Imports of tractors and power tillers have fallen this fiscal year owing to higher prices driven by the depreciation of taka against the US dollar and the discontinuation of government subsidies.

The opening of letters of credit (LCs) for agricultural machinery imports plunged 59 percent year-on-year between July and February of the fiscal year (FY) 2024-25, according to Bangladesh Bank data.

Meanwhile, LC settlements dropped 45 percent year-on-year, reaching $8.3 million in the eight months to the end of February.

"Increased cost of the dollar has pushed up the prices of tractors, and this has affected sales by up to 20 percent," said Sadid Jamil, managing director of Metal, a farming machinery importer.

Sales of combine harvesters have also nosedived since the government scrapped subsidies that had been aimed at speeding up farm mechanisation, cutting reliance on manual labour, reducing production costs, and improving yields.

Previously, farmers received up to 70 percent subsidy on the purchase of combine harvesters. However, this support was withdrawn in the last fiscal year following allegations of irregularities.

Jamil said the situation for power tillers, the most widely used farm machinery for cultivation, mirrors that of tractors.

He said that the subsidy had given a major boost to agricultural mechanisation and urged the government to reinstate it.

He also pointed out that banks remain reluctant to lend to farmers seeking to buy machinery.

According to a report by the International Food Policy Research Institute (IFPRI) last year, 98 percent of rice farmers used machinery for tillage and 87 percent for irrigation during 2018-19.

Machinery was also used by 78 percent of farmers for pesticide spraying and by 88 percent for threshing, said the report.

FH Ansarey, president of the agribusiness division at ACI Ltd, said sales of power tillers had shrunk considerably, largely due to the steep rise in prices over the past year.

He said that while the broader macroeconomic environment remains buoyant, the spike in power tiller prices has directly weighed on demand.

Moreover, the operational costs of tractors have fallen below those of power tillers, said Ansarey.

"As a result, many are now shifting towards tractors, which offer better efficiency and cost advantages," he added.

During FY24, Bangladesh's private sector imported power tillers and tractors worth $30 million, which was 8 percent higher year-on-year.