Govt to increase LNG subsidy

Hasibul Aman

28th May, 2019 10:31:58 printer

Government subsidies are set to increase in the ensuing budget as a hefty amount of money will be set aside to keep imported LNG (Liquefied natural gas) within people’s reach.  

In the budget for 2019-20 fiscal year, allocation for subsidy, incentives and loan sector is going to be increased by Tk 6,500 crore or 16.88 percent to Tk 45,000 crore, official sources said.

During the current fiscal year, budgetary allocation in this sector was Tk 38,500 crore.

“Subsidy allocation is being increased in the budget as the government will have to supply liquefied natural gas at a price lower than its import cost,” said officials in finance ministry.

About Tk 8,500 crore is being set aside for providing subsidy on LNG price which is main reason behind the rise in the government’s subsidy burden next fiscal year.

The decision came in response to repeated demands from the businessmen and industrialists, finance division officials informed. The government also calculated that if the LNG is supplied to industries or businesses at imported prices, the cost of finished products will shoot up beyond the reach of mass people.

Quoting Bangladesh Energy Regulatory Commission, he said that the present gap between the sales price and the import price was about Tk 1 per cubic metre. However, the highest subsidy allocation is going to the power sector. Its allocation is likely to be Tk 9,500 crore, up from current fiscal’s Tk 9,200 crore. 

According to finance ministry officials, there has not been too much increase or decrease in government subsidies in the last five years because of stable global energy price.

In 2014-15 fiscal year, total subsidy allocation was Tk 27,416 crore. In FY15 it came down to Tk 25,573 crore while it rose to Tk 27,500 crore in FY18. 

But the amount of subsidies went up to Tk 38,500 crore in the current 2018-19 fiscal year after inclusion  of LNG subsidy for the first time.

Earlier, the government put subsidy mainly on power, agriculture, exports, food, jute and jute goods. Now LNG has been included to the basket as a new item.     

As of May 24, the country’s LNG import stood at 596.5mmcf (million cubic feet), up from 350.5mmcf one month ago, according to the Petrobangla.

Food subsidy is going to be Tk 4,500 crore, which is Tk 104 crore down from current fiscal’s allocation. Subsidy allocation for other sectors will be Tk 9,600 crore.

The amount of incentives in the budget will remain unchanged at Tk 13,500 crore like the current fiscal year, including Tk 9,000 crore for agriculture, Tk 4,000 crore for cash incentives on exports, and Tk 500 crore for jute.  

Tk 1,500 crore is being allocated for recapitalizing the struggling state-owned commercial banks

There has been criticism against subsidies from International Monetary Fund (IMF). Local economic analysts also voice concern over subsidies, especially that to recapitalize state banks.

However, finance ministry officials think that there are some positive aspects of subsidies or incentives. If subsidies are not given, price of power and agro products will soar, while exports will also fall as other competitive countries are providing incentives, they said.