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Next FY to see 15.4% rise in subsidy

  • Published at 12:44 am April 30th, 2017
  • Last updated at 12:48 am April 30th, 2017
Next FY to see 15.4% rise in subsidy
Subsidy spending is set to hike by 15.40% in next fiscal year from that in this year’s revised outlay, mainly due to incentive to agriculture sector and cash credit sanctioned to Petrobangla for importing gas. A sum of Tk27,500 crore has been planned to allocate for subsidy purposes in the next fiscal year, according to documents obtained from the Finance Ministry. The proposed outlay reads that subsidy would be raised by Tk3,670 crore, from Tk23,830 crore of the revised budget. The state-run oil company is likely to get Tk2,500cr as cash credit to procure gas from international oil companies (IOCs) at higher prices, which will sell at a lower rate. The credit for Petrobangla is also meant for relaying Tk5,500 in dues to the National Board of Revenue. Petrobangla buys gas from IOCs at Tk292 per 1,000 cubic metres, which include their income tax, but it sells the same volume of gas at Tk176, including taxes. Hence, Petrobangla pays a subsidy of Tk126 for every 1,000 cubic metres of gas. On the other hand, the government from last year started waiving the tax imposed on gas at the time of import or purchase including 15% VAT. Meanwhile, the power sector will get a subsidy of Tk5,500 crore, which is the same as allocated in the current FY. The credit of Tk5,500 cr to the Bangladesh Power Development Board (PDB) is likely to increase if the  price of electricity is not hiked in the  first week of July, said the Finance Division which is behind the next budget  preparation process. On March 9, the PDB had sent a proposal to Bangladesh Energy Regulatory Commission (BERC) to increase the retail price of electricity by Tk0.98 per unit (kilowatt-hour). Nevertheless, the Finance Division does not want the hike proposed to be effective from early July as it fears that the government move will push up consumer product prices, especially at the retail level. Ever year, the prices of every day essentials shoot up in the first week of July after the budget is announced, causing the masses to suffer. A Finance Division official, requesting anonymity, said the Power Ministry would not pay heed to their advice. From the 2015-16 FY, the government has not allocated any fund for Bangladesh Petroleum Corporation as it turned into a profitable state-owned agency. The BPC was last allocated Tk600 crore in fiscal year 2014-15, and after that the Finance Division asked it to deposit state exchequer the profit the agency is making for the last years. For agriculture, the subsidy will increase to Tk9,000 crore, which is Tk3,000 more than that of the latest revised budget. In the revised budgetary outlay, the agriculture subsidy was cut by Tk3,000 crore to Tk9,000 crore as fertiliser prices fell in the international market. Food subsidy will rise to 7.5 % year-on-year to Tk279 crore owing to the increase of staple prices, despite the rates being unchanged in the international market. The subsidy will be required as the government plans to sell rice and wheat at lower prices in the upcoming FY, as it is doing in the current one. Each kg rice and wheat sells under the government’s Open Market Sale programme at Tk15 and Tk17 respectively, while the government ‘s latest procurement price for rice is Tk 32 a kg. Exports and jute subsidies will remain the same as the current year’s amounts of Tk4,000 crore and Tk500 crore respectively. Before the budget  announcement, Finance Minister AMA Muhith  makes his yearly rhetoric that the total subsidy would drop to a minimum level. But, his assumption failed in the last two fiscal years as the subsidy outlay saw a rise then.