes comparatively less time for distillation (7 hours in the morning and 4 hours in the evening) of 500 kg raw materials per batch

3 Yield % of essential oils

The average essential oil yield of Wintergreen leaves was 0.5% (300 kg Wintergreen leaves yielded 1.5 kg of Wintergreen oil)

The average essential oil yield of Wintergreen leaves is 0.7 % (500 kg Wintergreen leaves yield 3.5 kg of Wintergreen oil)

4 Quality of essential oils

Wintergreen oil retained brown color which needs further treatment with Oxalic acid to maintain normal color, which consumed both oxalic acid and time

Wintergreen oil obtained with normal color (similar to water white or light brown) and does not require further treatment with oxalic acid thereby minimizing the time. Furthermore, water white or light brown wintergreen oil is regarded as export quality oil

5 Handling Handling of M/S unit was bit difficult without the chain pulley system in the distillation unit

Comparatively easy to handle due to the presence of chain pulley system in the S/S unit

6 Management Before the construction of shade house, the workers could not accommodate in the processing unit and they had to carry essential oils along themselves for safety storage

After the construction of shade house, the workers find themselves the sound environment for working and the essential oils can be stored safely. The shade house/store houses are utilized for the collection centre/store house of essential oils that are produced by other processing units situated in different locations

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19. Future Strategy

19.1. Expected production of essential oils for 2006 After the installation of S/S distillation units, DMC targets to produce

essential oils items for 2006 as follows: Table 12: DMCʹs expected production of essential oils for 2006

SN Items Botanical Name Average annual production from M/S units to 2005

Expected production after S/S unit installation (2006)

1 Abies oil Abies spectabilis 100 kg 500 kg 2 Anthopogon oil Rhododendron anthopogon 200 kg 500 kg 3 Artemisia oil Artemisia vulgaris 50 kg 300 kg 4 Calamus oil Acorus calamus 50 kg 200 kg 5 Jatamansi oil Nardostachys grandiflora 100 kg 300 kg 6 Juniper oil Juniperus communis 300 kg 1000 kg 7 Wintergreen oil Gaultheria fragrantissima 2000 kg 5000 kg 8 Zanthoxylum

oil Zanthoxylum armatum 30 kg 250 kg

19.2. Search for new items of essential oils The S/S Testing/Portable distillation unit will be utilized for distilling the aromatic herbs into new items of essential oils that can have the potentiality for market promotion and sustainable sourcing of raw materials. The new items of essential oils (both from wild and cultivated plants) will be analyzed in terms of yield percentage, organoleptic properties, physico‐chemical properties and GC‐MS (Gas Chromatography‐Mass Spectrometry). All those new items of essential oils will be introduced and market linked by HBTL. The list of aromatic herbs (including wild crafted, cultivated species, spices and exotic species) proposed for distillations of new items of essential oils are as follows:

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Table 13: Essential oil bearing wild aromatic plants and their distribution in Dolakha

SN Essential Oils Botanical Name Parts Used Distribution in Dolakha

1 Hemlock oil Tsuga dumosa Needles and twigs 1800‐3500m 2 Pine oil Pinus roxburghii / Pinus wallichiana Needles and twigs 600‐1800m 3 Valerian oil Valeriana jatamansii Rhizomes 1500‐3300m

Table 14: Essential oil bearing plants that can be cultivated in Dolakha for essential oil production

SN Essential oils Botanical Name Parts used Distribution in Dolakha

1 Basil oil Ocimum basilicum Flowering herbs 300‐1500m 2 Chamomile oil Matricaria chamomilla Flowers 500‐1500m 3 Cinnamon oil Cinnamomum tamala Leaves and twigs 450‐2000m 4 Ginger oil Zingiber officinale Rhizomes 150‐1200m 5 Jasmine oil Jasminum officinale Flowers 800‐1800m 6 Lime oil Citrus aurantifolia Peel of fruits 600‐1500m 7 Marigold oil Calendula officinalis Flowers 300‐1500m 8 Orange oil Citrus reticulata Peel of fruits 600‐1500m 9 Peppermint oil Mentha piperita Flowering herbs 1200‐2700m 10 Tagetes oil Tagetes minuta Fresh flowers 900‐2000m

19.3 Value addition/product design and development DMC targets to design and develop herbal health care products, cosmetics items and food supplements utilizing the essential oils thus produced the cooperative. Also, the cooperative plans to design herbal incense from the aromatic residue left over after processing the essential oils.

19.4 Herbal extraction from medicinal herbs

The cooperative has planned to add value to medicinal herbs by processing into extracts which has both the national and international market, creating the local level employment.

19.5 DMC as a service provider

DMC aims to work as a service provider to NTFP collectors, processors, traders on sustainable harvesting, certification issues, technology transfer and marketing information system. Furthermore, DMC aims to lead such activities as a movement for micro level enterprise set up based on forest resources in the rural areas of Nepal.

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19.6 Replication of social inclusive model enterprise in other districts DMC has targeted to extend its expertise by facilitating for the establishment of social inclusive model of enterprises and market linkage activities in the NTFP resource rich districts and areas of Nepal.

19.7 Simplifying techno-legal hurdles for essential oils export

DMC along with HBTL in collaboration with Nepal Herbs and Herbal Products Association (NEHHPA) will work for simplifying the existing techno‐legal hurdles for essential oils export. The major issues that need to be simplifying for the smooth supply of essential oils to international markets are as follows: • The implementation practices of DPR are inconsistent, long; time

consuming and harassing to the export and have adverse impact on timely delivery of goods by the exporter.

• The sampling techniques are not based on standard sampling technique.

• Sealing of bottles/containers are done by metal wire and zinc. The wire and metal seal are classical sealing methods and injures hand of the handling personal /buyer.

• Service charges are illogically high due to sampling process / number of samples and are often set by HMG officers without participation of stakeholders.

• Service provided is non‐complying to scientific standards. The GC report submitted has neither the running condition of GC mentioned in it (Gas Chromatogram) nor major peak identified.

• The analytical reports are without remarks as absence or presence or percentage (%) of key /major ingredients.

• Both CITES ban products and non‐CITES products are treated similarly and take almost equal hassles.

• Internal circulars are implemented without consultation with stakeholders.

• DPR has lack of work force, instruments, methods and reference literature and reference chemical /marker compound and unable to overcome it for decades.

• DPR being the scientific authority for the plant resources of the country as well as CITES should up date the HMG/ DOF list of ban plant species / CITES.

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• The same gazette empowers the certification right to Herbs production and processing company [HPPCL] also but Department of Custom (DOC) dishonors HPPCL certification.

• The harmonized Code is either absent or are improperly used resulting in confusion of revenue rate to the state. Example: No harmonized system (HS) code for product specific origin in Nepal such as; all herbs indifferent to CITES / non ‐ CITES /wild crafted /cultivated are having one HS Code 12119000. Jatamansi oil: 15 11 0000 /Banaspati ghee: 15162000 /Turpentine oil: 15179000 have HS Code: 15 00 00 00 as if they are all similar products.

• Different HS code for same products as; Tarpine ko tel has 15179000 and Tel tarpine ko has 38051000 and Tel sugnadh kokila ko 33012900, creates confusion about revenue charge and leaves scope to play personal interest.

• Understanding gaps /trust between the HMG departments. DoC along with Department of Narcotic (DON), harass exporter even if the products are having metal seal of DPR, some time break the seal and start there trivial tool of inserting wooden stick / metallic rods.

• It has been observed that Certificate of Origin (CoO) for export to India is handled exclusively by Federation of Nepalese Chamber of Commerce and Industries (FNCCI) central, which requires every exporters must have an industry or MoU for purchase with any industry in order to get the CoO for export to India, though it has not been mentioned in Nepal‐India trade treaty.

• Department of Tax/VAT offices often compel entrepreneurs/traders for entry to VAT. Though forest based products are not subject to VAT.

• DDC/VDC have been imposing surcharges on the movement of essential oils which restricts free flow of product from site of distillation to market points adding additional cost to the product.

• Police and security personal has been harassing the movement of spare parts like pipes and flanges which essential for running of industry.

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20. Financial report 20.1. Co-funding Activities Co‐funding Organizations AmountsSelection of location for the distillation units establishment

Himalayan Bio Trade P. Ltd. (HBTL) Rs. 10,000.00

Identification of CFUGs HBTL Rs. 7,000.00 Coordination with CFUGs Ecology, Agriculture and Rural

Development Society (ECARDS) via Nepal Swiss Community Forestry Project (NSCFP) Asia Network for Sustainable Agriculture and Bioresources (ANSAB)

Rs. 40,000.00

Rs. 30,000.00

Marketing study of essential oils and supplier sourcing of distillation unit

HBTL via Public Private Alliance (PPA) Project

Rs. 1,15,000.00

Social mobilization ECARDS via ANSAB ECARDS via Action Aid Nepal (AAN) ECARDS via NSCFP

Rs. 1,12,500.00Rs. 1,08,000.00

Rs. 94,500.00 Collaboration with other enterprises

HBTL Rs. 15,000.00

Market linkage HBTL Rs. 25,000.00 Visit to various processing unit site/unit manufacturing site

HBTL Rs. 35,000.00

Organic certification HBTL via PPA Project Rs. 2,50,000.00 Share of pro‐poor in the cooperative

The share will be contributed by NSCFP Cluster 1‐ Lankuri Danda Cluster 2‐ Shyama Cluster 3‐ Suri

Rs. 2,77,500.00Rs. 2,08,620.00Rs. 1,67,700.00

Total Co‐funding Rs. 14,95,820.00

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20.2. Expenditure from GEF/SGP fund SN Particulars GEF Grants (Rs) Expenses (Rs) Balance (Rs)1 Grants received from GEF/SGP in

June 17, 2005 706,500.00 706,500.00

2 Grants received from GEF/SGP in September 14, 2005

13,34,750.00 20,41,250.00

3 Advance for overall conduction of the project (advertisement, shade house/store house construction, distillation units, containers, transportation and load/unload) in 3 clusters

6,50,000.00 13,91,250.00

4 Over draft charge 750.00 13,90,500.00 5 Over draft charge 3,125.00 13,87,375.00 6 Bank commission 1,125.00 13,86,250.00 7 Payment to General Mechanical

Workshop for S/S distillation units 11,25,000.00 2,61,250.00

8 Bank interest 10,107.00 2,71,357.00 9 Payment to General Mechanical

Workshop for S/S distillation unit and containers

2,65,000.00

Total grant received from GEF/SGP 20,51,357.00 Total expenditure 20,45,000.00 Balance 6,357.00

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Annexes Annex 1: Agreements with NTFP collectors Whereas, the community forestry user group has granted the permission to Mr............................................. , a resident of ..................... Village Development Committee, Ward no‐2 to collect Non Timber Forest Products and sell them to the processing enterprises under the following terms and conditions as set by the user groups; declaring that the stated terms are acceptable to me. Terms and conditions 1. Specified NTFPs will be collected from the particular forest area. 2. Sustainable harvesting practices will be adopted while collecting NTFPs. 3. Only matured NTFPs will be allowed to harvest. 4. A part of NTFPs should be left to allow regeneration for the next year. 5. Only identified NTFPs will be collected and will not be adulterated. 6. Collected NTFPs will be stored in good condition warehouse. 7. NTFPs and forest resources are the common property and should be conserved for the

future use. 8. Use of chemical fertilizers and hazardous pesticides are strictly prohibited in the area of

the collection site. I hereby declared that above stated terms and conditions are acceptable to me.

Name:

Address:

Signature:

Date:

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Annex 2: Agreement between Community forest user groups, Deudhunga Multipurpose Cooperative and Himalayan Bio Trade P. Ltd. Whereas, Bhitteri Community Forest User Group (CFUG); Bonch Village Development Committee (VDC)‐2, Bolde Setidevi CFUG; Bonch VDC ‐5, Dhande Singhadevi CFUG; Bonch VDC ‐7,8, Napke Yanmara CFUG; Lakuri Danda VDC ‐1, Sangkhadevi CFUG; Lakuri Danda VDC, Jharani CFUG; Chhamawoti VDC ‐4, Suspa CFUG; Chhamawoti VDC ‐9, Charnawoti CFUG; Vimeswor Municipality (Vi. Na. Pa.)‐13 and Majhkharka Lisepani CFUG; Vi. Na. Pa.‐13 of Dolakha district agrees to permit the collection and supply of the Non Timber Forest Products (NTFPs) including Medicinal and Aromatic Plants (MAPs) available in its territories to Deudhunga Multipurpose Cooperative Ltd. (DMC), a shareholder of Himalayan Bio Trade Pvt. Ltd. (HBTL) for processing them into essential oils for fulfilling the following objectives under the following terms and conditions. Objectives • To prepare the harvesting guidelines inclusive of sustainable harvesting

practices for the NTFPs collectors. • To conduct the Organic Certification to NTFPs available in the community

forests for the responsible market linkage. • To identify commercially important NTFPs that can be harvested and processed

at local level Terms and conditions 1. Community forest user groups (CFUGs) and interested users can be included to

run the essential oil enterprise in partnership with Deudhunga Multipurpose Cooperative Ltd. and Himalayan Bio Trade P. Ltd. is responsible for the market linkage of oils thus produced.

2. If the community forest user groups and interested users are not willing to operate the essential oil enterprise, then only Deudhunga Multipurpose Cooperative Ltd. should process the required NTFPs after permission from the concerned CFUGs and Himalayan Bio Trade P. Ltd. is responsible for the market linkage of oils thus produced.

3. The essential oils produced by the enterprise including CFUGs or operated with the permission of CFUGs, should be purchased by Deudhunga Multipurpose Cooperative Ltd. in fair price basis as per the contract, while the producer should supply essential oils to the cooperative as per the agreement.

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4. Himalayan Bio Trade P. Ltd. should assist for conducting Organic Certification to the essential oils produced by the enterprise either operated by Deudhunga Multipurpose Cooperative Ltd. or by Community forest user groups and other interested users, and should assist in research related other activities.

5. All the parties should collaborate to prepare the guidelines for the sustainable harvesting of NTFPs.

6. The CFUGs is prohibited to use chemical fertilizers and hazardous pesticide in the collection areas of NTFPs.

7. The agreement between the CFUGs, Deudhunga Multipurpose Cooperative Ltd. and Himalayan Bio Trade P. Ltd. will be valid for 5 years. Any further decisions to be taken will be decided by all parties consent.

We hereby declared that the above stated terms and conditions are acceptable to us.

1. For Bhitteri CFUG For DMC For HBTL Name: Name: Name: Title: Title: Title Signature: Signature: Signature: Date: Date: Date:

2. For Bolde Setidevi CFUG

Name: Title: Signature: Date:

3. For Dhande Singhadevi CFUG


4. For Napke Yanmara CFUG


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5. For Sangkhadevi CFUG


6. For Jharani CFUG


7. For Suspa CFUG


8. For Charnawoti CFUG


9. For Majhkharka Lisepani CFUGs


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Annex 3: Agreement between Community forest user groups, Everest Gateway Herbs P. Ltd. and Himalayan Bio Trade P. Ltd. Whereas, Kalobhir Community Forest User Group (CFUG); Jiri Village Development Committee (VDC)‐7, Thulonagi CFUG; Jiri VDC‐8 and Pathibhara CFUG; Shyama VDC‐1,2 of Dolakha district agrees to permit the collection and supply of the Non Timber Forest Products (NTFPs) including Medicinal and Aromatic Plants (MAPs) available in its territories to Everest Gateway Herbs P. Ltd. (EGHPL), a partner company of Himalayan Bio Trade Pvt. Ltd. (HBTL), for processing them into essential oils for fulfilling the following objectives under the following terms and conditions. Objectives • To prepare the harvesting guidelines inclusive of sustainable harvesting



at local level. Terms and conditions 1. Community forest user groups (CFUGs) and interested users can be included to

run the essential oil enterprise in partnership with Everest Gateway Herbs P. Ltd. and Himalayan Bio Trade P. Ltd. is responsible for the market linkage of oils thus produced.

2. If the community forest user groups and interested users are not willing to operate the essential oil enterprise, then only Everest Gateway Herbs P. Ltd. should process the required NTFPs after permission from the concerned CFUGs and Himalayan Bio Trade P. Ltd. is responsible for the market linkage of oils thus produced.

3. The essential oils that would be produced by the enterprise including CFUGs or would be operated with the permission of CFUGs should be purchased by Everest Gateway Herbs P. Ltd. in fair price basis as per the contract, while the producer should supply essential oils to the company as per the agreement.

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4. Himalayan Bio Trade P. Ltd. should assist for conducting Organic Certification to the essential oils produced by the enterprise either operated by Everest Gateway Herbs P. Ltd. or by Community forest user groups and other interested users, and should assist in research related other activities.



7. The agreement between the CFUGs, Everest Gateway Herbs P. Ltd. and Himalayan Bio Trade P. Ltd. will be valid for 5 years. Any further decisions to be taken will be decided by all parties consent.

We hereby declared that the above stated terms and conditions are acceptable to us. 1. For Kalobhir CFUG For EGHPL For HBTL

Name: Name: Name: Title: Title: Title Signature: Signature: Signature: Date: Date: Date:

2. For Thulonagi CFUG


3. For Pathibhara CFUG


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Annex 4: Agreement between Community forest user groups, Deudhunga Multipurpose Cooperative and Himalayan Bio Trade P. Ltd. Whereas, Balemdamji Community Forest User Group (CFUG); Marbu Village Development Committee (VDC)‐3,4,5,6, Pandit CFUG; Jhyanku VDC‐1, Bhatekhola Kamalamai CFUG; Jhyanku VDC‐9, Ramite Phungling CFUG; Suri VDC‐1, Deurali Pakha CFUG; Suri VDC‐2 and Bajre Danda CFUG; Suri VDC‐3,4,5,6 of Dolakha district agrees to permit the collection and supply of Non Timber Forest Products (NTFPs) including Medicinal and Aromatic Plants (MAPs) available in its territories to Deudhunga Multipurpose Cooperative Ltd. (DMC), a shareholder of Himalayan Bio Trade Pvt. Ltd. (HBTL) for processing them into essential oils for fulfilling the following objectives under the following terms and conditions. Objectives • To prepare the harvesting guidelines inclusive of sustainable harvesting



at local level. Terms and conditions 1. Community forest user groups (CFUGs) and interested users can be included to

run the essential oil enterprise in partnership with Deudhunga Multipurpose Cooperative Ltd. and Himalayan Bio Trade P. Ltd. is responsible for the market linkage of oils thus produced.

2. If the community forest user groups and interested users are not willing to operate the essential oil enterprise, then only Deudhunga Multipurpose Cooperative Ltd. should process the required NTFPs after permission from the concerned CFUGs and Himalayan Bio Trade P. Ltd. is responsible for the market linkage of oils thus produced.

3. The essential oils that would be produced by the enterprise including CFUGs or would be operated with the permission of CFUGs should be purchased by Deudhunga Multipurpose Cooperative Ltd. in fair price basis as per the contract, while the producer should supply essential oils to the cooperative as per the agreement.

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4. Himalayan Bio Trade P. Ltd. should assist for conducting Organic Certification to the essential oils to be produced by the enterprise either operated by Deudhunga Multipurpose Cooperative Ltd. or by Community forest user groups and other interested users, and should assist in research related other activities.



7. The agreement between the CFUGs, Deudhunga Multipurpose Cooperative Ltd. and Himalayan Bio Trade P. Ltd. will be valid for 5 years. Any further decisions to be taken will be decided by all parties consent.

We hereby declared that the above stated terms and conditions are acceptable to us. 1. For Balemdamji CFUG For DMC For HBTL

Name: Name: Name: Title: Title: Title Signature: Signature: Signature: Date: Date: Date:

2. For Pandit CFUG


3. For Bhatekhola Kamalamai CFUG


4. For Ramite Phungling CFUG Name: Title: Signature: Date:

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5. For Deurali Pakha CFUG


6. For Bajre Danda CFUG


Annex 5: Request for revision in project activities (Replacement of 500kg/hr capacity boiler to distillation units and boilers): Establishment of processing unit in the remote areas to process the medicinal and aromatic herbs is one of the best options for the value addition locally and creating local level employment thereby assisting in the poverty reduction. However, majority of the NTFP based community enterprises were either closed or shifted to urban areas. While other same categories of enterprises were operated in centralized model. Deudhunga Multipurpose Cooperative (DMC) also faced the similar difficulty in operation. Owing to the existing conflict situation, DMC submitted the proposal to GEF/SGP for the establishment of NTFP processing units with centralized boiler of capacity 500 kg/hr, since the cooperative was planned to be centralized around Charikot areas. It was analyzed as the justifiable proposal at the submitted time; since it could operate 2‐3 units with capacity of 2400 lt. capacity at a time. Resulting the large quantity production of oils with less fuel wood consumption in less management cost. But, it is seen feasible to operate the community based processing unit model which includes FUGs and socially excluded forest user groups and pro‐poor in Dolakha by the process of social mobilization. Therefore, DMC request GEF/SGP to revise for the replacement of 500 kg/hr capacity boiler and distillation unit to distillation units with

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attached boilers (one with capacity of 2400 lit. and another two with capacity of 2000 lit. with attached boilers) due to the following reasons: • To operate the processing unit in the community level, mobile distillation units

with medium capacity boilers seems technically feasible in the proposed location of the remote areas of Dolakha.

• The price of the two S/S distillation units with capacity of 2400 lt. has increased

in the four years period from the time DMC submitted proposal to GEF. Therefore, two S/S distillation units with capacity 2400 lt. cannot be purchased with the proposed amount. Moreover, the exchange rate of USD at the proposal submitted time was NPR 78.00 equivalent to 1USD. But it has been devaluated to NPR 71.00 equivalent to 1USD at present.

• The visit to the processing unit manufacturers of India and Nepal reflected the

improved distillation unit set with attached boiler in it which has been suggested by the technicians as appropriate to the remote areas. Such S/S distillation unit system was not started before by the manufacturers of Nepal and could not be visited to the manufactures of India at the proposal submitted time.

• The proposal to replace the boiler with capacity of 500kg/hr to distillation units

and boilers, can purchase three distillation units; one with capacity of 2400 lit. and another two units with capacity of 2000 lit. each with attached boilers. These distillation units systems can be operated in 3 clusters of Dolakha. As a result of which, more FUGs, disadvantage users and pro‐poor communities will be mobilized resulting in increase of members of DMC.

• The distillation unit system that is to be established in three clusters of Dolakha

can be utilized to process different items of essential oils respective of the availability of the raw materials in the area.

• Since the proposed distillation unit system can be easily transported from one

place to another, it will ensure the regeneration of the most used species to process the oils, thereby conserving the biodiversity of the locality.

Note: The supporting documents for the replacement of heavy boilers to distillation units and boilers as prepared by the technicians and the quotations of distillation unit systems with boilers prepared by the manufacturers was submitted to GEF.

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Annex 6:

Information of essential oils

6.1 What are essential oils?

Essential oils are chemical compounds with an odoriferous nature which are highly volatile, insoluble in water but soluble in organic solvent. They are obtained from herbs, flowers, woods, leaves and seeds including spices, by steam distillation or solvent extraction. ʹEssentialʹ refers to the presence of an essence or odor and the term ʹoilʹ is used due to the retention of oil spot when they are placed on a transparent paper. The families pinaceae and cupressaceae among the gymnosperms; apiaceae, myrtaceae, rutaceae, lauraceae, lamiaceae, asteraceae (dicots) and poaceae, araceae, zingiberaceae and amarylidaceae (monocots) among angiosperms, account for a large number of aromatic plants bearing essential oils of commercial importance. The utilization of essential oil is very extensive and covers a wide range of human activity. Some of the important uses are as; ingredients in the manufacture of soaps, cosmetics, perfumery, health care herbal products, confectionary, aerated water, syrups, disinfectants, insecticides, fungicides, paper writing pads, greeting cards etc.

6.2 Extraction method of essential oil

The distillation has always been the most widely practiced methods of essential oil extraction in Nepal. Distillation basically is the separation of components of a mixture of two or more liquids by virtue of differences in their vapor pressure.

6.3 Distillation process

In order to isolate essential oil by this process, steam is subjected into aromatic materials. Under the influence of steam, essential oil is freed from the glands of plant tissue. Both water and essential oil vaporized, condensed by an adjacent condenser and drained into a receptacle, where oil separates automatically above and below water, depending upon its density. Steam is continuously charged until all the essential oil is vaporized and the distillate formed in the condenser is essentially pure water.

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6.4 Storage of essential oil

Most essential oil deteriorates through oxidation and polymerization upon prolonged exposure to air and light. Therefore, essential oil should be stored in sealed bottles or containers in dark and cool cellars. Without such precaution essences become less intense, grow darker and more viscous, and develop a bleaching effect and eventually changes into a brown, odorless resin.

Annex 7: Specification of essential oils produced by DMC

1. Anthopogon Oil Common Name: Anthopogon Oil (Sunpati) Botanical Name: Rhododendron anthopogon D. Don Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

Anthopogon oil is obtained by steam distillation of the aerial part of Rhododendron anthopogon D. Don

1. Organoleptic Properties Appearance Fluid liquid. Color Pale yellow Aroma Sweet‐herbal, faintly balsamic 2. Physico‐chemical Properties Specific gravity 0.8630 to 0.8804 at 15º C Optical rotation [‐] 10.05º to [‐] 32.9º at 15º C Refractive index 1.4785 to 1.4881 at 15º C Acid number 1.54 to 4.06 Ester number 5.40 to 25.92 Ester number after acetylation

8.23 to 45.78

Solubility Due to altitudinal and regional variation some oils are soluble in 95% alcohol and some are not

3. Uses Medicinal: Aromatic, Stimulant, administered as an errhine to produce sneezing.

Oil: In perfumery and aromatherapy.

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2. Artemisia Oil Common Name: Artemisia Oil(Titepati ) Botanical Name: Artemisia vulgaris L. Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

The essential oil is obtained by steam distillation of the aerial part of Artemisia vulgaris L.

1. Organoleptic Properties Appearance Fluid liquid. Color Pale yellow or slightly greenish. Aroma Powerful, fresh‐camphoraceous, somewhat green &

bitter‐sweet. 2. Physico‐chemical Properties Specific gravity 0.8786 to 0.9265 at 25º C Optical rotation [‐] 13.25º to [‐] 29.35º at 25º C Refractive index 1.350 to 1.49 at 25º C Acid number 2.49 to 6.5 Ester number 25.05 to 55 Ester number after acetylation

65 to 90

Solubility Insoluble in alcohol 3. Uses (a) In perfumes and as a flavoring agent 3. Calamus Oil Common Name: Calamus Oil (Bojho) Botanical Name: Acorus calamus L. Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

The essential oil is obtained by steam distillation of the dried comminuted rhizomes of Acorus calamus L.

1. Organoleptic Properties Appearance Slightly viscous liquid Color Yellow to yellowish brown Aroma Warm woody‐spicy 2. Physico‐chemical Properties Specific gravity 1.0695 to 1.0795 at 23º C

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Optical rotation [‐] 0.2º to [‐] 0.5º at 23º C Refractive index 1.5335 to 1.5589 at 23º C Acid number 0.6 to 2.5 Ester number 2 to 12 Ester number after acetylation

8.5 to 12

Solubility Soluble in 0.4 to 1.5 volumes of 80% alcohol 3. Uses (a) In perfumes of the woody oriental type; in spice blends and flavors for alcoholic beverages (b) Medicinal & Aromatherapy use: Calamus causes increased dilation of spleenic vessels, an important factor in regulating blood pressure 4. Jatamansi (Spikenard) Oil Common Name: Jatamansi Oil (Spikenard ) Botanical Name: Nardostachys grandiflora DC Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

Jatamansi oil is obtained by steam distillation of dried rhizomes of Nardostachys grandiflora DC

1. Organoleptic Properties Appearance Fluid to slightly viscous liquid. Color Varies from amber to deep blue or greenish blue. Aroma Heavy, sweet‐woody and spicy‐animal odor. 2. Physico‐chemical Properties Specific gravity 0.9300 to 0.9587 at 25º C Refractive index 1.5055 to 1.5458 at 25º C Acid number 1.5 to 8 Ester number 6 to 45 Ester number after acetylation

40 to 65

Solubility Soluble in 0.4 to 1.5 vol. of 90% alcohol 3. Uses (a) In perfumery such as oriental bases, heavy floral, fougeres, woody bases, animal ambre types, etc; in flavors as a modifier for valerian, hop, ginger, calamus, cardamom, etc. (b) Medicinal & Aromatherapy use: Used for calming nerves, grounding for Vata dosha. This oil contains very powerful grounding forces, to assists people in

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taking charge of oneʹs life. It is used for various conditions such as reproductive issues, digestion issues, and skin issues. This oil is anti‐bacterial, anti‐fungal, anti‐infectious, anti‐parasitic and anti‐septic as well as antispasmodic 5. Juniper Oil Common Name: Juniper Oil (Dhupi) Botanical Name: Juniperus cummunis L. Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

The essential oil is obtained by steam distillation of the crushed dried or partially dried, ripe berries (fruits) and leaves of Juniperus cummunis L.

1. Organoleptic Properties Appearance Mobile liquid. Color Water white or very pale yellow. Aroma A fresh, yet warm rich‐balsamic, woody‐ sweet and

pine needle‐like odor. 2. Physico‐chemical Properties Specific gravity 0.8563 to 0.8731 at 23º C. Optical rotation [‐] 22º to [‐] 41.7º at 23º C Refractive index 1.481 to 1.899 at 23º C Acid number 0.5 to 2.5 Ester number 3.06 to 20 Ester number after acetylation

40 to 65

Solubility Due to altitudinal and regional variation some oils are soluble in 95% alcohol and some are not.

3. Uses (a) In perfumes and flavors (b) Medicinal & Aromatherapy use:. Good for acne, oily eczema, dermatitis, seborrhea of scalp. Colic, flatulence, indigestion, cystitis, fluid retention, pyelitis leucorrhoea, scanty rheumatic pain, anxiety, insomnia, stress.

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6. Wintergreen Oil Common Name: Wintergreen Oil (Dhasingre) Botanical Name: Gaultheria fragrantissima Wall. Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

It is obtained by distillation of the leaves of Gaultheria fragrantissima Wall.

1. Organoleptic Properties Appearance Fluid liquid. Color Pale yellow or yellowish or pinkish. Aroma Strongly aromatic with a sweet characteristic odor, displaying a

peculiar creamy‐fruity top note and a sweet‐woody dry out. 2. Physico‐chemical Properties Specific gravity 1.1735 to 1. 1 855 at 25º C. Optical rotation [‐] 0.3º to [‐] 10.5º at 25º C Refractive index 1.537 to 1.5405 at 25º C Acid number 10 to 25 Ester number 335 to 365 Ester number after acetylation

88.8 to 98% (calculated as Methyl salicylate)

Solubility Soluble in 2.0 to 3.5 volumes of 80% alcohol 3. Uses (a) As a flavoring agent in the confectionery industry and in the manufacture of soft drinks; it is also used in the pharmaceutical and perfumery industry. (b) Medicinal & Aromatherapy use: Antiseptic, a diuretic, stimulant, emmenagogue and anti‐ rheumatic. It is very useful in many rheumatic conditions, for gout and stiffness due to old age. It also revitalizes and gives energy following muscular pains, particularly good for athletes for instance. 7. Zanthoxylum Oil Common Name: Zanthoxylum Oil (Prickly Ash) Botanical Name: Zanthoxylum armatum DC Source: Wild crafted Introduction / Variety of plant / Method of extraction / Distilled organ:

The essential oil is obtained by steam distillation of the dried fruits of Zanthoxylum armatum DC

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1. Organoleptic Properties Appearance Fluid liquid. Color Light yellow. Aroma Refreshing, pleasant, spicy. 2. Physico‐chemical Properties Specific gravity 0.8150 to 0.9051 at 25º C Optical rotation [+] 5º to [+] 10.5º at 25º C Refractive index 1.4674 to 1.4815 at 25º C Acid number 0.5 to 5 Ester number 35 to 65 Ester number after acetylation 110 to 150 Solubility Soluble in 0.8 to 1.5 volumes of 90% alcohol Linalol content 55 to 75% 3. Uses (a) Being rich in linalol, methyl cinnamate and cineole, it is used in the fragrance and flavor industry (b) Medicinal & Aromatherapy use: Anti‐infectious, sedative, arthritis, cholera, toothache

New Distillation Units for Sustainable Management and Processing of NTFP Project, Dolakha

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Transcript of New Distillation Units for Sustainable Management and Processing of NTFP Project, Dolakha