Cash incentives on some export items to be cut from next FY

Rezaul Karim | Published: January 27, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

The government is likely to reduce the rates of cash incentive/subsidy facility on a good number of export items from next fiscal year (FY), officials said.
"The initiative has been taken to bring some potential and diversified export items under the incentive/subsidy facility while reducing government expenditure," a high official of the Ministry of Finance (MoF) said.
According to the move, the government may reduce the rates of cash incentive/subsidy on export of jute and jute goods, leather and leather goods, on new products and new market expansion facility, on additional subsidy given to small and medium garment factories and export-oriented textiles sector.
Besides, the rate of cash incentive facility on export of frozen shrimp and fish will be reviewed at an inter-ministerial meeting soon. The existing rate will, however, not be increased.
The proposed rate of cash incentive/subsidy will be made effective from the FY 2015-16, the officials said.
The proposed rates of cash incentive/subsidy have recently been submitted to the finance minister by senior secretary of the MoF for approval, an official of the ministry said.
Earlier, the Macroeconomic wing of the MoF prepared a study paper on cash incentive/subsidy facility following discussion and collection of related information with the ministries of commerce (MoC), agriculture, industries, jute and textiles and livestock and fisheries.
"The government wants to make the move effective from next FY as if the existing rates of cash incentive/subsidy are reviewed in the ongoing FY, country's export procedures might face impediments," the official said.
If the move is made effective from next FY, the government expenditure for this purpose will reduce by about Tk 3.0 to 5.0 billion in every FY, he added. Â
The government may reduce the rate of cash incentive facility on export of leather goods to 12.5 per cent from the existing 15 per cent.
It may reduce the rate of alternative cash incentive on the export-oriented textiles to 4.0 per cent from existing 5.0 per cent, additional subsidy for small and medium garment factories to 4.0 per cent from 5.0 per cent and incentive on new products and new market expansion (garment sector) except USA, Canada and EU to 2.0 per cent from the current 3.0 per cent, according to the MoF data.
Besides, the government may also decrease the rate of cash subsidy on export of both jute goods and jute yarn by 2.5 per cent from existing 10 per cent and 7.50 per cent respectively, the data showed.
Diversified jute goods will be included in the incentive basket which will get 10 per cent cash subsidy from the next FY, the data mentioned. Â
Potato, halal meat and agro-products are getting the highest 20 per cent cash subsidy. The small and medium garment factories get an additional 5.0 per cent subsidy, while 3.0 per cent incentive (including government special support) is provided for new products and new market expansion except USA, Canada and EU in the current FY.
The export-oriented textiles sector gets 5.0 per cent alternative cash incentive instead of customs bond and duty-drawback facility.
The products made of grass (hogla), paddy straw (khor) and sugarcane bark (akher chhobra) get cash incentive at the rate between 15 per cent and 20 per cent. Exporters of bone dust and leather goods get 15 per cent incentive, pet bottle, flakes, finished jute goods and products of light engineering sector get 10 per cent cash subsidy.
Among the other sectors, frozen shrimp and jute yarn get 10 per cent and 7.5 per cent incentives respectively and ship export gets 5.0 per cent cash subsidy. The senior secretary of the MoF could not be reached for his comment in this connection despite repeated attempts made over phone and Short Message Service (SMS).
"The entrepreneurs of the garment sector are now busy improving their factories and workplace environment safety which is consuming huge fund. They have made significant development in this connection. On the other hand, political unrest is going on in the country. In the circumstance, entrepreneurs concerned of the sector will be discouraged if the government reduces such incentives from their export items," former president of Bangladesh Garment Manufacturers & Exporters Association (BGMEA) Abdus Salam Murshedy told the FE Monday.
He, however, said: "Wages of the readymade garment (RMG) workers increased but the buyers did not raise the prices of the garment items as per expectation. As a result, we are suffering in different ways. So, the government should continue existing rate of cash incentive/subsidy for the next FY for the sake of economic growth".
The government provided a total of Tk 29.50 billion as cash incentive/subsidy for different sectors in the last FY.
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