The largest 20% of landholders in Bangladesh are capturing half of all government fertilizer subsidies, leaving small and marginal farmers with minimal support despite billions spent annually on agricultural relief.
The finding, highlighted in the World Bank’s latest report Bangladesh Development Update: Make Subsidies and Social Protection Work Better for the Poor, underscores a widening gap in the country's agricultural support structure.
While public spending on fertilizer subsidies nearly quadrupled from Tk7,200 crore (0.2% of GDP) in FY20 to Tk28,000 crore (0.5% of GDP) in FY25, the bulk of this spending continues to flow to wealthy farm operations.
By contrast, the smallest 40% of farm holdings receive only 13% of total fertilizer subsidy benefits.
"Because the benefit increases with the quantity of fertilizer purchased, the largest 20% of landholders receive 50% of total fertilizer subsidy benefits," the World Bank noted, pointing to the structural flaw of a universal, volume-based subsidy model.
The report warns that the current subsidy regime has become fiscally unsustainable.
With Bangladesh relying on imports for over 85% of its domestic fertilizer needs, the subsidy bill has left the national treasury severely exposed to global price volatility, supply chain disruptions, and currency depreciation.
External shocks, including recent geopolitical conflicts in the Middle East and Eastern Europe, have further inflated import bills and strained foreign exchange reserves.
Agricultural subsidies now absorb roughly 80% of the Ministry of Agriculture's total budget, up from 63% in FY19. This concentration of spending has severely crowded out long-term investments in rural development.
According to the World Bank, the government currently spends nearly Tk10 on input subsidies for every Tk1 allocated to agricultural research, extension services, irrigation, and climate resilience combined.
Supply shortages and yield loss
The report also details widespread operational failures within the distribution system.
Weak dealer oversight and paper-based tracking allow for localized shortages and unauthorized mark-ups, forcing cash-strapped smallholders to buy fertilizer above official government prices.
In addition, limited access to agricultural extension services means only about 5 percent of farmers apply nutrients in balanced proportions.
As a result, millions of takas in subsidies are spent on overapplied chemical fertilizers—such as urea and DAP—that fail to increase crop yields and instead degrade long-term soil health.
To address these distortions, the World Bank recommends transitioning away from broad price caps toward direct, targeted support for smallholders.
A central recommendation is the rollout of a digital Farmers' Registry and Farmers' Card system to verify actual cultivators—including sharecroppers and tenant farmers—and match assistance directly to land size and soil needs.
The multilateral lender advised that any adjustments to administered fertilizer prices should occur in small, pre-announced steps across multiple cropping seasons to prevent severe cost shocks for smallholders.
Savings generated from capping subsidies for large commercial producers should be reinvested into public goods, such as soil testing, storage infrastructure, and agricultural extension services.