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Dhaka Tribune

New committee to recommend better use of agri-subsidy

Update : 24 Nov 2014, 07:13 PM

Having failed to pull down crop harvesting cost despite reducing fertiliser prices several times, the government has formed a specialised committee tasked with recommending better ways to use agricultural subsidy.

Global lender International Monetary Fund (IMF), who is providing Bangladesh $1m in several tranches under its Extended Credit Facility (ECF), also wants transparency in the agricultural subsidy distribution.

A major portion of the government agricultural subsidy goes to the fertiliser importers so that they can sell the inputs at prices lower than their import prices.

However, questions have been raised in recent times regarding how the importers have been using the subsidy. There are allegations that some importers have been misappropriating the money given to them using the letters or credit (L/Cs).

A Finance Ministry official told the Dhaka Tribune recently: “Over the last couple of years, the Agriculture Ministry has reduced input costs several times by giving more subsidies. But that has not had any visible impact on the cost of harvesting crops. So, we need to know why the higher subsidy has failed to reduce harvesting costs.”

Sheikh Badrul Alam, deputy head of the Fertiliser Management and Monitoring wing under the Agriculture Ministry, has recently issued a circular announcing the formation of the committee.

The eight-member committee, headed by an additional secretary of the Agriculture Ministry, has been asked to submit a report to the minister in one month so that a new policy could be made.

The other members of committee are the chairman of Bangladesh Fertiliser Association (BFA), joint secretaries of the Finance Division and the Agriculture Ministry, and representatives of the Department of Agricultural Extension (DAE), Bangladesh Agricultural Development Corporation (BADC), the Foreign Monetary Policy Department of Bangladesh and Bangladesh Chemical Industries Corporation (BCIC).

According to the Finance Division, during the 2013-14 fiscal year, the Agriculture Ministry used up Tk6,116 crore out of the total Tk9,000 crore allocated for subsidy.

In September 2013, the price of urea was reduced by Tk4 per kg and re-fixed the procurement price of the BCIC at Tk14,000 per tonne.

However, in the first three months of the ongoing 2014-15 fiscal year, the allocation has remained the same but only Tk1,083 crore have been disbursed.

A total of 5,300 members of the BFA distribute non-urea fertiliser across the country. They enjoy nearly 50% subsidy on the prices quoted in the L/Cs while importing the inputs, especially from the former Soviet countries.

Agriculture Minister Matia Chowdhury has recently told Dhaka Tribune: “We are trying to continue reducing the price of agricultural inputs with transparency. That will definitely have a positive impact on the cost of harvesting crops. Farmers’ interests should come ahead of the donors’ advices.”

On October 30, with an aim to encourage the use of non-urea fertilisers, the Agriculture Ministry slashed the price of dominium phosphate (DAP) at the retail level by Tk2. From November 1, DAP is being sold at Tk25 per kilogram at the retail level instead of the previous Tk27. Since then, dealers have been purchasing the substance from the importers at Tk23.

The government estimates that the demand for chemical fertiliser will be 5.03 million tonnes in the ongoing 2014-15 fiscal year, up against a current reserve of 1.33 million tonnes.

According to the Industries Ministry, around Tk900 crore is drained out of the country every year for importing fertiliser at Tk38,589/tonne, although the locally produced inputs are far cheaper – around Tk14,000 per tonne. The government has to cover up for the gap by giving heavy subsidy to the importers.

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