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FAHMIDA KHATUN reviews the budgetary allocation for agriculture in previous years and argues that allocation for this sector must be increased to make it one of the strongest pillars of our economy.

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Agriculture was considered to be the backbone of the Bangladesh economy at the time of its independence since about half of its gross domestic product (GDP) would come from this sector. Over the years the contribution of the agriculture sector to GDP has declined due to the structural change of the economy. With the dominance of the service sector followed by the industrial sector, agriculture is now positioned in the third rank with a contribution of about 20 percent in the GDP. Despite a relatively lower contribution in the national income, the importance of the sector is still very critical from the point of its role to employment generation and poverty reduction. According to the Labour Force Survey (2010) agriculture still employs about 47 percent of total employment of the country. Per capita food grain availability in Bangladesh has increased from 453 grams in FY92 to 605 grams in FY10 due to the admirable performance of the sector. Agriculture is also a supplier of raw materials for the manufacturing sector. The unprecedented growth of the agriculture sector has increased income of farmers and wages of agricultural labourers and has contributed to increase their purchasing power. This, in turn has contributed to the expansion of demand for non-agricultural products.

It is undeniable that the sector has been able to achieve this success due to support from the government in various forms. During the last four decades, the GDP of the agriculture sector grew at an average rate of 3 percent while during 2005-10 by 4.19 percent. In order to maintain the growth momentum and exploit the full potential of the sector the government needs to allocate adequate resources in the national budget. Taking the budgetary constraint into account, the government can prioritise a few areas and sub-sectors within the sector. A number of suggestions may be put forward for consideration in the upcoming budget for fiscal year (FY) 2012-13 in light of this.

(1) Allocation for the agriculture sector: The first and foremost recommendation for the upcoming budget is the increase in allocation. One finds it surprising that even after so much of emphasis put by the government, the allocation for the agriculture sector as percentage of the total budget is on the decline during the last few years. As Table 1 depicts in FY2011-12 the percentage share of the agriculture sector in the total budget has come down to 7.65 percent compared to 11.06 percent in FY 2008-09. In FY 2011-12 the allocation for the agriculture and allied sectors in total budget was 4.23 percent lower than the revised budget of FY2010-11. In FY2011-12 the volume of allocation was also lower than the previous year.

(2) Subsidy and price support: Subsidy has become a part and parcel of ensuring increased agricultural production which is reflected through higher allocation (Table 2). This is important for keeping cost of production affordable for farmers. Input prices have increased pushing up the overall cost of production of the agriculture sector which is not matched by selling prices of agricultural products. However, the efficient utilization of subsidies, its return and its impact on the economy are to be probed since subsidy puts pressure on the government's expenditure stream. Therefore, subsidies and other price support schemes for the agriculture sector have to be economically justifiable through efficiency of allocation and maximisation of returns.

(3) Fair price for agricultural products: A related issue is ensuring fair price to producers. Farmers have always been complaining about the lack of fair prices while consumers about high prices. Many farmers are even willing to forgo input subsidies if they have a guaranteed profit of 10 percent on their products. It is in fact a challenge for the government to guarantee fair prices both at the producer and the consumer levels. This requires improved marketing service which is capable of ensuring fair returns to producers, improving market condition, reducing cost of marketing and ensuring fair market practices. The responsible organisation for this is the Department of Agricultural Marketing. The department has to be strengthened for providing such marketing services ranging from producers to consumers. It has also been proposed by experts that an Agricultural Price Commission should be set up under the umbrella of the Department of Agricultural Marketing which will forecast price of agricultural commodities so that the government can take necessary measures well in advance. In the budget of FY 2011-12 it was announced that the government will form additional 600 'Farmers' Marketing Group' and 6,200 'Farmers' Club' and establish 4 agro-products processing centres. Such initiatives can facilitate agricultural marketing and should to be continued.

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(4) Technological innovation and research: Bangladesh has been able to achieve higher growth in food grain production compared to her population growth. However, given that land is scarce, and cultivable land is in fact declining, achievement of food security will be a major challenge for the country. This will be particularly felt if the rate of agricultural production is not greater than the rate of population and income growth. It requires increased productivity through technological innovation and skill development of human resources engaged in the sector which emphasises the need for more investment. Bangladesh's success in adopting new technologies in agriculture including high yielding varieties, chemical fertilizers and irrigation is highly commendable. However, in the context of climatic change the country needs to invest on innovation of such agro-practices which are suitable for the country. Flood prone, cyclone prone and even drought prone areas should be brought under special varieties of crops and other products. Farmers' indigenous knowledge on crop variety should also be taken into consideration during scientific research.

In FY2011-12 agricultural research fund has increased to Tk.450 crores from Tk. 350 crores, mainly through interest accumulation. It may be mentioned that no new funds have been allocated for this account since FY2008-09. In view of the actual requirement and the commitment of the government towards agricultural development the size of the fund is very small. Resources are needed for research on improved variety of seeds for wheat and jute, and to examine emerging consumer preferences. In this regard, research organisations such as the Bangladesh Agriculture Research Institute should be further strengthened through higher allocation to enable it in undertaking research and coordinating the related activities. Allocation of funds has to be combined with specific mechanism for fund utilisation as funds remain mostly unutilised.

(5) Crop diversification: The agriculture sector of Bangladesh at present is dependent on crop. The contribution of the crop sector in the agriculture GDP is 11.2 percent (2010). Dependence on one single sector is not useful for the overall development of the sector. In the long run, such single focus can weaken the agriculture sector. Therefore, other sub-sectors should be encouraged and land under those sub-sectors should be expanded. High value products such as fruits, vegetables, oilseeds, legumes and spices which have export potentials should be encouraged through appropriate training and resource allocation.

(6) Crop insurance: In order to introduce crop insurance, Sadhanron Bima Corporation has drawn up pilot projects in a number of upazilas. However, in FY 2011-12, no allocation was made for this and the progress is insignificant. The objective of crop insurance is to protect farmers from shocks, particularly in the face of climate change. In the coming budget, there should be specific modalities for crop insurance backed by adequate resource allocation. Such insurance may be extended to other sub-sectors such as poultry, livestock and fisheries in due course.

(7) Fisheries: Fisheries sector contributes 4.5 percent in the agriculture GDP (2010). This is the second important sub-sector within agriculture. Given its role as an important source of protein and as the second largest export item from Bangladesh after the readymade garments, the sector deserves more attention in terms of financial and technical support. Hence strengthening of fish preservation, processing and marketing infrastructure are very important. The Bangladesh Fisheries Development Corporation needs to be strengthened to preserve and process fish during harvesting season which are marketed during lean period. In view of increased and emerging compliance issues on health and environmental grounds, farmers in the export oriented shrimp farms have to be supported through training for detection of diseases well in advance and for being updated on compliance requirement of importers. Fishery resources are also being contaminated due to pollution of the open water bodies, ecosystem of the rivers, canals and ditches which has reached an alarming level. Sources of such pollution should be stopped through various fiscal measures including pollution tax on the polluters.

(8) Livestock and poultry: The third important contributor in the agriculture GDP is the livestock and poultry sector. Its contribution has declined to 1.7 percent in 2010 compared to 2.6 percent in 1974. As this sub-sector suffers from virus attack from time to time it needs both policy and fiscal support. This could be in terms of tax exemption for poultry farms and poultry feed mills, credit to bird flu affected farms at a concessional rate, permission to use bird flu detection kit at the farm level to detect avian influenza, duty waiver for bird flu detection kits and zero duty on medicines and vaccines used in poultry, livestock and fisheries sector. The Department of Livestock Services should be provided with resources for undertaking training of poultry farmers in using the detection kit.

(9) Forest resources: Bangladesh has one of the lowest forest covers in the world with about 11 percent area under forest cover (2011). The amount of forest cover in Bangladesh was reduced from 15.6 percent in 1973. A minimum of 25 percent forest cover is suggested for a healthy ecosystem. Illegal acts such as settlement through clearing forest, encroachment and cutting of forest for commercial purposes have contributed to such poor condition of forest resources. The Department of Forest has to be strengthened through adequate human resources and training to stop such illegal use of forest resources. Fund should also be allocated for training on building awareness among officials as well as communities on the importance of forests in keeping ecosystem balance. The government should also invest on research and patenting of medicinal plants which can generate huge income for the country.

One of the reasons for a steady growth of the economy of Bangladesh is the inherent strength of the economy which lies with its agriculture sector. This has helped the country to navigate through even during the financial crisis of 2007-08. With budgetary allocations and policy incentives the sector can further be improved to generate high productivity and more income which can contribute to long term sustainable development of the country.

Dr Fahmida Khatun is an economist and Head of Research at the Centre for Policy Dialogue (CPD). The article has taken inputs from CPD's budget recommendations for FY 2012-13.