As the government has yet to adjust the prices of fertiliser, electricity, gas, and petroleum products according to their production cost, the ministries concerned sought Tk 6,286 crore additional budgetary allocations from the finance division as subsidies.
Sources said the finance division already took the request into consideration and conveyed it to the government high ups last month. A summary paper on the required extra subsidy was also submitted to the finance adviser.
The government prepared the current fiscal budget keeping in mind possible adjustment of prices of the products and utilities, but it could not implement the plan due to high inflationary pressure, said a finance ministry source.
As a result the ministries concerned have been incurring losses leading them to seek additional subsidies from the government.
According to the summary paper, sector based additional subsidies sought by the ministries are Tk 2,800 crore for petroleum products, Tk 586 crore for electricity, Tk 2,700 crore for agricultural products including fertilizer, and Tk 200 crore for jute and food items. The paper also projected that another Tk 300 crore might be needed for jute and food items.
The total amount of subsidy already allocated in the budget is Tk 4,186 crore, of which Tk 2,250 crore is set for subsidising the agricultural sector — Tk 750 crore of which is for subsidising diesel purchase by the farmers, and Tk 1,500 crore for subsidising the trade gap in the fertilizer sector.
But due to the government’s failure to adjust the prices of fertilizer, the required subsidy may reach Tk 4,950 crore this fiscal, Tk 3,094 crore of which is to subsidise urea production and Tk 1,011 crore to subsidise other fertilizer production.
The current budget allocated Tk 1,200 crore to subsidise the petroleum sector, but the prices of petroleum saw a fresh increase by 17.61 percent even after readjusting its prices in April this year.
Due to the post adjustment price hike, Bangladesh Petroleum Corporation (BPC) is now counting Tk 250 crore in losses every month. If the rate of loss continues at such a pace, the overall loss of BPC will stand at Tk 2,800 crore by the end of the fiscal year.
To meet the World Bank’s conditions for loans, the government committed to adjust the price of electricity in every six months.
In a bid to bring structural development in the power sector the government had a plan to bring gradual price adjustment, and to meet that end the government had allocated Tk 600 crore, but due to its failure to adjust the price of electricity, the power sector now needs an additional Tk 586 crore as a subsidy.
Production cost of electricity was Tk 2.826 per kilowatt-hour (kWh) in 2006-’07 fiscal, while it was being sold at Tk 2.260 per kWh.
A total of 55 percent of the demand for gas in the country is met by international oil companies. Bangladesh spends Tk 210 per 1,000 cubic feet (Mcf) of gas but it is being sold for Tk 92 per Mcf, making Petro Bangla lose Tk 61.98 crore per month.
Sources said the government has no plan to adjust the prices of the products and utilities at the moment. However some temporary measures will be taken to minimise financial losses.
According to a government plan, the central bank will provide 300 million dollars to three nationalised commercial banks for importing petroleum products, the sources added.
The ministries concerned may also get some extra allocations for subsidies according to their requirements.
The government will review the overall situation early next year and take further actions, said the sources.
Categories: Bangla, Bangladesh, Bangladesh Economy, Bangladesh News, Daily Bangladesh News, Economy, News
