Reliance on imported urea may continue with gas crisis not addressed in budget

In the context of the ongoing gas crisis in the five domestic urea plants and dependency on imported fertiliser in the outgoing fiscal year, the government has allocated Tk25,000 crore in subsidies and incentives for agriculture in the proposed budget for the fiscal 2024-25.

Of the allocation, Tk17,261 crore has been allocated as subsidies and the rest as incentives.

In the proposed budget, placed by Finance Minister Abul Hassan Mahmood Ali on Thursday (6 june), the overall budget for the agriculture sector has been proposed at Tk47,321 crore. The allocation was Tk43,700 crore in the outgoing fiscal year. 

The new allocation is 5.94% of the total budget. 

However, in the revised FY24 budget, the allocation for agriculture has been increased to Tk56,000 crore.

Sources in the finance ministry said due to the gas crisis, dependency on imported urea would continue in FY25, and the rising dollar value would further increase the cost.

In this context, additional funds have been allocated in the new budget for subsidies and incentives in order to prevent any disruptions in the import of urea, TSP and DAP fertilisers.

Additionally, there is pressure on clearing outstanding bills for imported fertilisers in the outgoing fiscal, estimated at Tk8,958.45 crore. Meanwhile, the government has paid Tk2,271.18 crore in fertiliser debt through the issuance of special bonds, said the sources.

As sources in the Ministry of Finance and Ministry of Agriculture have revealed that Tk17,000 crore was first earmarked for subsidy for the Ministry of Agriculture in FY24, which was later increased to Tk25,000 crore in the revised budget.

With production in the five domestic urea fertiliser plants hit by gas shortage, the government has to spend more than Tk10,000 crore every year only on the import of urea, which is expected to increase further due to the recent appreciation of the dollar.

However, despite the gas shortage and subsequent concerns regarding fertiliser supply, the government has maintained the import of fertilisers, facilitating good harvest in both Aman and Boro seasons in the current fiscal.

It is to be noted, though, that in the new budget, no new strategies have been introduced to foster sectoral progress, except for the facilitation of expanded loan availability for farmers.

Agricultural economist Jahangir Alam Khan told The Business Standard that the foremost priority within the agricultural sector should have revolved around minimising production costs and ensuring affordable product prices. To accomplish this, it is essential to prioritise the expansion of technology.

"A specific plan to increase agricultural production against the impacts of climate change is essential, which has been ignored in the budget," he added.

He further said the new budget should have included a declaration regarding gas supply to local plants rather than solely relying on imported fertilisers. To accomplish this, the government will need to raise the allocation for agriculture to 10% from the current 5.94% stated in the proposed budget.