Bangladesh News

The government will provide around Tk 6,000 crore more subsidies than the budgetary allocation for the current fiscal year due mainly to price hike of fuel, fertiliser and food in the international market.

The total amount of subsidies already allocated in the budget is Tk 6,000 crore, which includes Tk 4,200 crore for agriculture (fertiliser and others), petroleum, electricity and food, finance ministry sources said.

With the additional subsidies, the total volume now will be Tk 12,000 crore in the FY 08.

“We need another Tk 3,000 crore as the government has yet to adjust the prices of fertiliser, electricity, gas, and petroleum products according to their production cost,” said a government official.

Of the Tk 6,000 crore more subsidies, Tk 3,000 crore will be spent in fuel, and the rest for fertiliser and food.

Asked about the additional money in the form of subsidies, a source in the finance ministry said the government is considering reallocating the funds from the unspent money of the Annual Development Programme (ADP).

“Usually, the government depends on bank borrowing for such unexpected funds. We are looking for alternatives as bank borrowing has inflationary pressures on the economy.”

The official added that donors’ funds as budgetary supports will also be utilised as subsidies. “We are also expecting more revenue income in the second half of the fiscal year.”

The government has already decided in principle to cut Tk 4,000 crore to Tk 5,000c crore from the ADP due to slow implementation rates.

According to the estimate of the Bangladesh Petroleum Corporation (BPC), it will face a total loss of Tk 7,568 crore in the current fiscal for selling petroleum products at a subsidised price.

The budget has already allocated Tk 1,200 crore as bonds to pay the previous dues of the BPC.

Sources said the government may go for price increase of petroleum products at the end of current Boro season to reduce losses of the BPC. “Besides, the BPC will try to borrow money from its sources,” one source said, adding, the BPC will get about Tk 3,000 crore from the government.

The budgetary allocation for diesel and fertiliser under the agriculture sector was Tk 2,250 crore. But the revised import target of urea and non-urea fertiliser in the current fiscal by the agriculture ministry will need another Tk 1,765 crore subsidy.

The government allocated Tk 300 crore subsidy in food items for the current fiscal year. But finance ministry estimated that Tk 346 crore more subsidy is required for food as a result of price spiral food and loss of food production due to devastating floods last year.

The food subsidy will increase more as the country witnessed losses of food production in cyclone Sidr and there was a crisis of food in the local market.

“The government has failed to procure rice from local sources that means it will have to depend on international market and prices of rice in the international market is increasing,” said a finance ministry official.

The power sector got allocation of Tk 600 crore subsidy in the budget, but it needs an additional Tk 586 crore subsidy as the government did not adjust the power prices.

In the budget there was no subsidy for natural gas, but it is now required Tk 700 crore as subsidy due to under pricing of gas.

“We are selling gas to the people at a lower price than the price we buy it from the international oil companies in Bangladesh,” said a source.