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Jagorometer Analysis
This is one of the areas where the government has put most focus in since taking office, and not surprisingly. The price of essential agricultural products was a major challenge during caretaker government and largely drove the campaigns of parties prior to the elections.
The government deserves credit for its performance in the first fourteen months in office, even though external conditions have remained relatively favorable – e.g. decrease of international grain prices, no major natural calamities, etc. – making the task relatively easier. The government seems to have kept focus on the most important promises made in this area, especially the top three:
A1: Increase subsidies and ensure easy availability of agricultural inputs
- The government allocated new subsidies for farmers several times so far. Very early into the term, the govt. cut fertilizer prices by half, and also diesel prices by a small amount, demonstrating their commitment to this promise. Similar price cuts were repeated near the end of 2009. Recently, a total subsidy of 750 crores has started to be distributed among 9.1 million small and medium farmers, and an additional 1400 crores has been requested by Matia Chy. While positive for the farmer, such artificial distortion of market forces might not always bring positive results from a macroeconomic perspective. For example, far higher international prices can encourage smuggling and be draining on the national economy.
- During the Boro Season in 2009, the government diverted electricity to rural areas for uninterrupted irrigation at the cost of urban load-shedding, which was a welcome move. The Agriculture Minister has promised similar plans for 2010.
- The government has created a Agricultural Input Assistance (ID) Card for 15 million farmer families. Small and medium farmers can use this ID card to get assistance and subsidies and also open bank accounts. This is likely to eliminate corruption and increase efficiency in distribution of subsidies, and ensure it is actually reaching the farmers in need, and not filling the pockets of middlemen instead. This database of farmer families must however be regularly updated by a responsible and accountable authority in order to make this expensive undertaking fruitful in the long run.
- Agricultural traders and middlemen are being required to get licenses, which will regulate the market better, and reduce instability and large middlemen profits.
A2: Increase agricultural loans and simplify lending procedure
- The most important step for achievement of this goal came in January 2010, when it was announced that farmers can open bank accounts against their new ID cards at state banks for only a nominal fee of Tk. 10. If this scheme can be made popular, and once farmers have bank accounts, they can get loans much more easily and at much lower rates of interest than from traditional moneylenders and loan-sharks, or even NGOs. It must however be remembered that small accountholders like farmers will be a difficult task to manage the risks of, because of the latter’s lack of papers and collateral, lack of access and comfort with the paperwork necessary, the bank’s lack of human resources to collect payments from individual debtors, high risk of non-recovery, etc.
- Significant progress has been made, at least w.r.t. numerical loan disbursement targets. Loan targets were increased by 23% in 2009 from the previoius year, and the Bangladesh Bank Governor promised another one-fourth increase in FY 2010. However, we do not know how much of this target was actually disbursed, and more importantly, to whom.
- Also, loans cannot be judged based on disbursement targets only; it has to factor in the repayment rates as well. The repayment rate after the Boro season is not yet known, and is essential for evaluating the efficacy of these loans.
A3: Ensure fair price for all crops and agricultural products
- In 2009, the govt. tried hard, and succeeded, in reaching an acceptable middle ground between consumer affordability and farmer’s subsistence, and declared a fair price for procurement of rice. Implementation, however, was not optimal according to some experts and news reports, who say that corruption and inefficiency in local distribution chains were the main culprits. It remains to be seen how the government deals with this issue in the new year.
- The task was made relatively easier because of consistent fall of international market prices, except near the end of the year, when some commodities like sugar and lentils experienced price hikes which destabilized the market and caused public outcry. The government failed to deal with these situations well, issuing unnecessary arrest warrants against sugar businessmen which creating a sense of panic and insecurity among the business community.
- Requiring all traders to get licenses before trading in agricultural products, the government took a smart step in controlling the instability and inequity in the production and supply chain. This could discourage hoarding and syndicate activity, and therefore smoothen out price hikes while ensuring fair prices for farmers themselves.
Apart from these, the government has taken some significant steps to ensure food security for the population, including re-prioritizing the roles and geographic distributions of various crops, timely and expanded OMS, etc. The government has also been recently encouraging modern technologies in farming through a subsidy program designed to help farmers by agricultural power tools. There are, however, some rooms for improvement with respect to irrigation technology (which is still not optimal according to BRRI) and import planning to deal with production shortfalls (as in the case of lentil).
Targets that did not receive sufficient focus are:
- Distribute Khas land among landless farmers
- Reclaim land in coastal areas
- Land reform and digitization of records
Government's Scorecard
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