The government, upon pressure from the International Monetary Fund, may slash subsidy allocation drastically during the ongoing fiscal.
A finance ministry official said the government had various reform plans that might impact the allocation for power, the official said.
A large chunk – around Tk13,989 crore – of total subsidies was spent on fertiliser and power at the end of March while the target was Tk32,354 crore in the budget for the current fiscal year, finance ministry data show.
Sources said the government was going to be conservative in spending the remaining subsidy target for the ongoing fiscal and also slash the target significantly for the upcoming fiscal.
The total subsidy outlay for FY2013-14 will be Tk26,000 crore, down 20% from the figure for the ongoing fiscal.
More than half of the subsidy every year goes to the energy sector and steps were being taken to check that, the official said. Subsidy allocation for agriculture and other sectors might remain more or less unchanged, he added.
The subsidy for fertiliser stood at Tk6,221 crore at the end of the last month. Chances are high that the amount will remain that way.
The second highest subsidy of Tk4,113 crore was for power, but the amount may not increase as the government has planned to further hike energy prices before the upcoming budget.
However, export subsidy was Tk1,944 crore in the current fiscal and subsidy for petroleum was Tk1,253 crore, jute Tk400 crore and other subsidies Tk58 crore.
Spending on subsidy for petroleum and power grew substantially as the government in the last seven years approved a number of rental power plants in a bid to solve power crisis.
Against such a backdrop, the IMF has been putting pressure on the government for the last two years to bring down subsidy.
The government in the last two years adjusted electricity and petroleum prices several times after being pressured by the IMF, the finance ministry official said.
Bangladesh Energy Regulatory Commission on March 13 increased retail power tariff by 6.96% per unit (kilowatt-hour) on an average with the price rising from Tk5.75 to Tk6.15, a hike of Tk0.40.
The government has also made a commitment to the IMF that if the difference between the international and domestic prices of petroleum goes beyond Tk10 a litre, they will go for price adjustments to cut subsidy, the official said.
A special audit will be carried out into the state enterprises that deal with fuel, electricity and fertiliser to contain misuse and increase efficiency so that subsidy comes down, he added.
Also, the loans taken by these enterprises for giving subsidy will be repaid from the budgetary allocation in the next fiscal year by releasing special bonds.
IMF ECF MoU revealed the efficiency of audits of Bangladesh Petroleum Corporation, Power Development Board and Chemical Industries Corporation, completed in June 2013, which are now operating with financial inefficiencies.
The government also promised to focus on efforts first on strengthening the BPC and hire professional staff for its financial management by March 2014 and adopt automated financial reporting software for it by December 2014.
The energy division will also appoint a global firm in association with a local firm to conduct a financial audit for BPC for FY13, to be completed by September 2014, according to an agreement between the finance division and IMF under ECF programme.
Dr Khondarker Golam Moazzem, additional research director of CPD, said the government would have to ensure proper utilisation of subsidy and thus affected sectors benefit from it.
“The government has no alternative, but to raise energy prices for fear of a huge shortfall in revenue. The government will take decision to raise energy prices on the pretext of setting conditions by the IMF,” he said.