The government’s subsidy spending may go down by 21% in next fiscal year compared to the revised budget of current fiscal, making a room for the authorities to raise energy and fertiliser prices.
According to official sources, although the government’s plan to slash subsidy for some reforms and price adjustments, it will result in creating financial burden on people and industries.
The government, however, plans to raise Tk1,500 crore subsidy on electricity to ease its possible price hike so the people would not face any sudden shock.
Officials of finance division fear the government may face difficulty in managing subsidy as ongoing heat across the country will increase power consumption.
Besides, there is also a fear within the government that if the incumbent Congress fails in India elections, getting cheap supply of electricity from the neighbouring country may become uncertain.
According to the officials, there were IMF advice or conditions to reduce subsidy. IMF only talked about big budget plan and Annual Development Programme, which the global lender thinks not completely implementable.
According to primary estimates of last budget management meeting, the total outlay for subsidy in fiscal year 2014-15 will be Tk26,053 crore, which 20.70% less than the current fiscal year and 1.9% of next fiscal’s estimated gross domestic product (GDP).
The overall subsidy target for the current fiscal was Tk32,854 crore.
Meanwhile, State Minister for Power and Energy, Nasrul Hamid Bipu in a seminar last week said the price of electricity will be increased in phases in next five years as implementation of the coal-based power projects lingers.
On March 12, Bangladesh Energy Regulatory Commission raised retail power tariff by 6.96%
The regulator said the power tariff hike, effective from March 1, was to help distributor companies cut their losses.
But for the lifeline users consuming up to 50 units and for irrigation pumps, the tariff has been kept unchanged.
The consumers criticised the hike as standard of service has not been improved in last one decade.
Dulal Miah, an electrician in Dhaka, said they still suffer power outage four times a day.
“Repeated load-shedding (power outage) making us sick in this unbearable hot weather,” he said.
“We want good service at affordable price from the government. It is possible if corruption and irregularities are controlled.”
Meanwhile, the government raised subsidy allocation for power by Tk500 crore last week in the revised budget of current fiscal to address probable increase in power purchase from the costly private sector plants.
The increased subsidy in power sector stands at Tk6,000 crore.
As per the latest estimations, the subsidy on fertiliser will be increased to Tk7,000 crore in the next fiscal year.
Export subsidy may be raised to Tk2,850 crore from Tk2,750 crore while the fuel subsidy is estimated to be increased to Tk2,700 crore and food subsidy will be Tk1,803 crore in next fiscal.
The remaining Tk3,000 crore will be used as subsidy in other sectors.
The total subsidy was Tk37,399 crore in FY2012-13, Tk30,163 crore in 2011-12, Tk17,141 crore in 2010-11, Tk9,334 crore in 2009-10 and Tk10,546 crore in 2008-09.
“The government will keep subsidy at a reasonable level in the next fiscal,” Finance Minister AMA Muhith told the Dhaka Tribune.
He said subsidy amount will not be more than 2% of GDP in next fiscal year, but the donors always insist we are giving huge subsidies.
“They (donors) want to reduce the subsidy to zero,” finance minister said.