14pc hike in subsidies proposed

FE Team | Published: June 10, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
The caretaker government (CG) has made provisions for subsidy worth Tk 41.99 billion in the proposed budget for new fiscal, which is 14 per cent higher compared to that of the outgoing fiscal, official sources said.
It has proposed to provide subsidies in form of food and fertiliser, and cash incentives to the export-oriented sectors.
In addition, the CG has proposed to offer subsidy worth Tk 7.5 billion on sales of diesel to the farmers, sources added.
According to Ministry of Finance (MoF), the proposed amount is equivalent to the losses that the farmers might incur to grow agricultural products paying the current market price of per litre of diesel at Tk 40.
In the outgoing fiscal the amount of total subsidy was Tk 36.71 billion. There was no subsidy on diesel sale.
However, the proposed measures on subsidy is encouraging for the export oriented garments and frozen food sector as the CG has decided to continue the subsidy despite repeated calls from the donor agencies to suspend it.
The CG has proposed to increase cash subsidy to Tk 11.00 billion for the export oriented sectors, which is up by Tk 3.00 billion from the revised allocation of the outgoing fiscal.
An amount of Tk 8.00 billion was kept for cash subsidy to export-oriented sector in the revised budget for 2006-07 fiscal.
Local knitwear exporters association's president Fazlul Haq welcomed the proposal saying the move is logical considering the competitiveness in the international market. The country's main global rivals are China, India and Pakistan.
"All conditions of the donor agencies are not logicalâ€¦ the government has proposed correct measure by maintaining the cash subsidies to the export oriented sectors," he said.
At a meeting with International Monetary Fund (IMF) officials a couple of months ago, Haq said his organisation argued in favour of such cash incentive to maintain the country's competitiveness against its rival countries.
The CG has, however, proposed to reduce subsidy on fertiliser and electricity in the new fiscal by Tk 410 million.
In the outgoing fiscal, the government provided subsidy worth Tk 15.41 billion on fertiliser and electricity. The amount, as per proposal, stands at Tk 15.00 billion.
However, experts, including former CG finance adviser Akbar Ali Khan, have emphasised on monitoring for proper utilisation of cash subsidies.
Unless the government applies right mechanism there is a big chance of misuse of cash subsidy, especially in the export-oriented sector, they said.
Finance and planning adviser, however, told at the pre-budget discussion that the government would bring changes in the distribution and monitoring system in the new fiscal to curb misuse of cash subsidy.