Subsidy burden to be heavier | The Daily Star
12:00 AM, May 27, 2018 / LAST MODIFIED: 12:54 AM, May 27, 2018

Subsidy burden to be heavier

Three new areas being added to recipient list

Subsidy expenditure is set to increase 16.36 percent to Tk 32,000 crore in the incoming fiscal year as three new areas -- gas, fuel and home loan for government staff -- are likely to be added to the list.

For the first time the government is planning to subsidise gas price as it is importing liquefied natural gas at a rate much higher than that of the locally produced gas.

The subsidy for gas price in fiscal 2018-19 is likely to be Tk 2,500 to Tk 3,000 crore.

The first consignment of imported LNG has arrived and will be added to the national grid in a couple of weeks' time.

As soon as it is blended with local gas, the gas price will increase but still it will be lower than the purchasing cost of LNG, said energy ministry officials.

The cost of production for per unit of gas would be Tk 14.64 when LNG and local gas are blended, but the retail price might be set at about Tk 13.

The average retail price of gas supplied by Petrobangla from domestic sources is Tk 7.39 per cubic metre.

Finance Minister AMA Muhith has already said gas price will go up further and the government will still have to give subsidy to the energy sector.

Meanwhile, after a few years of historically low prices fuel price has started to increase in the international market, meaning the need for fuel subsidy has emerged once again.

The energy and mineral resources division has proposed either subsiding the petroleum products or hike their prices. But the government is opposed to to the idea of increasing the fuel price so close to the national elections.

The finance ministry has advised the energy ministry to cover the loss from the profit made in the last several years from petroleum products.

“No decision has been taken yet on whether subsidy will be given to fuel price,” said a finance ministry official.

In another new subsidy, the budget may set aside Tk 400 crore to Tk 500 crore as interest on home loans for 14 lakh government staff, who will be able to borrow Tk 20 lakh to Tk 75 lakh.

Home loans loan will be distributed through state-owned banks and financial institutions. Government staff will pay 5 percent interest for the loans, with the government bearing an additional 3 to 5 percent.

The subsidy in the power sector may be set at Tk 6,500 crore in fiscal 2018-19, up from Tk 6,000 crore this year.

Subsidies to the agriculture sector will go up to TK 9,500 crore from Tk 9,000 crore now, while export subsidy will increase by Tk 500 crore to Tk 4,500 crore as a number of new products have been added to the sectors that are eligible for cash incentives.

Food subsidy will remain unchanged at Tk 4,000 crore next fiscal year.

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