Fertiliser subsidy going to be three times higher

The import price of urea has shot up three times to Tk96 per kilogram in just a year, and the government subsidises Tk82 to make the essential agriculture input available at Tk16 to farmers.

Import costs of other fertilisers also more than doubled compared to the previous year's prices, and so increased the subsidy requirements. The current fiscal year's budget has kept aside Tk9,500 crore as fertiliser subsidy, but the agriculture ministry will need Tk28,000 crore to deliver fertilisers to farmers at subsidised rates, which are way below the purchase rates.

Though the mounting subsidy in the agriculture sector, particularly on fertilisers, has been a matter of worry for the government, there is no plan to increase the fertiliser prices right now, Agriculture Minister Muhammad Abdur Razzaque has said.

"The government has to provide high subsidies on fertilisers due to volatile global markets. But if the volatility prolongs, it would be tough for the government to carry on the subsidy," he told a press conference at the Secretariat in the capital on Monday.

The allocation for subsidies on fertilisers was Tk7,717 crore in the fiscal 2020-21, which was increased to Tk9,500 crore in the current fiscal year. "We still need Tk19,000 crore more to ensure a sufficient amount of fertilisers for FY22," the minister said.

"If the government largely increases the subsidy spending, other development activities will be hampered. On the other hand, a hike in fertiliser prices will increase costs of agricultural production and raise food prices," Razzaque said, explaining how tough the choices are for the government.

There is a demand for 57.5 lakh tonnes of fertilisers in the current fiscal year, including 26 lakh tonnes of urea. The state-owned mills produce 10 lakh tonnes of urea and the rest is met by imports.

"Bangladesh used to import the highest amount of fertilisers from Belarus, but the trade stopped. Currently, the country is importing fertilisers from some Middle East countries, Russia, India and others," the minister said.

Fertilisers have become three times costlier in the international market over the past year thanks to a halt in extraction of minerals during pandemic restrictions, and an increase in raw materials and fuel prices, the minister explained. Freight rates also doubled, contributing further to the purchase cost.

The minister, however, expressed hope that the prices would come down soon.

The subsidy for urea gradually has shot up to Tk82 per kg this fiscal year from Tk15 in 2005-06. The amount of subsidy in other fertilisers also rose 14 to 19 times during the period.

Taking the additional requirement into account, the fertiliser subsidy in this fiscal year would be 27 times the amount given 16 years ago.

"The World Bank and other development partners are advising the government to reduce the subsidies. However, the government is yet to have a plan to do so," said the agriculture minister.

According to the ministry, the government purchases urea at Tk96 per kg and subsidise Tk82 of it; it bears Tk50 per kg subsidy for triple super phosphate (TSP), Tk41 for muriate of potash (MOP), and Tk79 for decomposed organic phosphorus (DOP).

The price of 1kg of urea at the customer level was set at Tk16 per kg, TSP at Tk22, MOP at Tk15, and DOP at Tk16.

"We have enough fertilisers in stock for meeting the demand until next Aman season," Razzaque said.