Budget and subsidy cut

It is hard to conceive of a national budget without any allocation of public expenditure fund for, what is categorised as, subsidy. There could be variation in its amount but the presence of subsidy in the budget is a must either to promote export or safeguard the interests of consumers and farmers or make public education and healthcare facilities cheaper for the poor or low-income people. Bangladesh has not been any exception as far as the use of subsidy is concerned. In fact, its size has ballooned over the years with the growing cross-sectoral demand for the same.

However, the bulk amount of public subsidy fund has, in recent years, been eaten up by the power and energy sector. This is an area where the government has reluctantly been making available the subsidies worth billions of Takas every year. Whenever the international prices of fuel oils go up, the volume of subsidy also rises. The subsidy on account of sale of power has declined considerably following an intermittent yet frequent increase in power tariff in very recent times. However, the subsidy to the power sector would have been very negligible by now, had there been no rental plants engaged in power generation.

The government, according to a report published in this paper last Saturday, is likely to cut the volume of total subsidy expenditure by around 20 per cent in the next fiscal year (FY), 2014-15. The slash, if made effective, would be even bigger than that was put into effect this fiscal over that of the previous one, -- FY 2012-13. However, the FY 13 saw a big jump in subsidy payments, primarily because of a sizeable increase in fuel oil prices in the international market at that time. Notwithstanding the fact that the benefits of subsidy given to power and fuel oils are also enjoyed by the affluent section of society, the government neither can bypass this section of beneficiaries nor can it stop subsidy payments for the sake of the poorer section of people.

Besides, the government makes available farm inputs at subsidised rates, with a view to helping the small and marginal farmers. A substantial amount of money is also given as subsidy to the exporters of a number of items. The government does not mind paying this kind of subsidy as it has otherwise some favourable impact on the economy. But the possibility of abuse of public subsidies remains very strong under the given set of circumstances in Bangladesh. In fact, the opposition to the budgetary provisions for such subsidies has stemmed from a widespread allegation that these very often do not reach the target population.

A number of studies have found the allegation to be true, particularly in the case of programmes that are meant to benefit the rural poor. An unscrupulous section of government officials and politically influential elements at the local level, deprive the target population of a large part of the benefits of the related subsidy and embezzle funds. The central administration has been aware of this mischief. But it has hardly taken any corrective measure. The economy which still suffers badly due to resource constraints, cannot afford any wastage of resources in the name of subsidy. The government needs to ensure that the subsidy given for trade promotion does produce the intended results and the same meant for helping the poor and low-income people does reach the target groups smoothly.