Subsidy to soar 37pc next fiscal year
Expenditure on subsidy is set to soar about 37 percent in fiscal 2016-17 from that in the current year owing to food distribution at lower prices through public channels and opening up of new sectors to financial support.
Some Tk 26,729 crore has been allocated for subsidy purposes next fiscal year, according to data from the finance ministry.
Food subsidy will shoot up 42.69 percent year-on-year to Tk 2,821 crore even though the prices of staples have dropped at both the international and local markets.
The subsidy will be required as the government plans to sell rice and wheat at lower prices next fiscal year, like it has done this year.
For open market sale (OMS), the price of rice is Tk 15 a kg and the price of wheat is Tk 17 per kg. The government's latest procurement price for rice is Tk 32 a kg.
Besides, from the forthcoming fiscal year the government also plans to introduce the Palli Rationing Programme, under which rice would be sold at a price that would be lower than the OMS rate.
The demand for food grains sold under the OMS programme declined in recent times as the price of rice fell much in the local market.
As a result, the government warehouses were bulging with stocks, which prompted cuts in the OMS price twice this year.
In fiscal 2016-17, the government plans to distribute 29.72 lakh tonnes of rice and wheat, up 34 percent year-on-year, according to the government's budget document.
Another reason for the rise in allocation in the upcoming fiscal year is that the government will provide subsidy to the gas sector for the first time. About Tk 2,500 crore has been allocated for the purpose.
The government will purchase gas from international oil companies and sell it in the local market at prices lower than the buying price.
Previously, the government waived the tax imposed on gas at the time of purchase.
But no tax waiver will be available for international oil companies from next fiscal year, and hence subsidy will be needed to plug the price difference.
The allocation may increase further in the revised budget for next fiscal year, according to finance ministry officials.
For the first time, the finance division is not allocating any fund as subsidy for Bangladesh Petroleum Corporation as it started turning in profits from last fiscal year.
The government had given the state-run agency Tk 800 crore in fiscal 2015-16 but withdrew it later on.
Instead, the finance division has asked the BPC to deposit to the state coffer the profit it has been making for the last two years.
BPC, the country's lone oil importer and seller, is likely to make a profit of more than Tk 12,000 crore in fiscal 2015-16 even though the government cut the prices of petroleum products last month.
Despite the price adjustment, BPC's production cost will remain much lower than the retail rate. The agency made profit of Tk 4,107 crore in fiscal 2014-15.
The power sector will get a subsidy of Tk 6,000 crore, which is the same as this year. The subsidy for agriculture in the upcoming fiscal year will also remain the same as in the current year, at Tk 9,000 crore.
In the revised budget, the agriculture subsidy was cut by Tk 2,000 crore to Tk 7,000 crore as fertiliser prices fell in the international market.
The subsidies for exports and jute will remain the same as in the current year as well.
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