CPD: High time to discuss subsidies, incentives

The Centre for Policy Dialogue (CPD) thinks it is high time to discuss the usage of subsidies and incentives that are being introduced every fiscal year.

Discussing the record allocation of subsidies and incentives, reaching Tk43,230 crore in the upcoming fiscal year, CPD Distinguished Fellow Dr Debapriya Bhattacharya said: “We have to discuss how much we will spend for underprivileged people and how widely we will use it.”

He was speaking at a media briefing analysing the National Budget FY2019-20 at a hotel in Dhaka on Friday. 

Subsidy for the gas sector for FY 2019-2020 has more than doubled, from Tk4,500 crore in the previous fiscal year to Tk9,600 crore in the next budget.

According to government sources, gas sector subsidy was increased because of import of liquefied natural gas (LNG), which is more expensive than the domestically produced alternatives.

Per unit cost of imported LNG is Tk25.17, after adding tax and regasification charges the total cost reaches Tk39.44, said sources from Petrobangla. When the LNG is blended with local gas, the cost of production for per unit reaches Tk14.64.

Meanwhile, the average retail price of gas supplied by Petrobangla from domestic sources stands at Tk7.39 per cubic metre.

In his budget statement on Thursday, Finance Minister AHM Mustafa Kamal also recommended setting aside Tk9,500 crore as subsidy for the power sector in the next fiscal year, which was Tk9,200 crore in FY2018-19.

“In 2013, the highest portion of subsidies were allocated to agriculture sector, and Bangladesh Petroleum Corporation (BPC). But over the last seven years, the composition of subsidy has shifted towards power and gas,” Debapriya further said while analyzing the proposed subsidies.

He also stated that it is difficult to claim a certain quarter is benefitting from the allocated subsidies as some portion of it is surely reaching underprivileged farmers and common people through Bangladesh Power Development Board (PDB).

“So, we can say everyone is benefitting from the subsidy,” Debapriya said.

Criticising the agriculture sector subsidy and its policies, the CPD distinguished fellow said: “A total of Tk9,000 crore has been allotted for agriculture sector, which is the same amount as the previous fiscal year. However, the subsidy has not been spent fully in the past three fiscal years.

“Presently we have around 2 crore registered farmers. If we want them to survive, the government should allocate Tk5,000 for each farmer under the subsidy, which we proposed last year.”

Mentioning the Tk4,000 crore subsidy for Bangladesh Jute Mills Corporation (BJMC), Debapriya opined that only a subsidy is not enough, and a reform agenda is a must for this sector.

In the proposed budget, Tk3,060 crore was allocated, incentivising 2 percent benefits on money sent by expatriate Bangladeshis, aiming to bring in more foreign remittance through legal channels.

Instead of cash incentives, the CPD recommended a gradual depreciation of Taka to help incentivise export and remittances.