IMPACT OF INCREASED ENERGY PRICE ON SHALLOW TUBEWELL BUSINESS IN TANGAIL DISTRICT OF BANGLADESH

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1 Bangladesh J. Agric. Econs. XXXII, 1&2 (2009) IMPACT OF INCREASED ENERGY PRICE ON SHALLOW TUBEWELL BUSINESS IN TANGAIL DISTRICT OF BANGLADESH F. Nargis R.H. Sarwer T.H. Miah * ABSTRACT This study evaluated the impact of increased energy price on income of shallow tubewell (STW) owners under diesel and electrically operated STWs. Five adjacent villages of Ghatail Upazila in Tangail district were purposively selected. In total, 30 STW owners were randomly selected from these villages. Both diesel operated shallow tubewell (DOSTW) and electricity operated shallow tubewell (EOSTW) business were found profitable in current energy prices. The profit from MV Boro paddy production under EOSTW was relatively higher than the DOSTW due to lower operation and maintenance (0 & M) cost of EOSTW. The DOSTW owners were anxious about increased price of diesel over time. The trend of increasing diesel price hike would possibly break the existing irrigation market in Bangladesh. A stable energy price is essential to protect the irrigation water market, more particularly DOSTW. A reasonable scope apparently exists in the study areas for the expansion of STWs to increase productivity of MV Boro paddy and farm income of the STW owners. Hence, investment in this business can go ahead elsewhere in Bangladesh where topographical and ecological environments are similar to those of the study areas. Since the EOSTW business was more profitable than the DOSTW, the expansion of electricity supply to this business would be positive way to increase the food production resulting ultimate food security of farm households. It is also necessary to take steps for stabilizing diesel price for the interest of the majority of MV Boro paddy producers mainly depend on DOSTWs. I. INTRODUCTION Bangladesh suffers from food deficiency for a long time. The economy of Bangladesh is dominated by agriculture and livelihoods of farmers are largely connected with intensive agriculture production. About per cent of its labour force is engaged in agr iculture contributing about per cc: - it <, the Gross Domestic Product (GDP) is mainly derived from crops (GOB, 2007). The performance of this sector has an overwhelming impact on major macroeconomic objectives like employment generation, poverty alleviation, human resources development, and ensuring food security. The yearly production of rice increased from around 10 million tonnes in early 1970s to nearly 27 million tonnes in 2006, improved food self-sufficiency and food security of the country (BBS, 2006). *First author is a Sector Research Analyst, Vista Consulting Services Ltd, Second author is a Data Analyst, The WorldFish Center and third author is a Professor, Department of Agricultural Economics, Bangladesh Agricultural University, Mymen sing Bangladesh.

2 18 The Bangladesh Journal of Agricultural Economics Irrigation has revolutionized rice production in Bangladesh. Cultivation of modern variety (MV) of rice during winter season is almost entirely dependent on irrigation water. Both small and minor scale irrigation systems play dominant role in MV Boro rice production. Minor irrigation is comparatively smaller, easier and cheaper. To meet the need for increased food production, minor irrigation is being widely used in the country. The surface and ground are two major sources of irrigation water. Due to large and easy availability of groundwater in the country, the groundwater irrigation has been popularized over time. Two types of irrigation equipment such as deep tubewell (DTW) and shallow tubewell (STW) are mainly used for groundwater irrigation. About 60 per cent areas were covered by STW (BBS, 2006) and its coverage increased by about 17 per cent during the last 6 years (2000/ /06) (BBS, 2006). The STWs are operated by diesel as well as electricity where mainly crop share and cash payment systems have widely been used to irrigate rice field in Bangladesh. The demand for electricity operated shallow tubewells (EOSTWs) has been increasing due to upward trend of diesel price both at domestic and international markets. At present, irregular supply of electricity, increase of electricity price and diesel price hike have created a problematic situation in irrigation business as farmers are not getting expected profit or some of them are losing in irrigation business (Reuters 2008 and Newspaper 2009). To overcome these problems it is necessary to investigate the situation. It is expected that the study will provide some valuable information to the farmers and the owners of the STWs. The policy stakeholders may use the result of the study in making decision with respect to irrigation management. This analysis would also help in making decisions as to the choice of technology and systems of payment for water which will contribute most to increase household's income. The study will also be helpful for policy makers in reviewing the policy options for irrigation in general. Under the situation, the present study has been designed to fulfill the following specific objectives: i. to assess the profitability of STW irrigation business from the viewpoints of investors; ii. to analyse the impact of increased energy prices in the business and contribution of STW irrigation business to household income and food security; and iii. to suggest some policy guidelines/recommendations. Study Area II. RESEARCH METHODOLOGY The study area was chosen purposively from an intensively irrigated area of Ghatail Upazila in Tangail district, which falls under the Indo-Gangetic basin. The study area comprises five adjacent villages namely Sheikh Shimul, Saitapara, Kurmushi, Kaijalipur and Kagmari Beltail of Ghatail Upazila. The entire irrigation system of the areas mainly depends on groundwater lifting device like STW. Another significant advantage for selecting this area is the presence of a reputed irrigation water market business over the past few decad,~s. In total, 30 STW owners were selected randomly for this study. During the selection of 30 STW owners, equal importance was given to DOSTWs and EOSTWs. Primary data were collected during the period from January to April in 2008.

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