Agri subsidy rises Tk8,000cr in revised budget of current FY

Despite a decline in international fertiliser prices, the agricultural subsidy for the current fiscal was rather increased – a trend that has been seen for the last few years.

In the revised budget, the subsidy allocation for agriculture has increased by Tk8,000 crore to Tk25,000 crore, according to a report from the Ministry of Agriculture. The allocation for this sector was initially set at Tk17,000 crore in the main budget.

Moreover, the government has decided to allocate Tk600 crore as agricultural rehabilitation assistance in the current fiscal.

A senior official from the ministry attributed this subsidy hike in the current fiscal to various factors, including the increase in fertiliser prices globally, the devaluation of the taka against the dollar, rising shipping charges, and the increase in LNG prices. 

The official further said a proposed allocation of Tk18,000 crore for agricultural subsidy has been set for the next financial year. The final decision on the allocation will be determined by the Ministry of Finance.

However, according to the World Bank Commodities Price Data (The Pink Sheet), the prices of fertilisers in the international market were considerably lower in February compared to the average prices in 2021, 2022, and 2023. 

In February, urea was $351.30 per tonne, DAP $583.80 per tonne, TSP $454.40 per tonne and MOP $289.40 per tonne.

In April 2023, the government raised the prices of urea, TSP, DAP, and MOP fertilisers by Tk5 per kg and farmers have been bearing the increased costs throughout the current financial year. 

The price adjustment came into effect on 10 April 2023, increasing the price of urea and TSP to Tk27 from Tk22, DAP to Tk21 from Tk16 and MOP to Tk20 from Tk15 for per kilogramme.

At the time, the Ministry of Agriculture explained that in light of abnormal price increases in the international market due to global economic conditions, the prices of fertilisers were reevaluated to ensure the rational import of fertilisers and their optimal utilisation.

According to agriculture ministry data, the demand for fertilisers in the country for the current fiscal has been estimated at 27 lakh tonnes of urea, 7.5 lakh tonnes of TSP, 16 lakh tonnes of DAP, and 9 lakh tonnes of MOP. 

Out of this, 10 lakh tonnes of urea, 1 lakh tonnesof TSP, and 1 lakh tonnes of DAP are domestically produced by the Bangladesh Chemical Industries Corporation (BCIC). 

The ministry data also showed that imports of 15.85 lakh tonnes of urea, 6.72 lakh tonnes of TSP, 13.05 lakh tonnes of DAP, and 10.34 lakh tonnes of MOP have been made until 15 March of the current fiscal year.

Analysing the budget reports of the Ministry of Agriculture, it was seen that the allocation for agricultural subsidies in the original budget has been increasing in the revised budget every year.

The highest increase was observed in FY 2022-23, where the initial allocation of Tk16,000 croreescalated to Tk26,000 crore by the end of the fiscal year. Similarly, in FY 2018-19 and 2019-20, the original subsidy budget was Tk8,000 but the end of year expenditure stood at Tk9,000 croreand Tk9,500 crore respectively. In FY 2021-22, the subsidy of Tk9,500 crores finally stood at Tk12,000 crore.

Most of the subsidy is spent to provide fertilisersat a low cost to farmers. Additionally, 20% of the electricity bill for irrigation is also subsidised. Apart from these, some of it was also spent on subsidising sugarcane cultivation.

Govt to spend Tk600 crore as support for agricultural rehabilitation

In the current fiscal year's budget, the government plans to spend Tk600 crore for agricultural rehabilitation assistance. Out of this, Tk530 crorewill be allocated for fertilisers, seeds, and saplings. 

This assistance aims to encourage farmers to cultivate new varieties of seeds and diversify crops. Furthermore, Tk70 crore will be allocated for grants. This aid is intended to mitigate the losses incurred by farmers due to floods, cyclones, storms, and waterlogging. 

In the fiscal year 2022-23, the government had spent Tk500 crore for rehabilitation.