Gas subsidy in the offing

The government plans to set aside funds for gas subsidy in the upcoming fiscal year though it shook off the burden of fuel subsidies amid plummeting oil prices.

An official of the energy ministry said the finance division is likely to allocate Tk 5,000 crore as subsidy for gas in fiscal 2016-17, which was never given before.

The government purchases gas from international oil companies and sells it in the local market at prices lower than the buying prices.

Earlier the government used to waive tax imposed on gas at the time of purchase. But no tax waiver will be available for government organisations or projects as per a new decision.

Rather, the government will maintain a separate fund, and it will give money from the fund, if needed, said the official.

However, at the end of the fiscal year, the government might not need the entire Tk 5,000 crore in gas subsidy, he added.

For the first time, the finance division is not allocating any fund as subsidy for Bangladesh Petroleum Corporation (BPC).

The government had given the state-run agency Tk 800 crore in 2015-16, but later, the fund was withdrawn as it was not required.

Instead, the finance division has asked the BPC to deposit to the state coffer the profit it has been making for the last two years. 

In the last eight years, BPC received more than Tk 42,000 crore from the government as subsidies.

The energy ministry official said BPC, the country's lone oil importer and seller, is likely to make a profit of more than Tk 11,000 crore in fiscal 2016, though the government cut prices of petroleum products last month.

Despite the price adjustment, BPC's production cost will remain much lower than the retail rate. The agency made profit of Tk 4,107 crore in fiscal 2015.

Food subsidy will increase 50 percent to Tk 2,800 crore though prices of staples fell at both international and local markets.

The government will have to increase the food subsidies as it had to cut prices of rice and wheat under its open market sale (OMS) programme twice in the current fiscal year, said a food ministry official.

At the OMS level, the price of rice is Tk 15 a kg and Tk 17 for wheat. The price will remain the same in the next fiscal year. The government's latest rice procurement price is Tk 32 a kg.

The government was forced to cut the OMS rates as the price of rice was lower in the local market. Had the government not cut the prices, the supply of the staple would have been huge.

Food ministry officials said the price cut was necessary to trim losses of the government as the quality of rice would deteriorate if they remain in warehouses.

The amount of food subsidy increased 7.29 percent to Tk 2,000 crore in the revised budget of the current fiscal year, although food subsidies used to witness cuts in recent years, thanks to stable rice and wheat prices.

Food ministry officials said the OMS price will remain the same in fiscal 2017. Besides, a new programme called Palli Rationing Card is likely to be introduced in the next fiscal year, under which rice will be sold at Tk 10 a kg.

The government plans to sell about 11 lakh tonnes of rice through the OMS in fiscal 2017. The current fiscal year's target is 7 lakh tonnes.

The power sector will get a subsidy of Tk 6,000 crore against the current year's Tk 8,000 crore.

The subsidy for agriculture in the upcoming fiscal year will remain the same as in the current year, at Tk 9,000 crore.

In the revised budget, the agriculture subsidy was cut by Tk 2,000 crore to Tk 7,000 crore as fertiliser price fell in the international market.

The subsidies for exports and jute will remain the same as in the current year.

The total subsidy in the next budget may cross Tk 28,000 crore, from Tk 25,573 crore in 2015-16.