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

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
1
lights

Project number

Project NEP/04/11
Highlights 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.

2
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
3
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
4
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
5
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
6
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

7
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.
8

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
13
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.
15
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 171 Wintergreen, Calamus, Artemisia,
Bonch‐ 5 Valerian
3 Dhande 346.25 Wintergreen, Calamus, Artemisia,
Singhadevi Bonch‐ 7,8 Valerian
4 Napke Yanmara 160.88 Wintergreen, Calamus, Artemisia,
Lakuri Danda‐1 Valerian
5 Sangkhadevi Lakuri Danda 301.1 Wintergreen, Artemisia, Valerian
6 Jharani 208.85 Wintergreen, Calamus, Artemisia,
Chhamawoti‐ 4 Valerian
7 Suspa 635.36 Wintergreen, Calamus, Artemisia,
Chhamawoti‐ 9 Valerian
8 Khorthali Vi. Na. Pa.‐10 168.40 Wintergreen, Artemisia, Valerian
9 Charnawoti 247 Wintergreen, Calamus, Artemisia,
Vi. Na. Pa.‐13 Valerian
10 Majhkharka 146.6 Wintergreen, Calamus, Artemisia,
Lisepani Vi. Na. Pa.‐13 Valerian
11 Thansa Deurali 286 Wintergreen, Calamus, Artemisia,
Vi. Na. Pa.‐12,13 Valerian
Cluster ‐2
1 Kalobhir 545.25 Wintergreen, Artemisia, Valerian,
Jiri‐7 Abies, Juniper, Zanthoxylum
2 Thulonagi 239.53 Wintergreen, Artemisia, Valerian,
Jiri‐8 Abies, Juniper, Zanthoxylum
3 Pathibhara 710 Wintergreen, Abies, Artemisia,
Shyama‐1,2 Valerian, Zanthoxylum
4 Kyangse Setep 180.25 Wintergreen, Abies, Juniper
Jiri Artemisia, Valerian, Zanthoxylum
5 Balemdamji 495 Abies, Anthopogon, Juniper,
Marbu‐3,4,5,6 Zanthoxylum
Cluster ‐3
1 Basa Pandit 508.5 Abies, Anthopogon, Juniper,
Wintergreen, Artemisia, Valerian,
Jhyaku‐1 Zanthoxylum
2 Bhatekhola 746 Abies, Anthopogon, Juniper,
Kamalamai Wintergreen, Artemisia, Valerian
Jhyaku‐9
17
3 Ramite Phungling 72 Abies, Anthopogon, Juniper,
Wintergreen, Artemisia, Valerian,
Suri‐1 Zanthoxylum
4 Deurali Pakha 79.5 Abies, Anthopogon, Juniper,
Suri‐2 Wintergreen, Artemisia, Valerian
5 Kukur Dayale 16 Abies, Anthopogon, Juniper,
Suri‐3,4 Wintergreen, Artemisia, Valerian
6 Kosh Nidhi 865 Abies, Anthopogon, Juniper,
Suri‐3,4,5,6 Wintergreen, Artemisia, Valerian
7 Kobutar Yarpang Suri‐6 Abies, Anthopogon, Juniper
8 Bajre Danda 570 Abies, Anthopogon, Juniper,
Suri‐3,4,5,6 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
18
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/Organization

1 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

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/Organization
1 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

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 Address
1 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
21
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
22
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:
3. Everest Gateway Herbs P. Ltd.: 35% (Rs. 2, 43,390.00)
4. Pro‐poor user groups: 30% (Rs. 2, 08,620 .00)

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
23
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:
3. Community Forest User Groups: 30% (Rs. 1, 67,700.00)
4. Pro‐poor user groups: 30% (Rs. 1, 67,700.00)

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
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
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

24
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.

25
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
26
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.

27
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.

28
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
29
6 Bajre Danda CFUG; Suri‐3,4,5,6 570
Total land area 6545.13 ha.

Table 9: List of NTFPs for Organic certification

Local Name Botanical Name Qty. in kg
SN
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 ‐
30
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

31
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 Description
A. S/S Steam Distillation Units a. Vessel: S/S (304 grade)
1. Capacity: 2400 Lts. with attached boiler (M/S) ‐ 1 No. b. Condenser: Cylindrical Shell and Tube
2. Capacity: 2000 Lts. with attached boiler (M/S) ‐ 2 No type
3. Capacity: 1000 Lts. (Portable/Testing type)‐ 1 No. c. Receiver: S/S (304 grade)
d. Steam pipe line with valves, fitting &
S/S vapor line
B. S/S Containers 2 mm thick
1. Capacity: 50 Lts. ‐ 1 No.
2. Capacity: 200 Lts.‐ 1 No.
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).
32
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.

33
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
Filter Net

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

c. Lid
‐ Diameter: 59ʹ
Chain pulley system vessel's cover

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

Transportation of distillation unit to
processing site

34
e. Net
‐ Thickness: 2mm
‐ Diameter: 55ʹ
‐ Hole size: 8‐10mm

f. Steam cross pipe
Oil separator ‐ Thickness: 2mm
‐ Diameter: 8ʹ
‐ Pipe: 22ʹ; fixed; No.: 4 pieces

g. Stand fixed to net
‐ Thickness: 3mm
‐ Diameter: 55ʹ
‐ Height: 8ʹ

2. Condenser
a. Lid
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 10ʹ
Steam boiler
b. Condenser
‐ Height: 6ʹ
‐ No. of pipe: 49 pieces; size: 1.5ʹ

c. Base
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 6ʹ

d. Drain
‐ Pipe size: 1.5ʹ
‐ Knot bolt: 64 pieces

3. Oil separator
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 29ʹ
‐ With funnel pipe fixed
35

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
‐ Thickness: 2mm
‐ Diameter: 48ʹ
‐ Height: 66ʹ

‐ 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.
36
‐ Fixed to steel tank

d. Lid
‐ Diameter: 51ʹ
‐ Height: 12ʹ

e. Neck
‐ 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
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 10ʹ

b. Condenser
‐ Height: 6ʹ

c. Base
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 6ʹ

d. Drain
37

3. Oil separator
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 29ʹ

C. Capacity: 1000 Lts. with attached boiler (Testing/Portable type)‐1
1. Vessel
a. Steel tank
‐ Thickness: 2mm
‐ Diameter: 38ʹ
‐ Height: 49ʹ

‐ 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
‐ Diameter: 43ʹ
‐ Height: 10ʹ
e. Neck
‐ Length: 5ft.

f. Net
‐ Thickness: 2mm
‐ Diameter: 37ʹ
38
‐ Hole size: 8‐10 mm
‐ Stand size: 10ʹ

With folding system
‐ Thickness: 3mm
‐ Diameter: 37ʹ
‐ Height: 10ʹ

2. Condenser
a. Lid
‐ Thickness: 2mm
‐ Diameter: 14ʹ
‐ Height: 8ʹ

b. Condenser
‐ Thickness: 2mm
‐ Diameter: 14ʹ
‐ Height: 36ʹ

c. Base
‐ Thickness: 2mm
‐ Diameter: 14ʹ
‐ Height: 6ʹ

d. Drain pipe

3. Oil separator
‐ Thickness: 2mm
‐ Diameter: 14ʹ
‐ Height: 24ʹ

D. S/S Containers: 2
1. 50 Lit. Capacity
a. Container
39
‐ Thickness: 2mm
‐ Diameter: 16ʹ
‐ Height: 15ʹ

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
‐ Thickness: 2mm
‐ Diameter: 20ʹ
‐ Height: 36ʹ

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

E. Weighing Machine

40
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.

41

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.

Wintergreen leaf ready to
collect

Weighing Wintergreen
leaves in the processing unit
i

Collectors getting money by
selling Wintergreen leaves

42
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

43
Packaging
Wintergreen oil
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.

44
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.
45
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
46
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 M/S distillation units S/S distillation units
measured for
1 Fuel wood High fuel wood consumption (150 Comparatively low fuel wood consumption
consumption kg fuel wood for distilling 300 kg (160 kg of fuel wood for distilling 500 kg of
of raw materials) per batch raw materials) per batch
2 Distillation Takes more time for distillation (8 Takes comparatively less time for distillation
time hours in the morning and 4 hours (7 hours in the morning and 4 hours in the
in the evening) of 300 kg of raw evening) of 500 kg raw materials per batch
materials per batch
3 Yield % of The average essential oil yield of The average essential oil yield of Wintergreen
essential oils Wintergreen leaves was 0.5% (300 leaves is 0.7 % (500 kg Wintergreen leaves
kg Wintergreen leaves yielded 1.5 yield 3.5 kg of Wintergreen oil)
kg of Wintergreen oil)
4 Quality of Wintergreen oil retained brown Wintergreen oil obtained with normal color
essential oils color which needs further (similar to water white or light brown) and
treatment with Oxalic acid to does not require further treatment with oxalic
maintain normal color, which acid thereby minimizing the time.
consumed both oxalic acid and Furthermore, water white or light brown
time wintergreen oil is regarded as export quality
oil
5 Handling Handling of M/S unit was bit Comparatively easy to handle due to the
difficult without the chain pulley presence of chain pulley system in the S/S unit
system in the distillation unit
6 Management Before the construction of shade After the construction of shade house, the
house, the workers could not workers find themselves the sound
accommodate in the processing environment for working and the essential
unit and they had to carry oils can be stored safely. The shade
essential oils along themselves for house/store houses are utilized for the
safety storage collection centre/store house of essential oils
that are produced by other processing units
situated in different locations
47
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 Expected production
production from after S/S unit
M/S units to 2005 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 Zanthoxylum armatum 30 kg 250 kg
oil
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:

48
Table 13:
Essential oil bearing wild aromatic plants and their distribution in Dolakha
Distribution in
SN Essential Oils Botanical Name Parts Used
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
Distribution in
SN Essential oils Botanical Name Parts used
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.
49
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.
50
• 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.

51
20. Financial report
20.1. Co-funding
Activities Co‐funding Organizations Amounts
Selection of location for the Himalayan Bio Trade P. Ltd. (HBTL) Rs. 10,000.00
distillation units establishment
Identification of CFUGs HBTL Rs. 7,000.00
Coordination with CFUGs Ecology, Agriculture and Rural
Development Society (ECARDS) via
Nepal Swiss Community Forestry Rs. 40,000.00
Project (NSCFP)
Asia Network for Sustainable Rs. 30,000.00
Agriculture and Bioresources (ANSAB)
Marketing study of essential oils HBTL via Public Private Alliance (PPA) Rs. 1,15,000.00
and supplier sourcing of Project
distillation unit
Social mobilization ECARDS via ANSAB Rs. 1,12,500.00
ECARDS via Action Aid Nepal (AAN) Rs. 1,08,000.00
ECARDS via NSCFP
Rs. 94,500.00
Collaboration with other HBTL Rs. 15,000.00
enterprises
Market linkage HBTL Rs. 25,000.00
Visit to various processing unit HBTL Rs. 35,000.00
site/unit manufacturing site
Organic certification HBTL via PPA Project Rs. 2,50,000.00
Share of pro‐poor in the The share will be contributed by
cooperative NSCFP
Cluster 1‐ Lankuri Danda Rs. 2,77,500.00
Cluster 2‐ Shyama Rs. 2,08,620.00
Cluster 3‐ Suri Rs. 1,67,700.00
Total Co‐funding Rs. 14,95,820.00

52
20.2. Expenditure from GEF/SGP fund
SN Particulars GEF Grants (Rs) Expenses (Rs) Balance (Rs)
1 Grants received from GEF/SGP in 706,500.00 706,500.00
June 17, 2005
2 Grants received from GEF/SGP in 13,34,750.00 20,41,250.00
September 14, 2005
3 Advance for overall conduction of 6,50,000.00 13,91,250.00
the project (advertisement, shade
house/store house construction,
distillation units, containers,
transportation and load/unload) in
3 clusters
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 11,25,000.00 2,61,250.00
Workshop for S/S distillation units
8 Bank interest 10,107.00 2,71,357.00
9 Payment to General Mechanical 2,65,000.00
Workshop for S/S distillation unit
and containers
Total grant received from GEF/SGP 20,51,357.00
Total expenditure 20,45,000.00
Balance 6,357.00

53
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:

54
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

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.
55
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
Name:
Title:
Signature:
Date:

4. For Napke Yanmara CFUG

Name:
Title:
Signature:
Date:
56

5. For Sangkhadevi CFUG

Name:
Title:
Signature:
Date:

6. For Jharani CFUG
Name:
Title:
Signature:
Date:

7. For Suspa CFUG

Name:
Title:
Signature:
Date:

8. For Charnawoti CFUG
Name:
Title:
Signature:
Date:

9. For Majhkharka Lisepani CFUGs
Name:
Title:
Signature:
Date:

57

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

at local level.

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.
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.
58
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.


1. For Kalobhir CFUG For EGHPL For HBTL
Name: Name: Name:

Title: Title: Title
Date: Date: Date:

2. For Thulonagi CFUG

Name:
Title:
Signature:
Date:

3. For Pathibhara CFUG

Name:
Title:
Signature:
Date:

59
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

at local level.

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.
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.
60
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.


1. For Balemdamji CFUG For DMC For HBTL
Name: Name: Name:

Title: Title: Title
Date: Date: Date:

2. For Pandit CFUG

Name:
Title:
Signature:
Date:

3. For Bhatekhola Kamalamai CFUG

Name:
Title:
Signature:
Date:

4. For Ramite Phungling CFUG

Name:
Title:
Signature:
Date:
61
5. For Deurali Pakha CFUG
Name:
Title:
Signature:
Date:

6. For Bajre Danda CFUG

Name:
Title:
Signature:
Date:

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
62
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.
63
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.

64
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 / Anthopogon oil is obtained by steam
Method of extraction / Distilled distillation of the aerial part of Rhododendron
organ: 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 8.23 to 45.78
acetylation
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.

65
2. Artemisia Oil
Common Name: Artemisia Oil(Titepati )
Botanical Name: Artemisia vulgaris L.
Introduction / Variety of plant / The essential oil is obtained by steam
Method of extraction / Distilled distillation of the aerial part of Artemisia
organ: vulgaris L.
Color Pale yellow or slightly greenish.
Aroma Powerful, fresh‐camphoraceous, somewhat green &
bitter‐sweet.
Ester number 25.05 to 55
Ester number after 65 to 90
acetylation
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.
Method of extraction / Distilled distillation of the dried comminuted
organ: rhizomes of Acorus calamus L.
Appearance Slightly viscous liquid
Color Yellow to yellowish brown
Aroma Warm woody‐spicy
66
Ester number 2 to 12
Ester number after 8.5 to 12
acetylation
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
Introduction / Variety of plant / Jatamansi oil is obtained by steam distillation
Method of extraction / Distilled of dried rhizomes of Nardostachys grandiflora
organ: DC
Appearance Fluid to slightly viscous liquid.
Color Varies from amber to deep blue or greenish blue.
Aroma Heavy, sweet‐woody and spicy‐animal odor.
Acid number 1.5 to 8
acetylation
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
67
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.
Method of extraction / Distilled distillation of the crushed dried or partially
organ: dried, ripe berries (fruits) and leaves of
Juniperus cummunis L.
Appearance Mobile liquid.
Color Water white or very pale yellow.
Aroma A fresh, yet warm rich‐balsamic, woody‐ sweet and
pine needle‐like odor.
Specific gravity 0.8563 to 0.8731 at 23º C.
Optical rotation [‐] 22º to [‐] 41.7º at 23º C
Ester number 3.06 to 20
acetylation
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.

68
6. Wintergreen Oil
Common Name: Wintergreen Oil (Dhasingre)
Botanical Name: Gaultheria fragrantissima Wall.
Introduction / Variety of plant / It is obtained by distillation of the leaves of
Method of extraction / Distilled Gaultheria fragrantissima Wall.
organ:
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.
Specific gravity 1.1735 to 1. 1 855 at 25º C.
Acid number 10 to 25
Ester number after 88.8 to 98% (calculated as Methyl salicylate)
acetylation
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
Method of extraction / Distilled distillation of the dried fruits of Zanthoxylum
organ: armatum DC

69
Color Light yellow.
Aroma Refreshing, pleasant, spicy.
Optical rotation [+] 5º to [+] 10.5º at 25º C
Acid number 0.5 to 5
Ester number after acetylation 110 to 150
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

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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 NTFP Project, Dolakha

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New Distillation Units for Sustainable

Management and Processing of Non Timber

Highlights Project name

AAN : Action Aid Nepal

6.2.3 Prioritization of available aromatic plants according to market

SN Name of participants Designation/Organization

6.4.7 Persons involved in social mobilization activities

8. Market linkage activities

9. Visit to various processing unit sites

15. Collection of raw materials, processing and packing

16. Difficulties in project implementation

18. Comparison between the efficiency of former M/S

and newly installed S/S units

19.2. Search for new items of essential oils

Terms and conditions

Whereas, Bhitteri Community Forest User Group (CFUG); Bonch Village

• To prepare the harvesting guidelines inclusive of sustainable harvesting

• To prepare the harvesting guidelines inclusive of sustainable harvesting

Name: Name: Name:

• To prepare the harvesting guidelines inclusive of sustainable harvesting

Name: Name: Name:

Information of essential oils

6.1 What are essential oils?

Most essential oil deteriorates through oxidation and polymerization upon

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