Inadequate bank loans holding back automation in agriculture

There is no alternative to bringing automation in agriculture for modern and commercial cultivation. Ninety-five percent of cultivation and irrigation are dependent on machines while a few other processes involving sowing, transplanting, harvesting etc. are still dependent on humans.

There is a shortage of labour in agriculture across the country as the new generation hardly shows any interest in it. Hence, the use of machinery is on the rise.

One of the pioneer agricultural automation companies, Metal (Pvt.) Limited has been selling agricultural equipment across the country for a number of years. They also provide training to farmers.

Engineer Sadid Jamil, managing director of the Metal (Pvt.) Ltd, talks to Rejaul Haque Kawshik, about his take on the agricultural automation business, challenges, and successes.

TBS: How did you start your business?

I joined the Bangladesh Chemical Industries Corporation after completing my graduation in Mechanical Engineering from Khulna Engineering College. I was considering starting a business of my own, but I did not have the courage and the capital. My office had two shifts and I worked in the morning shift from 6am to 2pm. After office, I used to market my own products.

One day, I met the managing director of Project Builders Ltd, Engineer Aminul Islam, and we decided to start a partnership business.

We did not succeed at the beginning. We changed many tracks in our business. We chose the name "Metal" for our company because we had an import business of bus-truck chassis. However, that business also failed.

The Indian company from which we imported chassis suggested that we should import tractors instead.

On his advice, we began the business of importing and selling agricultural machines, especially tractors. 

TBS: When did you begin selling tractors?

The use of power tillers in cultivation commenced in our country from 1993. The Sugar Mills Corporation and tea gardens started buying tractors for cultivation. Metal was the first company to sell tractors to farmers.

TBS: When did you start selling tractors on a large scale?

In the first year we sold five tractors. In the second year we sold 17, and the next year 87. At one stage we found that we could not sell more than 150 tractors per year.

When we observed that farmers could not afford to buy tractors because of the high price, we started selling tractors to them on loan. Gradually our sales increased.

A tractor can cost Tk 7 lakh to 8 lakh. A group of entrepreneurs started buying tractors and renting them out.  

We encouraged them to buy more. Their rental service helped farmers, and our business also started increasing.

TBS: What is the demand for tractors annually?

There is a demand for nine thousand tractors annually, and this is increasing every year. As a result, the demand for small machines such as power tillers is decreasing. The demand for power tillers has declined from 1lakh to 50,000 per year. We import more than three thousand tractors every year.  

TBS: What is the demand for combine harvesters?

The demand is around 2,000 yearly now. I think, it will rise.

TBS: What is the advantage of automation in agriculture?

Cost cutting is the biggest advantage. It cuts expenses by 10 to 20 percent compared to the conventional method of agriculture. For instance, it costs Tk8,000 to cultivate an acre of land using a power tiller, whereas the cost drops to Tk5,000 when using a tractor. That is a saving of Tk3,000.

A combine harvester takes an hour to harvest a plot of land that would require eight workers a whole day to do manually.

TBS: How is the market for agricultural equipment in the country?

Ninety-five percent of agricultural work is dependent on machines. But the use of machines in paddy cutting and threshing is one percent or less. There is a lot of opportunity to introduce machinery in this type of work.

TBS: Does Metal help the farmers?

During the last Boro season, when farmers had a labour crisis, we cut paddy for free at many places. We also began selling a variety of high yield seeds. We have around 50 varieties of vegetable seeds and we are also exporting them on a small scale.

We want to support farmers, and as part of this we have set up a foundation. We will begin activities in favour of farmers through the foundation soon.

TBS: Some machinery is being produced locally. Do you manufacture anything?

We started manufacturing small agricultural equipment for a couple of year. For example, threshers, bed planters, seeders, potato harvesters, potato diggers, USG etc.

We are also producing trolleys for tractors.

TBS: What problems are farmers facing over automation in agriculture?

Farmers in our country do not get technical support. But big companies are bringing in experts to solve these problems.

TBS: What else are required to bring full automation in agriculture?

We need funds for automation in agriculture, so banks and other financial institutions should give a helping hand to farmers.

Bank loans are provided with strict terms and conditions. Bangladesh Bank has given a guideline to other banks to keep two percent interest on loans for the agriculture sector. However, not all banks comply with the central bank's guidelines. 

The agriculture loan policy does not have any fixed provision that explains how much loan will be provided to buy machinery.

Automation in agriculture would expand and crop production would rise if loans were introduced to purchase tractors, combine harvesters and reapers.

Another problem is that a major portion of loans are distributed through NGOs, making the interest rate higher for farmers.

TBS: How do the farmers buy expensive machines? Do the government help them?

The government is giving a subsidy for the import of combine harvesters. In the last fiscal year, the government had subsidy of Tk5 lakh for land areas, and Tk7 lakh for haor (wetland) areas. The subsidy has increased in the current fiscal year. Farmers now get 50 percent subsidy. 

TBS: What is your future plan?

We manufacture small agricultural equipment at present, but we have a plan to add tractors and combine harvesters to the manufacturing list soon.