Farm mechanisation awaits investment boom
A Tk3,020 crore farm mechanisation project will provide 52,000 agro equipment to farmers within 2025 at subsidised rates
With the government focusing on mechanising farm work and subsidising farmers in equipment purchase, local entrepreneurs are gearing up to manufacture heavy agricultural machinery.
The Tk3,020 crore farm mechanisation project will provide 52,000 agro equipment to farmers within 2025 at subsidised rates. The market is worth at least Tk30,000 crore according to business sources.
Farmers may get up to 50% subsidies – 70% in the haor region – on the prices of machinery, such as combine harvesters, reapers, transplanters, etc under the five-year agricultural mechanisation project that started in fiscal 2020-21.
This mega project is expected to create a strong market for agricultural machinery in the country. Encouraged by this huge potential, some companies are readying big investments in the sector, according to industry insiders.
Agriculture Minister Dr Abdur Razzaque told The Business Standard, "We are giving utmost importance to agricultural mechanisation as there is now a farm labour crisis. We shall modernise the agriculture sector and make it profitable by minimising cultivation costs."
"We will be able to harvest crops faster with the increased use of harvesters to minimise possible agricultural losses from natural disasters," he added.
Meanwhile, half of fiscal 2020-21 had gone by before work on the farm mechanisation project started. That is why the disbursement was less than planned. But this year the government has allocated Tk600 crore more to speed up the project, the minister pointed out.
Dr Mohammad Saidur Rahman, professor of Agricultural Economics at the Bangladesh Agricultural University, told TBS that the government aims at making agriculture commercially profitable. And, if it is done, many educated youths will feel encouraged to choose farming as a full-time profession.
FH Ansari, managing director and chief executive officer of ACI Agribusiness, told TBS, "There is a Tk30,000 crore potential agricultural machinery market in Bangladesh. But the machinery being used now amounts to only Tk3,000 crore."
If the government's farm mechanisation project is implemented, the market will be bigger and it will be considered a sector ready for investment, he added.
Currently, only a handful of companies, including ACI Motors and Monno Agro, import heavy agricultural machinery, while over 100 companies manufacture light agricultural devices in the country.
Nonetheless, the subsidy programme has not yet gotten expected momentum even after over one year of its rollout and stakeholders are apprehensive about its timely implementation.
According to agricultural ministry statistics, farmers could buy only 2,300 farm machinery in FY21 under the programme which involved Tk200 crore government subsidies. The government has increased the subsidy allocation to Tk680 crore in the current fiscal year.
Stakeholders said the farmers' inability to bear their shares of the cost of the expensive machinery is the main reason behind the slow progress of the programme. For example, a combined harvester costs Tk30 lakh – meaning even after receiving 50% in subsidy, a farmer has to pay another Tk15 lakh.
Banks need to provide farmers with loans to purchase the machinery, they added.
Large investments in the offing
Recently, Agriculture Minister Md Abdur Razzaque, at an event, said the government was looking to manufacture agricultural equipment locally.
"Currently, most machines are being imported. We want to reduce this import dependence. We have discussed with several companies, including Yanmar and Tata, and requested them to set up agro machinery factories in Bangladesh."
According to the Agricultural Machinery Manufacturers Association, ACI Motors and Alim Industries are importing heavy machinery.
ACI imports these machines from Japan's Yanmar. ACI is now planning to manufacture them in the country in a joint venture with the Japanese company.
According to ACI sources, the company is negotiating an agreement with Yanmar on setting up a joint venture company and on the amount of investment. However, nothing has been finalised yet.
"Not all farm equipment that Yanmar markets worldwide are suitable for the land pattern of Bangladesh. These devices need to be modified to be used here. On the other hand, Bangladesh does not have enough technology and skilled manpower to make such machinery," they said, adding ACI wants technical collaboration with Yanmar to manufacture these machines in Bangladesh.
The Japanese company is also interested in setting up a factory in Bangladesh, they continued.
It also wants to supply such products manufactured in Bangladesh to other countries of the region.
ACI has already set up an automated factory for making light agricultural machinery in Manikganj. The Dutch government's private-sector investment institution, FMO, in partnership with Singapore-based SDI Pte Ltd, have jointly invested around Tk200 crore in this project.
Meanwhile, Monno Agro is making small scale agricultural machinery in an old factory this year. The factory manufactures threshing machines, reapers and sowers. The company is using the technology of Bangladesh Agricultural Research Institute (BARI) to make these instruments.
According to company officials, they want to build a state-of-the-art factory to produce agro machinery with an initial investment of Tk100 crore.
Benoy Paul, company secretary of Monno Agro, said, "We are getting good response in the agricultural machinery market. That's why we are emphasising on making agricultural machinery. We are trying to get loans to finance large investments."
Alimul Ehsan Chowdhury, president of Agricultural Machinery Manufacturers Association and managing director of Alim Industries, said, "There are hundreds of companies who make small agricultural machinery. The government should make plans to increase their capacity so that some of these companies can manufacture heavy agricultural machinery."
Dr Mohammad Saidur Rahman of Agriculture University said, "We are not yet technologically capable enough to manufacture heavy agricultural machinery domestically. So we need to draw in foreign companies for investment. The government has to formulate a policy in such a way that local entrepreneurs get more opportunities in producing such machines," he also said.
The agricultural mechanisation will also lead to the development of backward and forward linkage industries that will create employment opportunities for many farm labourers, he added.
Present situation of farm mechanisation
Farmers in the country use power tillers and tractors for tilling about 95% of their land. However, the use of machinery has not increased in planting, harvesting or threshing.
According to the Department of Agricultural Extension, planting machines are being used on only 1% of land and for harvesting and threshing the rate is 3%.
The managing director of ACI Agribusiness, said, "The demand for tractors and power tillers is high in the market. About 10,000 of these machines are sold annually."
The annual market for agricultural machinery in the country is Tk3,000 crore, according to people concerned. The market for tractors and power tillers is import dependent. However, the market for small machinery manufactured by local entrepreneurs is only Tk300-Tk350 crore.
In FY21, the government distributed 2,300 different agro machinery, including 1,762 combine harvesters, 379 reapers, and 34 rice transplanters at a cost of Tk208 crore among farmers under the agricultural mechanisation project. In the current fiscal year, there is an allocation of Tk680 crore in this regard.
According to the Ministry of Agriculture, the government started focusing on mechanisation of agriculture in 2010 with a Tk150 crore project.
Later, in FY13, the government started another project at a cost of Tk339 crore.
Sheikh Md Nazim Uddin, former director of Enhancement of Crop Production Through Farm Mechanisation Project Phase-2, said, "The use of heavy machinery has not increased much as there is a shortage of skilled manpower in the country to operate them. Moreover, the backward linkage required for machinery servicing has not developed yet."
In recent years, the use of different types of threshers has increased in the country along with power tillers and tractors. Currently, about 1,500 threshers are being used.
On the other hand, about 2,200 reapers are being used to harvest paddy.
Combine harvesters are used for harvesting, threshing, and packing of paddy. The use of this device started in the country in 2016-17. In that year, 78 combine harvesters were sold. At present, about 3,000 combine harvesters are being used.
Bangladeshi farmers started to use rice transplanters for planting paddy in 2016-17. Currently, only 148 rice transplanters are being used in the country.
Most of the agricultural machinery in the country comes from China, India, Indonesia, Japan and Cambodia.