Power subsidy to double in FY23

The power sector is getting the highest amount of subsidy, double when compared year-on-year, in the budget for Fiscal Year 2022-23, shows data from the finance ministry’s projection.

Ministry sources say the agriculture sector had initially gotten the highest amount of subsidy. The government has decided to boost subsidies in both agro and power sectors in the next FY, but the latter is getting the largest amount – Tk 18,000 crore.

Bangladesh had allocated Tk 9,000 crore as subsidy in the power sector this FY, but in the revised budget, the amount rose by Tk 3,000 crore and hit Tk 12,000 crore.

The government is also allocating Tk 17,300 crore as subsidy for a number of purposes, mainly for helping to pay import costs of LNG (liquefied natural gas) in a bid to prevent any readjustment of gas prices, and for interest payment of incentive packages.

Tk 10,300 crore was initially allocated for such purposes in the current FY, but in the revised budget, these subsidies rose to Tk 15,300 crore.  

According to the finance ministry’s projection, the government is allocating Tk 15,000 crore as subsidy in the agriculture sector, and Tk 6,745 in the food sector.

Need for subsidies growing

Ministry sources say Bangladesh is feeling an increasing need for subsidies due to a multitude of factors, such as to tackle the heightened demand of energy after withdrawal of Covid restrictions, and fuel and LNG price hikes in the global market due to the Russia-Ukraine war.

The business and industry leaders, who depend on power and gas for keeping the wheel of production going, have also urged the government to boost subsidies in the sector.

Considering the circumstances, the government is boosting subsidies in the power and energy sectors.

The Bangladesh Energy Regulatory Commission (BERC) recently proposed further increasing the prices of gas and electricity, and two public hearings have already been held in this regard.

In both hearings, the business owners and experts demanded that wastage and mismanagement in the energy sector be addressed, instead of hiking power prices.

Meanwhile, the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) wants the government to boost subsidies and efficiency to keep gas and electricity prices at the current level.

At a programme last Saturday, business leaders claimed that the costs in the sector are going up due to a lack of transparency and inefficiency in the electricity and energy industries. They spoke in favour of a complete overhaul of these sectors.

Finance ministry officials said the projected amount of subsidy will be effective only if the prices of power, gas and fertiliser are not readjusted. They added that the amount of subsidies can go down if those prices increase further in FY23.

Insiders added that the government’s expenses on subsidies and incentives have been going up every year. Especially, there has been a need for providing an increasing amount of subsidies to power, energy and agriculture sectors.

Tk 57,045cr for subsidies, incentives

The government is allocating Tk 57,045 crore for providing subsidies and incentives in the budget for FY23, which is an increase from Tk 40,425 crore allocated in the current FY. So, the government expenditure for these purposes is going up by Tk 16,620 crore next FY.

Responding to reporters’ queries on whether the government is planning to reduce energy prices, State Minister for Power, Energy, and Mineral Resources Nasrul Hamid said, “We want to keep the energy prices stable, we do not want the rates to either increase or decrease.

“Though the prices have dropped a bit, the current situation does not demand a readjustment of rates.”

Bangladesh imports 50 lakh tonnes of diesel, 13 lakh tonnes of unrefined oil, two lakh tonnes of furnace oil, and 1.20 tonnes of octane annually.

According to the finance ministry projection, the size of the budget for FY 2022-23 will be Tk 6,77,864 crore.

The government plans to spend Tk 1,77,145 crore in three sectors – subsidies, incentives and cash loans, which is 26,13 per cent of the budget and an increase of Tk 27,910 crore when compared year-on-year.

It allocated Tk 1,49,235 crore for the above mentioned sectors in the current FY.