The government is set to slash subsidy allocation by about 19 percent in the upcoming budget, with the bulk of the cuts falling on fuel subsidy, in keeping with the commitment to the International Monetary Fund.
The total allocation for subsidy is likely to be around Tk 26,453 crore in fiscal 2014-15, in contrast to Tk 32,354 crore set aside this year.
In a memorandum with the IMF for the Extended Credit Facility, the government pledged to continue with its efforts to contain energy subsidy.
On the basis of the commitment, the multilateral lender last Friday approved around $141 million, the fifth instalment of the ECF loan.
As part of the efforts, fuel subsidy would be slashed by 62 percent from the current year's allocation to Tk 2,800 crore.
The government also committed to keeping domestic average fuel prices within Tk 10 per litre of international prices, with the price to be adjusted as needed to keep to that target.
To enhance financial management at Bangladesh Petroleum Corporation, the sole agent for importing fuel, the government plans to hire professional staff by June, appoint a global firm to audit its financial statements and adopt automated financial reporting software by December.
To strengthen the transparency of subsidy policies, the required subsidy expenditure of BPC, the Power Development Board and Chemical Industries Corporation (BCIC) will be met through regular budgetary transfers, at least on a quarterly basis. Power subsidy though is likely to be increased by around 15 percent to Tk 7,000 crore. An official of the power division said a big portion of the subsidy will be needed for the quick rental plants.
Agricultural subsidy will remain the same as this year, which will be around Tk 9,000 crore.
Export subsidy may rise 10 percent over the current year's to Tk 2,850 crore. Food subsidy too would get a raise.
The government's expenditure on subsidy has gone up significantly in recent years mainly due to quick rental plants. In fiscal 2009-10, the amount of subsidy was Tk 9,534 crore, which rose to Tk 16,285 crore the following year and Tk 28,814 crore the year after. In fiscal 2012-13, subsidy allocation was Tk 37,399 crore.