Govt faces extra budgetary pressure due to rise in fertiliser subsidy

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S M Jahangir
The government has to face an extra budgetary pressure this fiscal year as it will require providing additional subsidy to the agriculture sector following a significant rise in the import of fertiliser coupled with its price hike in the international market.
A senior Agriculture Ministry official indicated that the volume of subsidy on fertiliser could hit Tk 40 billion for the fiscal year (FY) 2007-08 against the previous projection of Tk 25 billion.
"This year, the government will require spending an additional Tk 15 billion for selling fertiliser, especially urea, to the farmers at subsidised prices," said the official.
Citing the current global fertiliser market, sources said the import of per tonne of urea could cost Tk 1200 while the government sells the item at about Tk 6000 per tonne or Tk 300 per 50-kg bag.
"Since the government is to import an increased volume of urea this year for meeting the country's demand for the item, the amount of subsidy will go up significantly," an official source said.
According to the Agriculture Ministry sources, the government has already decided to import a record 1.35 million tonnes of urea fertiliser for the FY 2007-08.
The volume is nearly 0.5 million tonnes higher than last year's urea import, they said, adding that the government imported about 0.82 million tonnes of urea in the last FY against its target of 0.9 million tonnes.
Of the total target, the government will procure 0.45 million tonnes of urea from the Karnaphuli Fertiliser Company Limited (KAFCO) while the remaining 0.9 million tonnes will be imported from abroad,
An official, however, said a high-powered monitoring committee on fertiliser, headed by Education Adviser Auyub Quadri, at its recent meeting had revised the government's fertiliser import target by nearly 0.3 million tonnes against its previous projection.
Other members of the committee -- Agriculture Adviser CS Karim, Industries Adviser Geeteara Safiya Choudhury and secretaries of finance, industry and agriculture ministries -- were also present at the meeting.
The committee had revised the import target, taking a possible shortfall in the domestic urea output coupled with a growing demand for the item, the official mentioned.
The meeting was told that the local urea output would decline to 1.5 million tonnes in the current fiscal against the target of 1.7 million tonnes due to a suspension of production at the 0.2-million capacity of Palash Urea factory in Ghorashal.
On the other hand, the demand for urea has been estimated at over 2.8 million tonnes for the current fiscal.
Meanwhile, crisis of urea fertiliser has already been reported in different parts in the country against the backdrop of an enhanced demand for the main agricultural input in the current 'aman' cropping season, sources said.