Agricultural Mechanization in Bangladesh — The Future
Bangladesh has made great strides in mechanizing many aspects of agricultural production since the early 1980s, when manual labor and animal power did all the work. To replace the large number of draught animals lost in the 1988 flood quickly, the government withdrew brand and testing restrictions on the import of agricultural machinery and allowed the duty-free import of irrigation engines, power tillers and spare parts. As a result, thousands of low-cost power tillers and irrigation engines were imported, making possible the rapid expansion of mechanization of primary tillage, irrigation and threshing. By the mid-2000s, draught animals in use earlier had been replaced by 300,000 power tillers.
Growing labor costs and shortages of supply, particularly during the rice harvest period, are now driving a demand for mechanized rice transplanting and harvesting services. The private sector has responded to this through the aggressive promotion and sale of rice transplanters and mini combine harvesters, and the government has responded through the provision of subsidies on the sale price of a range of machines, including combine harvesters and rice transplanters. Despite this, adoption of combine harvesters and rice transplanters has been slower than expected, and many crop production activities still continue to be done by hand.
To contribute to addressing these issues, the USAID Feed the Future Bangladesh Cereal Systems Initiative for South Asia Mechanization and Extension Activity (CSISA-MEA), in partnership with Bangladesh Agricultural University (BAU), held a workshop for agricultural mechanization value chain actors on “Agricultural Mechanization in Bangladesh — The Future” in Dhaka on March 21-22, 2022. Its purpose was to review progress made with agricultural mechanization, the impact this has had on rural society in Bangladesh and how the increase in the availability of rural labor force will support the industrialization of the Bangladesh economy. Within this context, the workshop aimed to identify:
- Opportunities for mechanizing crop production operations, which are currently still partly or entirely done manually
- Constraints to accelerating the pace of mechanization and the changes required in government and private sector policy to make this happen
- How the Bangladesh light engineering sector could be supported to manufacture agricultural machinery and spare parts for domestic and international markets
- Support which rural women and youth need to gain employment in the agricultural machinery sector and establish agricultural mechanization-based businesses
- Innovative ways of financing agricultural machinery manufacture, sales and service provision
The workshop was attended by 297 participants from a wide range of sectors, including agricultural machinery-based light engineering enterprises, machinery marketing companies, machinery service-providing entrepreneurs, public and private sector finance institutions, microfinance institutions (MFIs), representatives from the Department of Agricultural Extension, national agricultural research stations, the Ministry of Industries, international development organizations, USAID and universities. It was held over two days, starting with an inaugural session attended by the Honorable Minister Dr. Muhammad Abdur Razzaque, member of Parliament, Ministry of Agriculture, Government of the Peoples’ Republic of Bangladesh. This was followed by sessions titled:
- Agricultural mechanization in the context of economic development in Bangladesh
- What have we learnt about adoption of agricultural mechanization?
- Manufacture of agricultural machines and spare parts
- Access to finance and business development
The full workshop agenda and workshop presentations can be accessed through the CSISA website: https://csisa.org/agricultural-mechanization-in-bangladesh-the-future/.
Summary of workshop findings
Progress with mechanizing agriculture in Bangladesh
- Bangladesh agriculture is transforming from subsistence to semicommercial agriculture; agricultural mechanization is one of the important drivers of this change. Reducing poverty and hunger status through agricultural mechanization is the first priority of government.
- A proper guideline and collaborative effort between public and private sector actors is needed to synchronize agricultural mechanization activities.
- The rising cost of labor is a key driver of agricultural mechanization in Bangladesh.
- In particular, planting and harvesting of rice, wheat and maize need to be mechanized.
Spare parts availability and quality
- Limited spare parts supply often constrains the efficient use of expensive, imported agricultural machinery.
- Implementing the National Agricultural Mechanization Policy 2020 and Mechanization Road Map requires that local manufacturers be supported through awareness-raising programs and training to fabricate modern agricultural machineries and spare parts.
- A large proportion of spare parts sold are imported; however, agricultural machinery and the spare parts market in Bangladesh is growing, and local manufacturing has the potential to capture a major share of the market.
- Locally manufactured machines and spare parts are not considered to be as good quality as imports.
- Workers and managers of light engineering enterprises rarely receive training in the skills needed to produce quality machines and parts, and training programs (face-to-face and online) are needed.
- Training is needed in factory floor layout, spare parts and machine design, and making and reading drawings to enable the precise manufacture of agricultural machines and spare parts.
- Capacity building related to casting, heat treatment and fabrication of agri-machinery (for technicians) and in marketing and financial management skills (for management personnel) is needed.
- Access to information is needed for manufacturers on markets, export potential, modern capital machinery and improved production technology options.
- Local foundries need to be modernized through collaboration and experience-sharing with the South Asian Association for Regional Cooperation (SAARC) and industrialized countries.
- There is a need for capital machinery (e.g., computer numerical control (CNC), laser cutters, 3D printers and lathe machines) and training on how to use them. In many cases, these investments will require funding from financial services institutions or equity investors.
Agricultural machinery service provision and technology adoption
- Bangladesh farmers are poor and unable to buy machines, even with the benefit of a subsidy program. However, the country has entrepreneurs who can use the subsidy to buy machines and provide services to the community.
- Initiatives to promote mechanization, such as the National Agricultural Mechanization Policy 2020 and the 50%-70% subsidy for procuring machines, may not be enough. Banking credit policies, trade policies, quality regulations and provision of extension services all need to be addressed; public-private partnerships setting policy direction are also needed to reduce the time taken to achieve adoption of new agricultural mechanization technology.
- There is a need to increase awareness among farmers of agricultural mechanization technology and where machinery services can be obtained.
- There is a need to support the private sector to provide better aftersales services by establishing training programs for machinery operators and mechanics.
- Infrastructure (approach roads, access to fields) needs to be adapted to enable larger machines, like combine harvesters, to gain access to all farm land in Bangladesh.
- A Government of Bangladesh policy change is needed to facilitate businesses to test and introduce drones for pesticide and fertilizer application.
- Postharvest losses of fruits and vegetables are high and need to be reduced through appropriate interventions.
Access to finance
- Access to finance is a common problem for all stakeholders in the agricultural sector.
- Loan repayment systems need to be designed to take account for the seasonal nature of the sector. Agricultural machinery and spare parts are mainly procured and used during the cropping seasons and, therefore, need to be made before the season starts to be ready in time for customers to buy in advance.
- Other often-cited problems for machinery manufacturers and machinery solution providers (MSPs) are: (1) the need to provide collateral when applying for loans, (2) limited availability of the business records that would allow banks to assess the credit worthiness of loan applicants and (3) the long distances to the bank branches.
- By contrast to banks, MFIs have extensive networks of field staff. They are, therefore, easier to access than banks for rural entrepreneurs living some distance from the larger, regional towns where banks have offices.
- Establishing a registration system for combine harvesters and other similar machines, and installing GPS trackers in combines and tractors, would help banks recover machinery from creditors who default on loans.
- Bangladesh Bank has a guideline, “Agricultural and rural credit policy and program for the FY 2021-2022,” which is in line with government policy and facilitates the provision of loans to farmers and small and medium enterprises (SMEs). This fixes interest rates that banks can charge SMEs for loans at 9%, which might not be high enough to cover the costs of disbursing loans and collecting loan repayments.
- If the light engineering industry is to expand and become a major sector in the Bangladesh economy, foreign investment is needed. To encourage this will require incentives to make it easy for investors to invest in Bangladesh and, most importantly, repatriate these investments.
Female and youth entrepreneurs
- Rural, educated women and youth will be the main driving force in the light engineering and agricultural machinery service provision sectors. Systems, therefore, need to be put in place to provide them with the business skills training, financial support and incentives required to encourage them to become rural-based entrepreneurs in the agricultural mechanization sector.