Historic high subsidy planned for rising fuel, fertiliser prices

The government will have to bear a historic high subsidy in the next financial year on account of rising energy and fertiliser prices on the international market.
 
Finance Minister AHM Mustafa Kamal proposed a Tk82,745 crore subsidy for the next fiscal year which is 54 percent more than the original or 24 percent over the revised allocation of this fiscal year.
 
Of the subsidies, some Tk47,300 crore will be spent on power, LNG and agriculture, which is Tk12,000 crore higher than the revised budget for the current fiscal year.
 
The government will have to spend more than 12% of its expenditure budget on subsidies and incentives in the fiscal 2022-23.
 
The finance minister fears that even if the subsidy allocation increases to tame soaring inflation, it can still pose challenges to the government's budget management.
 
Experts observed that the subsidy pressure is rising day by day as there is no exit plan on the part of the government. 
 
According to finance ministry data, fuel prices went up by 65%, prices of urea fertilisers by 114% and prices of LNG by 1,200% year-on-year in May this year because of the Russia-Ukraine conflict.
 
Initiatives have already been taken to hike gas prices in the country, and the process of increasing power tariffs is also underway.
 
Apart from these two strategic items, prices of fuel oil and fertilisers will be adjusted upward slightly in phases, the finance minister said, adding that the government's extra spending burden because of rising prices in the international market cannot be imposed on the consumers.
 
So, even if the government increases the prices of gas, electricity, fertilisers and oil, the subsidies will continue.
 
The fuel oil price in the international market has exceeded $113 per barrel, but the government has not announced any hike in its price. Again, the new budget has not proposed any allocation for fuel subsidy. 

Since 2016, the government has completely withdrawn fuel subsidies. It is currently selling fuel at a loss, but has made a profit by selling it at a higher price in the last few years.
 
At present, the government's daily loss on fuel amounts to about Tk90 crore. Despite this, Bangladesh Petroleum Corporation has deposits of Tk31,939 crore in banks till the end of March this year.