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Agriculture is the backbone of human civilisation which has evolved over thousands of years. From the simple hand tools of ancient times to the highly sophisticated machinery of the modern era, the story of agricultural mechanisation is of innovation, transformation, and immense impact on human society.
Early agricultural practices primarily depended on human and animal labour. However, it was not until the Middle Ages that major advancements in agricultural machinery occurred.
Ancient civilisations, like the Egyptians, Greeks, and Romans, incorporated various forms of mechanisation, such as water wheels for irrigation and animal-drawn ploughs. Major advancements in agricultural machinery arrived in the middle ages. The Industrial Revolution, which began in the late 18th century in Britain, marked a turning point in agricultural mechanisation. The rise of industrialisation brought technological advancements and innovations that spread to agriculture. The development of the steam engine revolutionised transportation and allowed for the mechanisation of agricultural tasks.
The adoption of agricultural mechanisation led to a remarkable increase in agricultural productivity. With the ability to cover larger areas in less time, farmers experienced higher yields and reduced labour requirements. Mechanisation also facilitated the efficient use of fertilisers and pesticides, further enhancing crop production.
In Bangladesh, the level of agricultural mechanisation varies across different regions and types of farms. While there has been some progress in adopting agricultural machinery, the overall level of mechanisation in the agricultural sector is still relatively low compared to many other countries. Although industrialisation has played a major role in the Bangladeshi economy recently, most people still depend on agriculture for their living.
In the 2021-22 fiscal year, agriculture contributed 11.66 per cent to the country's Gross Domestic Product (GDP). Out of this, 5.64 per cent was attributed to crops and horticulture. The latest labour force survey in 2022 indicates that approximately 45.3 per cent of the employed population in the country is engaged in agriculture, marking a notable increase of 4.7 per cent compared to the figures in 2017.
Agri-mechanisation requires incorporating modern machinery and equipment in farming practices to boost productivity and reduce farmers' exposure to labour shortages and environmental adversities. Although tremendous development has been achieved in crop production in Bangladesh, a 2013 study in the Journal of Animal and Plant Sciences suggested that farmers in Bangladesh fail to exploit the full potential of technology and that input uses might be reduced through the adaptation and spread of improved agricultural mechanisation.
On the other hand, a more recent study in 2019 shows that some agricultural operations, such as land preparation, irrigation, threshing, and pesticide application, have witnessed substantial mechanisation, exceeding 90 per cent. But other applications, such as planting and harvesting, fertiliser application and weeding, are below 2 per cent and 10 per cent, respectively.
Over the last three decades, Bangladesh has experienced a notable shift in its labour force dynamics, as evident from the 2022 data, showing an increasing proportion of employment in the agriculture sector. However, a significant migration of rural labourers to urban centres occurred during this period. Many unskilled agricultural workers have chosen to pursue opportunities in the thriving service and RMG sectors, capitalising on the demand for affordable labour.
This migration phenomenon has had significant implications for the agricultural sector, resulting in labour scarcity in rural areas, particularly during critical tasks like planting and harvesting. Consequently, there has been a surge in labour costs, elevating the overall production expenses for farmers. These operations are time-sensitive, and the lack of available labourers often leads to delayed planting or harvesting, exposing farmers to additional risks, such as natural calamities or reduced crop yield. This problem requires finding viable solutions to address the labour crisis and enhance agricultural productivity in changing labour patterns.
Agricultural mechanisation, with its array of benefits, emerges as a transformative force in modern farming practices. By integrating advanced machines and equipment, mechanisation offers advantages such as increased productivity, enhanced operational efficiency, and effective prevention of crop losses. In the context of Bangladesh, where agriculture plays a pivotal role in the nation's economy, embracing mechanisation represents a crucial step towards sustainable agricultural development.
One striking aspect of mechanisation's impact is its stark contrast compared to traditional manual labour. For instance, manual planting in Bangladesh demands a substantial amount of time and effort, approximately 123-150 man-hours per hectare. However, with the adoption of mechanical transplanting techniques employing a four-row walking transplanter, the same task could be accomplished in a remarkably shorter period, requiring merely 9-11 man-hours per hectare. This significant reduction in labour hours bolsters efficiency and addresses the perennial issue of labour shortages that have plagued the agricultural sector.
The timeliness of agricultural operations plays a pivotal role in determining crop yield. Studies reveal that even a slight delay of one month in transplanting can lead to a detrimental 25 per cent reduction in yield. In more extreme cases, where the delay extends to two months, an alarming 70 per cent of the total crop yield can be lost. Here, mechanisation emerges as a game-changer, ensuring that critical operations like planting and harvesting are executed as soon as possible, safeguarding crops from potential yield losses.
A study by the Bangladesh Agricultural University on rice cultivation further emphasises the economic advantage of mechanisation. By incorporating seed planters, transplanters, and harvesting machines, the cost of each agricultural operation could be remarkably reduced by at least 50 per cent. This reduction in operational costs contributes to overall cost-effectiveness and enables farmers to make better financial decisions, improving their livelihoods and fostering sustainable agricultural practices.
But mechanising agriculture in Bangladesh is easier said than done. According to industry experts, the annual market size for agricultural machinery amounts to Tk 3,000 crore, yet the portion of locally manufactured small machinery constitutes only a mere 10-12 per cent of the total market size.
The lack of domestically produced, ready-to-use, high-quality agricultural machinery remains a significant hurdle. The local foundries and agricultural machinery manufacturing industries primarily produce spare parts and small machines, such as rice milling machines, sprayer machines, threshers, and vertical pumps.
The limitations in fully manufacturing larger machines like threshers, planters, and combine harvesters are attributed to several factors. First and foremost, domestic manufacturers lack the necessary technology, expertise, and qualified manpower for designing, drawing, reverse engineering, and maintaining quality control. Moreover, the absence of modern machine manufacturing machinery, dependency on imported raw materials, and the high cost further compound the challenges faced by the industry.
The impact of external factors, such as the COVID-19 pandemic and the ongoing Ukraine-Russia war, have worsened the situation. The prices of raw materials and utility overheads have increased, directly affecting the profitability of the foundries and workshops involved in agricultural machinery production.
On both the supply and demand sides, barriers to accessing finance pose significant obstacles.
While the government has provided subsidies on selected machinery, the remaining cost burden on farmers after receiving the assistance remains substantial. Consequently, farmers encounter difficulties acquiring the necessary machinery, hindering further mechanisation efforts.
Lack of access to finance from traditional financial institutions drives many farmers to borrow from informal money lenders or loan sharks. These informal sources provide loans in a short period but at significantly higher interest rates, making it challenging for farmers to save money for future mechanisation endeavours.
In the formal financing sector, agri-loan products often overlook the cultivation period of crops, leading farmers to take additional loans at higher rates to meet off-season financial demands, further impeding their progress in adopting mechanisation. Additionally, small machinery manufacturers face obstacles in accessing working capital financing, which limits their ability to meet peak demand.
The stringent documentation requirements imposed by banks and Non-Bank Financial Institutions (NBFIs) act as a barrier for small machinery manufacturers seeking loans. Often, these manufacturers lack prepared sales ledgers, audited financial statements, and necessary environmental and health certifications, resulting in loan approval difficulties.
From the perspective of financial institutions, the policy-dictated interest rate for agricultural loans (8 per cent) fails to adequately account for the credit risk involved in lending to small-scale machinery manufacturers or farmers. As a consequence, most institutions shy away from approving loans for these applicants, leaving a persistent gap in access to finance.
Despite these challenges, addressing the financing gaps and investing in the technological capabilities of domestic manufacturers could pave the way for significant advancements in the agricultural mechanisation sector in Bangladesh. The industry can overcome obstacles through strategic policy interventions, collaboration between stakeholders, and innovative financial solutions and realise its potential to revolutionise the country's agricultural landscape.
Bangladesh's financing landscape for agricultural machinery is diverse, with several key players, including scheduled and non-scheduled commercial banks, Non-Banking Financial Institutions (NBFIs), and Microfinance Institutions (MFIs). Despite numerous institutions, the formal finance gap for Micro, Small, and Medium Enterprises (MSMEs) remains high at 67.3 per cent. Foundries in Bangladesh access formal finance through various channels, including banks, NBFIs, and MFIs. To encourage banks to support the agricultural sector, the Central Bank sets agricultural credit disbursement targets, with a target of Tk 30,911 crore for FY23, reflecting an 8.88 per cent increase from the previous fiscal year.
Banks in Bangladesh offer specialised agricultural loans at favourable interest rates, ranging from 4 per cent to 8 per cent. The government-owned Krishi Bank provides a credit programme tailored to farmers' needs, particularly for farm and irrigation equipment. NBFIs also offer agricultural financing products, with average interest rates ranging from 5 per cent to 7 per cent. However, the loan approval process is reportedly more stringent with NBFIs. Meanwhile, MFIs provide agricultural loans, albeit at substantially higher interest rates, approximately three times that of banks.
The cost of larger agricultural machinery often poses a challenge for farmers and small machine manufacturers to bear upfront. Consequently, financial assistance is sought to facilitate the adoption of machinery. However, repayment within a year with monthly instalments can be burdensome for end-users or manufacturers, especially considering the seasonality impact on their business.
Given the high cost of larger agri-machineries, specialised loan provisions are crucial to support both farmers and manufacturers. Long repayment periods, low-interest rates, and alternative risk mitigation schemes should be considered to improve the mechanisation status in the country. With rising pressure on imports and supply chain disruptions affecting various industries, agricultural mechanisation becomes increasingly vital in boosting productivity and reducing import dependency. Through enhanced access to finance, farmers can access tools that will revolutionise agricultural productivity, further contributing to the nation's economic growth.
Tareq Ahmed Robin is an entrepreneur and industrial management expert. [email protected]