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Beneath the surface

The finance minister and his farmers

Abdul Bayes
T
HE time i was about to leave the country for a short assignment abroad, remarks from the Finance
Minister M Saifur Rahman -- about the ensuing budget that he was poised to present in the parliament -- kept me count economics even at an altitude of 30,000 feet from the ground. There are many interesting observations that our finance minister has been famous for, but the only one that could draw my attention is about his "new" realisation about farmers and farming community. It appeared to me that he would aim at making the budget pro rural, pro-farmers, and pro-poor. We appreciate his position, but with a note that it is neither a new nor a novel venture in this part of the world. The first budget of Bangladesh and the following few ones had also given top priority to agriculture and rural development although, in practice, the achievements were far short of the expectations. Finance ministers of developing countries are always the fans of the farmers, at least in words if not in actions.
Learning the wrong
But this time, a pro-agriculture or pro-rural budget became a news headline. This is because, we suppose, during the last few years, and especially during the tenure of the present finance minister, agriculture remained almost at the backseat of the budget. A sense of complacency loomed large across policy makers about food selfsufficiency. The notion was that agriculture played its part and now
was the time to pay attention to other sectors. We have learnt a lot from the experience of East Asia and other countries as to how non-agricultural sectors become the bearers of torch in development. But what we have utterly missed is the point that in all those countries, the foundation stone of growth and development was layed by agriculture. Making it more livable so that it can continuously release land, labour, and other resources for the rest of the economy, should constitute the crux of the policy
shifts. Before agriculture could achieve a sustainable development, hurriedly we started pooling out resources from agriculture.
in our country context, the advent of HYVs paved the way for the path towards a self-sustaining growth but seems to have suddenly fallen flat due to withdrawl of budgetary resources from this sector to feed non-agricultural pursuits. Thus disconcertingly, agricultural research tends to claim less resources, and poor farmers starve of capital, while the loan defaulters emerge as lawmakers for the country.
Example is better than....
Critics say that the recent Indian election might have sounded a wake-up call to our policy makers. Readers should be aware that despite the record of robust growth in the Indian economy, a rise in the per capita income and enviable success in ICTs, the rural sector recently revolted against the ruling BJP and put Congress and allies in power. Andhra Pradesh is a classic case in point where the rural sector
pointed out the failures of the government through secret ballots. Similarly, in Bangladesh today, the rise of the reserves, so called macro-economic stability, might not help hide the fact that income inequality soared high over the years and Bangladesh continues to witness an "urban-bias" policy of promoting growth. Poverty is still rampant and mostly in rural areas.
subsidy is not substantial
How could we make a budget pro agricultural or pro-rural? I assume
that the finance minister would present a budget that would entail more budgetary allocations for the farming sector. And traditionally, more allocations have been tagged with more subsidies to farmers. Thus, if the subsidy for agricultural activities were Tk.300 crores during the last budget, the amount could be raised to, say, 600 to 700 crores in the new budget.
That our farmers would receive a subsidy to the tune of Tk. 600 crores or so is definitely good news. And as I glanced through the budgetary allocation, I find that an enhanced allocation has been earmarked on account of farm subsidy. But the unanswered question is who would get that subsidy, how would that be distributed, and in what ways the subsidiy amount would be utilised. More importantly, the finance minister should have come up with an assessment of the utilisation of the last year's subsidy and its implications. Unfortunately, we see no deliberation on that count in the budget speech.
Tips to tow
A few tips could be on board for the finance minister and his government. First, agriculture has become a knowledge-intensive industry where knowledge about modern farming assumes more importance than the size of the land endowments. The Seed Health improvement Project of iRRi reveals that training on seed health imparted more positive impacts on the poor that on the rich farmers. The yield gain for the whole sample is 10-12 per cent but for the large farms it is around 5-6
per cent over the benchmark level. our assumption is that if all farmers in Bangladesh (say 13 million) could be trained in good agricultural practices, Bangladesh could produce extra 2.4 million metric tones of paddy and thus wipe out the largest level of imports made during the years of the worst crisis. in this case, training to poor farmers -- in the absence of formal education -- about the ways and means to manage their meager resources to enhance income and widen choice set. So, you need to extend the programme to a wider audience of farmers so that marginal farmers can escape marginalization.
Another study, by Drs. Mahabub Hossain and Manik Lal Bose, based on 62-village survey show that a farmer having one year of schooling could have earned $25 more than the one with no education. Since we cannot send the farmers to formal institutions at the age he is faced with, we can at least provide him with practical lessons in the field.
Second, agriculture nowadays lies in the hands of the resource poor farmers. Most of them live
with a land endowment of less than 1.5 acres and engage in share cropping practices. The subsidy money might not reach them in the absence of proper identification of these farmers and the consequent channelization of the subsidy. The past history of subsidy brings to the fore the fact that the rich benefit more than the poor from the subsidy (unless targeted) to widen the inequality of income in rural areas.
The impact of traing and research has other implications too. For
example, poor farmers and their spouses with proper training tend to raise income on the one hand, and reduce dependency on the credit market on the other hand.
Comparable costs
But surely the high prices of diesel and fertilizers are constraints to increased income of the poor households. in a recent field survey conducted by the author appears to show that in sample sites of Rajshahi, Barisal, Bogra, Rongpour, Hobigonj, Chuadanga, and Gazipur districts, sample farmers have more yield rate than farmers of neighbouring countries including india. But unfortunately the cost per unit of output is relatively high, following high costs of fertilizers and irrigation.
There are many factors adducible ranging from climatic to technology conditions, but differences in the prices of inputs would also matter most. For example -- a la Mahabub Hossain and Uttam K. Deb -- a farmer in Bangladesh procures fertilizer at $176/ton compared to $107/ton in indian Punjab, $126/ton in Andhra Pradesh, $165/ton in Thailand and
$170/ton in Vietnam. Likewise, the prices of irrigation are as follows: $51/ha in Bangladesh, $32/ha in Punjab, $18/ha in Thailand, and $26/ha in Vietnam. We are told that indian farmers reap higher levels of subsidy in irrigation and other inputs and thus reach a stage of 'concocted' comparative advantage compared to Bangladesh.
Thus a level playing field is seemingly absent for farmers in Bangladesh. it is thus no surprising that Bangladesh would emerge as the market of rice from other countries. Given a yield rate of more than 5 ton per hectare in sample villages (with training in good seed and agricultural practices), with the level prices faced by farmers of neighbouring countries, Bangladeshi farmers could very soon beat others.
Will and ways
Besides that, the finance minister rightly pointed out that farmers should be encouraged to grow more high value agricultural crops. But that means storage facilities for the perishable crops, the research networks that were dominated by rice so far be extended to no-rice crops, credit facilities, marketing networks, etc. The budget speech seems to be short of the ways of accomplishment, although, not shy of the will to do it.
A pro rural policy is more than that also. it means a reversal of the decades old "urban-bias" policies of the government. it means expansion of road communication, electricity, power, etc. in rural areas. it means, inter alia, facilitating small towns or growth centers nearby rural areas, strengthening local government institutions. And finally, it means peace and harmony in villages -- the freedom to produce and market, consume and distribute. The budget says only about subsidy, but subsides these perennial issues.
And to us, at the moment, this is a heart-breaking note from a record-breaking budget presentation.
Abdul Bayes is a Professor of Economics at Jahangirnagar University.
***A level playing field is seemingly absent for farmers in Bangladesh. It is thus no surprising that Bangladesh would emerge as the market of rice from other countries. Given a yield rate of more than 5 ton per hectare in sample villages (with training in good seed and agricultural practices), with the level prices faced by farmers of neighbouring countries, Bangladeshi farmers could very soon beat others.***