Agriculture sector’s resilience on the wane: What to do?
The resilience of the domestic agriculture sector mainly of the crop sector appears to be in a weak state. Without proper policy intervention the pressure on the agriculture sector would increase further and would cause a number of challenges on food security for a large section of people in the coming months.
Although Bangladesh economy has been confronting multiple challenges since March 2020 in view of Covid-19 pandemic, the resilience of the agriculture sector mainly in rice production was a major relief for the country.
A number of positive intervention of the Ministry of Agriculture had ensured timely harvesting of Boro rice from major rice producing regions such as haor areas. Despite that production of non-crop agricultural products such as vegetables, poultry, dairy, livestock and partly fisheries have been badly affected.
And the government's policy intervention (Tk 9,000 crore for farmers and Tk 3,000 crore for livestock, fisheries and agro-based rural enterprises) would not be of significant positive contribution.
Even the agriculture sector has been badly affected afterwards -- first by cyclone Amphan in the south-western Part of Bangladesh and later by three consecutive floods, which caused significant damages in 33 districts, inundating one-third of the country.
According to the Ministry of Agriculture, the flood caused a total damage of Tk 1,323 crore. The damage was mostly caused to the production of Aus rice, vegetables, fisheries, livestock and poultry etc.
Because of the flood, cultivation of Aman, which comprises the second highest share of rice production, would be delayed. Shortages of seedlings and delay in cultivation would affect the rice yield.
It is to be noted that every monsoon season, a large part of domestic supply of vegetables are largely dependent on import particularly from India. Because of floods in many states in India, production of vegetables and other essential food items has been partly damaged there as well. Thus, supply from India became pricier.
Overall, domestic supply of agricultural products—particularly essential products—are in pressure. This is reflected in food inflation data of the last two months (July and August, 2020).
Unless proper measures are not taken into account, the food inflation is likely to be increased further. Given the pressure of limited/no employment opportunities and low/no income of a large section of people, an inflationary pressure is there. A higher level of inflation would force people to further downgrade their daily consumption which would ultimately affect their nutritional status.
The monthly food inflation during April-August period was higher in most of the months in 2020 compared to that in the previous year. Food inflation has crossed the 6 per cent mark in two months of this year – 6.54 per cent in June and 6.08 per cent in August.
The food inflation is like to rise further in the coming months unless proper measures are not taken. The retail market price of essential consumer goods has significantly increased.
According to the Trading Corporation of Bangladesh, retail price of coarse rice has increased by Tk 3 and onion by Tk 12 within a month (July-August, 2020). Similarly, price of other essential commodities such as green chilli rose by Tk 300-400 per kg, leafy vegetables and other vegetables around Tk 60-100 per kg. The people in every quarter has difficulty in purchasing those essential items as per requirement. Low earning people have already changed their food habit – by shifting from consumption of fish, let alone meat, to vegetables by taking less amount of food every time and even in extreme cases, sacrificing one meal of the day.
Under any circumstances, the prices of rice and essential food items need to be stable. Given the damage caused to domestic production, supply in the local market would not be increased unless sufficient amount of those products are imported from neighbouring countries. Without adequate supply in the local market, food inflation is likely to be higher in September-November, 2020 period particularly till the next crop is harvested.
The government should encourage the private sector as well as itself to go for import of rice, onion, soybean and even vegetables from neighbouring countries at the earliest to give a signal to the market for increased supply of food.
There is always a significant time-gap observed in taking policy decisions. This gap is meant to be between the demand for imported food in the local market and public policy response in this regard.
Similar is true in opposite direction as well - controlling of import of food against good harvest at the local level. Failure to take timely decision leaves negative impact on consumers (in first case as mentioned above) as well as on producers (in second case).
It is expected that the Ministry of Commerce should be more proactive in taking decisions with regard to maintaining stable supply in the domestic market and thereby ensuring the interest of both consumers and producers.
The Commerce ministry should take into cognizance of three issues with regard to facilitate/control import of essential food products – a) timely announcement of the decision to import (with import duty structure), b) specific period for allowing import (should not be 'until further notice' type) and c) specific amount of allowable import (should not be non-specified).
Given the current state, the Ministry of Commerce should encourage the private sector to import different essential food items. The government may consider import of rice for increasing its public food stock.
Public food stock is not at a healthy state at present. According to the stock data, there was 10 lakh tonnes of rice available during July this year, which was much lower compared to that of the last year's 14 lakh tonnes.
The government has successfully utilised the food stock during Covid-19 and has continued supplying rice to flood-affected people. However, there is further demand for distribution of rice and other essential food items among the flood affected people and coronavirus-affected people.
According to the CPD this year, the government should not use the list of poor people for distribution of relief in the flood affected areas. The list should be widened to cover non-poor flood victims as well. Most importantly, the rising food inflation has created demand for supply of rice and other essentials among the poor people at subsidized rates.
The government should increase its open market sales and other social support scheme activities particularly in flood affected areas. To pursue such schemes efficiently, the government needs to increase the food stock. It is important to note that public food stock has important positive market-signalling effect in the private market. Since procurement of boro paddy was not successful—only 22 per cent was procured—and higher market price made rice millers less interested to sell to government, it is important to import rice by the government to increase its food stock immediately considering the demand for September-November 2020.
The stability in the rice market in the coming months would largely depend on the acreage of Aman rice cultivation finally to be made by the farmers and its harvest afterwards.
It is usually noted that the post-flood rice cultivation ensures higher yield compared to the normal period. However, delay in cultivation this year due to flood in most part of the country may have adverse effect in the Aman yield.
The government should immediately ensure sufficient supply of seedlings for farmers across the countries so that cultivation of Aman is not affected badly.
Given the consecutive adverse impacts on the agriculture sector, a large portion of farmers and farm labourers would be affected in terms of production, revenue, employment and wages. A large number of people have returned to villages from urban areas in search jobs in view of Covid-19 pandemic.
Over 96,000 migrant workers have returned to Bangladesh and are now staying mainly in villages and rural areas. These people are also without job. The public policy support in the form of subsidised credit is largely undistributed among the farmers, agro-based entrepreneurs, informal sector workers and returnee migrants.
The conditions attached to get those loans is difficult to comply with by these people. Hence, these people are largely without jobs, with low/no income and are in need of jobs.
The inflationary pressure has worsened their life further. The government may consider undertaking large scale project in rural areas such as rural infrastructure development project to renovate roads, bridges, culverts in flood affected areas as per the national budget 2021.
It may also consider a specific component of development of infrastructure in rural areas such as development of sewerage and sanitation system at thana and upazilla levels under its 'Amar Gram Amar Shahar' programme. Those income generating programmes would hugely benefit the rural people in getting employment and to earn their minimum subsistence income.
The writer is the research director of the Centre for Policy Dialogue (CPD).