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Chemical fertilizer is one of the priority inputs as identified by agriculture perspective plan and agriculture development strategy of Nepal in achieving increased agricultural productivity. High price and unavailability of required quantity of fertilizer in time are major problems associated to this sector. Subsidy in chemical fertilizer was introduced aiming at reduced cost and increased production. However, as found by many past studies, subsidy could not bring seemingly positive changes in Nepal in terms of fertilizer availability and crop productivity. It further increased government financial burden in importation of chemical fertilizers which being politically sensitive issue could not be removed. Further, it discouraged private sector’s import due to which total supply could not be increased as expected. Private sector should, thus, be encouraged through soft loan, bank guarantee, and transport as well as transit liberalization. Government-to-government agreement with fertilizer manufacturing countries including India will help in cost reduction and supply assurance. With the ineffectiveness of chemical fertilizer policies and everlasting short supply, Nepalese government introduced subsidy in organic fertilizers also. However, organic products were found poor in quality. Due to their slow response and difficulty in transportation, farmers expressed their reluctance in using organic fertilizers. Organic fertilizers in the present context of Nepal could not completely substitute the chemical fertilizers. Rather combination of organic and chemical fertilizers may ensure higher productivity as well as reduced cost which in long-term induce sustainability. Subsidy in organic fertilizer should be removed and program to improve farmyard manure, compost, and green manuring should be launched.