Changes in fertiliser subsidy policy
Wednesday, 4 June 2008
The government, according to a report published in this daily Monday, is planning to bring about major changes in the decades'-old system of subsidised sale of fertiliser. From the next financial year, the authorities concerned might cut down substantially the amount of subsidy given to urea, a widely used nitrogenous chemical fertiliser, and offer cash subsidy to the small and marginal farmers at the end of every rice cropping season. The government has been constrained to modify the system with a view to stopping abuse of the subsidy-provision and smuggling of fertiliser to neighbouring India and Myanmar where the same is costlier.
It is not difficult to understand the reasons behind the desperation on the part of the government to cut the amount of subsidy, which has increased almost two-fold in the outgoing fiscal in view of the abnormal hike in the prices of the item in the international market. The government in the national budget for fiscal 2007-08 allocated a sum of Tk 22 billion but the amount has soared to Tk 40 billion because of an ever-widening gap between the procurement and the sale prices of urea. Under the circumstances, the government can hardly afford any abuse of the subsidy facility meant to help the poor and marginal farmers.
The government must have examined the possible impact, both positive and negative, of its planned change in the provision for subsidy to fertiliser in line with the amount of cash subsidy disbursed among the farmers on account of diesel use for irrigation purposes for the first time during the just concluded Boro season. There were, however, allegations of mismanagement and delays in the disbursement of fuel subsidy among the farmers. A sizeable amount of subsidy meant for diesel, allegedly, ended up in wrong hands. If the government really decides to switch over to cash payment of subsidy on account of fertiliser use by small and marginal farmers, it will have to start work on the preparation of the lists of possible beneficiaries at the grassroots without further delay. Since the next Aman season is still months away, it would not be that difficult for the field level officials of the departments concerned to prepare such lists if they are really sincere in their work.
However, the possibility of a negative effect of the hike in the prices of urea that has remained unchanged for more than two decades cannot be ruled out. If the government fixes the urea price even at Tk 20 a kg-which will also be much lower than the procurement price-- at the growers' level, it would mean a three-fold rise in the price of this key agri-input. Nobody knows for sure the possible reaction of the medium and large farmers to such a hike. Will it anyway affect the food grain output? Fertiliser prices are important, no doubt. But no less important is its timely availability in right quantities. Growers, in most cases, have been forced to buy fertilisers at prices much higher than what is officially fixed during the peak Aman and Boro cropping seasons. While trying to stop the abuse of the subsidy facility, the government does need to ensure the availability of fertilisers in right time and in right quantities.
It is not difficult to understand the reasons behind the desperation on the part of the government to cut the amount of subsidy, which has increased almost two-fold in the outgoing fiscal in view of the abnormal hike in the prices of the item in the international market. The government in the national budget for fiscal 2007-08 allocated a sum of Tk 22 billion but the amount has soared to Tk 40 billion because of an ever-widening gap between the procurement and the sale prices of urea. Under the circumstances, the government can hardly afford any abuse of the subsidy facility meant to help the poor and marginal farmers.
The government must have examined the possible impact, both positive and negative, of its planned change in the provision for subsidy to fertiliser in line with the amount of cash subsidy disbursed among the farmers on account of diesel use for irrigation purposes for the first time during the just concluded Boro season. There were, however, allegations of mismanagement and delays in the disbursement of fuel subsidy among the farmers. A sizeable amount of subsidy meant for diesel, allegedly, ended up in wrong hands. If the government really decides to switch over to cash payment of subsidy on account of fertiliser use by small and marginal farmers, it will have to start work on the preparation of the lists of possible beneficiaries at the grassroots without further delay. Since the next Aman season is still months away, it would not be that difficult for the field level officials of the departments concerned to prepare such lists if they are really sincere in their work.
However, the possibility of a negative effect of the hike in the prices of urea that has remained unchanged for more than two decades cannot be ruled out. If the government fixes the urea price even at Tk 20 a kg-which will also be much lower than the procurement price-- at the growers' level, it would mean a three-fold rise in the price of this key agri-input. Nobody knows for sure the possible reaction of the medium and large farmers to such a hike. Will it anyway affect the food grain output? Fertiliser prices are important, no doubt. But no less important is its timely availability in right quantities. Growers, in most cases, have been forced to buy fertilisers at prices much higher than what is officially fixed during the peak Aman and Boro cropping seasons. While trying to stop the abuse of the subsidy facility, the government does need to ensure the availability of fertilisers in right time and in right quantities.