Give highest priority to agriculture in budget

In recent years, Bangladesh has made significant economic progress across various sectors, with agriculture being the most visibly advanced. Previously, Bangladesh was a country with a food deficit, importing an average of 15 to 20 lakh tons of food annually. During the Liberation War, agricultural production was severely disrupted, resulting in a food deficit of 30 lakh tons in 1971-72, which was about 30% of the total production. Currently, the deficit has decreased to below 15%.

Following independence, the total food grain production in the country was one crore and 10 lakh tons. Now, it has increased to four crore and 60 lakh tons. Over the past 53 years, food grain production has grown at an average annual rate of approximately 3%. Farmers, who once faced food shortages, now have a surplus. Workers who previously demanded daily wages equivalent to 3 kilograms of rice now earn wages equivalent to 10 kilograms of rice per day. Both farmers and workers no longer face significant food shortages, and no one goes hungry. Agricultural production has increased manifold.

Bangladesh currently ranks third in rice production. In terms of developing and improving various crop varieties, Bangladesh is at the forefront. Additionally, Bangladesh ranks second in jute production, third in vegetable production, second in farmed fish production, seventh in wheat production, and eighth in potato production. Since independence, rice production has increased nearly fourfold, wheat twofold, maize tenfold, and vegetable production fivefold. Bangladesh has a surplus in the production of potatoes, fish, meat, and eggs. A country once plagued by famine and hunger has now achieved remarkable progress in food production and supply.

Despite an annual population increase of 2 million and a reduction of 800,000 hectares in agricultural land, the per capita supply of agricultural products has not decreased but has continuously increased. According to Bangladesh Bureau of Statistics (BBS) data, the growth rate of crop production has generally been higher than the population growth rate over the past 53 years. This trend has continued for the past three years. The growth rate was 3.17% in 2020-21, 3.05% in 2021-22, and 2.61% in 2022-23. However, there were periods of much higher growth, such as 7% in 2006-07 and 7.57% in 2009-10, as well as periods of lower growth, like 0.88% in 2015-16 and 0.96% in 2016-17. Overall, the long-term average growth has been satisfactory, though recently, rice production growth has slowed.

In 2019-20, the total rice production was 38.695 million metric tons. The following year, 2020-21, it was 37.608 million metric tons, with a negative growth rate of 2.8%. In 2021-22, the total production was 39.18 million metric tons, with a growth rate of 4.8%. In 2022-23, the total production was 39 million metric tons, with a negative growth rate of 0.45%. The average growth rate over the past three years was 0.52%, while the average population growth rate was 1.33%. Consequently, the growth rate of rice production did not significantly exceed the population growth rate, failing to create a substantial surplus. This, along with rising international food prices, has led to higher rice prices in the domestic market. Additionally, increased input costs and inflationary pressures have played a role, with business manipulations also contributing.

There is a significant discrepancy between the rice production data provided by the BBS and the Department of Agricultural Extension (DAE). The DAE's data often shows an upward bias in production figures, making the BBS data more reliable. The BBS collects data through specially trained and experienced personnel, although their analysis and publication of production data are often delayed. When finally published, the data mostly serves to adorn libraries and personal collections, rather than being effectively utilized for determining the level of food self-sufficiency, formulating import-export policies, or setting tax and duty rates.

The recent slowdown in rice production can be attributed to several factors. Firstly, the reduction in agricultural land and diversification of crops have significantly impacted rice cultivation, reducing the land area dedicated to rice farming. Farmers find rice cultivation labor-intensive and expensive with relatively low returns. Often, during the harvest season, farmers do not receive even two-thirds of the government-determined procurement price for rice. They sell their rice to intermediaries and large traders at much lower prices. By the time the price of rice increases, farmers no longer have surplus stock, which has already moved to the warehouses of mill owners who then sell at higher prices, reaping the profits. Both farmers and consumers suffer as a result. Government market interventions are largely ineffective in this regard. Moreover, the expansion of climate-resilient crop varieties is limited, and the amount of subsidies and incentives is insufficient.

Recently, the global price of chemical fertilizers has dropped by approximately 52%; however, the high price of fertilizers in Bangladesh remains unchanged. In mid-2022, fertilizer prices were raised twice in the domestic market citing global price hikes. Even though global prices have now fallen, prices in Bangladesh have not returned to early 2022 levels. A 20% subsidy is provided on electricity used for irrigation equipment, but there is no subsidy on diesel. Notably, about 70% of irrigation equipment in the country still relies on diesel. While the government provides a 50% and, in some cases, a 70% subsidy for purchasing agricultural machinery, the rising value of the dollar has increased the cost of irrigation equipment in local currency. Due to the current subsidies, many farmers are not interested in purchasing agricultural machinery at the higher prices compared to the past. Therefore, subsidies need to be increased, and investments in agriculture need to be boosted. With the upcoming budget, agriculture should be identified as a priority sector, reflected in budget allocation policies.

Over the past decade, the national budget has grown rapidly, but the agricultural budget has not increased proportionately. In the 2011-12 fiscal year, the share of the agriculture budget in the total national budget was 10.65%. In the 2023-24 fiscal year, it has dropped to 5.74%. Similarly, the share of agricultural subsidies has decreased from 6.4% to 2.3%. In the last budget, approximately 17,500 crore takas were allocated for agricultural subsidies, but actual spending was about 8,000 crore takas higher. For the next fiscal year, the agricultural subsidy amount should be set at 40,000 crore takas. Last year, the broader agricultural sector (under five ministries) was allocated 43,703 crore takas, which was 5.74% of the total budget allocation (761,785 crore takas). This time, the new budget could have an allocation of around 800,000 crore takas, of which at least 10%, or 80,000 crore takas, should be allocated to agriculture. Additionally, import duties and taxes on agricultural machinery and other inputs should be waived. The budget policy should prioritize agriculture to the highest extent.

Currently, we are under significant inflationary pressure, causing hardship for the general population. Food inflation has remained above 10% for several months. Without a significant increase in the production of rice, our primary staple, controlling high inflation will be very difficult. This year, Bangladesh has faced prolonged drought, damaging field crops. Adverse weather due to El Niño is affecting global production, with severe drought and heatwaves in the Philippines and Africa, and floods in China, Pakistan, Afghanistan, and Russia. These disruptions have increased global food prices. In such a situation, without boosting domestic agricultural production, particularly rice, controlling inflation will be challenging. Therefore, increasing investment and allocation in the agricultural sector is crucial.

In the current decade, we aim to achieve the Sustainable Development Goals (SDGs). One of the primary goals of sustainable agricultural development is to eradicate hunger by 2030 and ensure food supply for all, particularly for the poor. Another goal is to double food production by 2030 and introduce sustainable agricultural practices through the development and expansion of climate-resilient agricultural technologies. Other goals include ensuring access to and optimal use of agricultural land, preserving biodiversity in crops and livestock, removing trade barriers, and increasing investment in agriculture.

Although production is continually increasing in various agricultural subsectors, achieving food security and ensuring a sustainable food supply for everyone requires accelerating this growth rate. Therefore, investment in agriculture needs to be increased, and the share of the agricultural sector in the national budget needs to be raised. Recent economic reforms have reduced budget allocations and subsidies for agriculture. Even with a slight increase, it is not sufficient for sustainable agricultural development. This amount needs to be significantly increased. Additionally, to transform traditional agricultural production systems into commercial agriculture, capital infusion is necessary. Support should be provided for establishing and marketing agro-processing industries. Agriculture needs to be considered a profitable and respectable profession. Input costs should be reduced, mechanization should be expanded, and fair prices for agricultural products should be ensured. Above all, there must be political commitment to improve the living standards of farmers.

Author: Agricultural Economist; Director, Dhaka School of Economics and former Vice-Chancellor, University of Global Village.