Govt may defer some subsidy

The public exchequer is facing a 'huge pressure' in paying out hefty arrears accrued from July for pay hike of employees, and subsequently the government may have to withhold subsidy disbursements of some sectors.
Officials at the Finance Division told the FE that they are now actively considering deferring some payments, like - various subsidies, to cope with sudden big demand stemming from the latest pay hike.
The government approved the new pay-scale this month, with retrospective effect from July, thereby doubling the existing monthly pay packs for its more than 1.8 million staff members, including those of autonomous bodies.
But drawing salary in the new scale along with arrears will take time for procedural reasons.
Sources at the Ministry of Finance and the Office of the Comptroller and Auditor General (OCAG) said the public servants might draw the arrears and new pay either in November or December.
If they draw new salary in November, they will get four months' arrears generated from the difference between the new and old basic pays. If it happens in December, they will get new pay with arrears of five months.
According to a rough estimate, a government employee paid in the fifth grade might get additional Tk 60,000-70,000 as arrears.
"This payment will cause big pressure on the government expenditure at a time when the revenue earnings have become slow and much current expenditure are being met through borrowing," said a senior official.
NBR's revenue collection remains low during the first few months of any fiscal year.
He said they may defer payment of some subsidies, like the power development subsidies, for a few months to offset the pressure.
The government will have to pay more than Tk 53 billion on account of the arrears, if paid in November. If paid in December, the government will have to pay an additional amount of Tk 13 billion.
The government has earmarked Tk 159.04 billion to meet the additional expenditure for the whole fiscal year (FY), 2015-16. This year, the government will give only increased basic pay and the remaining bonus and other perks will be paid in FY 2016-17.
The government has raised the salary of its employees on considerations that they would stay away from any type of bribery and provide 'honest' services to people. Besides, the increased salary would help them adjust with growing inflationary pressure.
Meanwhile, there are many autonomous bodies, corporations and boards under different ministries, which pay their employees from their own coffers.
Such institutions include WASA, city corporations, state-owned banks, port authorities, Bangladesh Inland Water Transport Authority (BIWTA) and handloom board etc.
Many autonomous bodies, corporations and boards that pay their staffs from their own revenues are likely to face extreme pressure in footing a fat bill for arrears of four or five months at a time.
But, officials at a number of corporations and autonomous bodies told the FE that their parent organisations will provide them loans to bear with the difficulty, if arise.
Syed Mohammed Mozammel Hoque, director (finance) at Bangladesh Steel and Engineering Corporation (BSEC) under the Ministry of Industries, told the FE: "We will give loans, if any organisation fails to meet the urgent demand."
He said they prepared annual budgets of the autonomous organisations taking into account the new pay structure.
BSEC sources said they will provide loans at 5.0 per cent rate to pay both blue- and white-collar staffs under the new scale.
There are nine organisations under BSEC, and at least three to four of them are losing concerns.
However, many autonomous organisations are planning to cut their development expenditure to meet the enhanced staff payment.
Mohammad Mahmud Hossain, chief accounts officer at Dhaka South City Corporation (DSCC), said: "We may face financial trouble for payment of enhanced salary and arrears."
He said the DSCC Mayor has already directed his wing to figure out how much additional money will be required to meet the expenses.
They may cut some projects that are mainly funded by the public exchequer to meet the expenses.
"We'll require an additional amount of around Tk 60 million. We're thinking how to realise the amount."
He said they cannot stop providing services to the city-dwellers while addressing the monetary problems.
Mr Hossain said DSCC, which has around 8,000 employees, including contractual ones, wants to avoid any 'agitation' on the issue through paying in time.
Currently DSCC pays around Tk 110 million to its employees, mostly low-grade ones. This payment size is equivalent to around 80 per cent of its revenue earnings, DSCC sources said.
On the other hand, many autonomous organisations are expecting that the Finance Division will provide them a lump-sum amount to make the emergency payment.
Md Moniurzzaman, director (finance) at BIWTA, told the FE: "We're expecting that the Finance Division will allocate the extra amount to meet the demand."
He said the government allocates around Tk 1.5 billion each year as grants, and BIWTA earns around Tk 1.6 billion a year.
"If we face any shortage, the government will come up," he added.
On the other hand, Zakaria Al Mahmud, deputy chief information officer at Dhaka WASA, said his organisation has adequate funds to meet the pay rise.
jasimharoon@yahoo.com