Subsidy cut to upset agriculture: analysts

A budgetary plan to cut farm subsidies will frustrate farmers and the sector as a whole, as they still need special care for a few more years, analysts said yesterday.
They also said the government would face challenges in implementing the budget, as the mechanism to implement the annual development programme is still weak and slow.
"The national budget allocates fewer subsidies for the agriculture sector than the previous two years. We think the sector still needs special care for another few years,” said Khondkar Ibrahim Khaled, emeritus fellow of Unnayan Shamannay, a private think-tank.
“Ideally, subsidy is not a solution for any sector in the long run, but the government should continue providing financial assistance to the sector for at least three more years,” he said.
“Although the government allocates more money to be disbursed as loans for the sector, it will not be as beneficial as subsidies for farmers,” said Khaled.
He spoke at a post-budget discussion meeting co-organised by Unnayan Shamannay and Shamun-nay, both research organisations, at the CIRDAP auditorium in Dhaka.
Finance Minister AMA Muhith has proposed a 12.19 percent cut in subsidy for the agriculture sector in the national budget for fiscal 2011-12.
The government plans to provide Tk 4,500 crore in farm subsidy in 2011-12, which was Tk 5,700 crore in the outgoing fiscal year. The minister has also proposed to set a target to disburse Tk 13,800 crore in farm loans in 2011-12.
Khaled, also the chairman of Bangladesh Krishi Bank, said the government has to change its mindset about determining black money in order to increase the tax-GDP ratio further, so that it can reach its target of becoming a middle income country by 2021.
“The tax department should not ask about the source of income. If one declares his income as illegal he pays less tax. So, if there was no such differentiation, the government could have earned more,” he explained.
“Whenever one earns illegally, there is police and Anti-Corruption Commission to punish him. So there is no point of losing revenue from these people,” he said.
Khaled said the implementation of the proposed budget would depend on managing funds to finance the budget deficit of Tk 45,000 crore.
In his keynote paper, AK Enamul Haque, a consultant of Unnayan Shamunnay, said the government has to manage Tk 27,000 crore from internal borrowing, which may create an extra burden on banks while disbursing loans to private sector.
He said the budget “lacks revolutionary direction”. He also said the government has failed to show any hope in controlling inflation and balancing rising food and fuel prices.
Haque said the budget also lacks direction for attracting investment, although the increased allocation for energy sector would help better the situation in the upcoming fiscal year.
He applauded the move to impose a 10 percent surcharge on incomes of over Tk 2 crore. He also stressed on properly utilising block money of Tk 6,000 crore, so that the poor and landless people in char areas can reap benefit from the assistance.
AKM Muksudul Alam Morshed, coordinator of Unnayan Shamannay moderated the discussion.