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Dr Debapriya Bhattacharya on subsidy policy

Published in The Daily Star on Friday, 5 June 2015.

Subsidy cut 10.34pc

Rejaul Karim Byron

The government is set to slash the allocation for subsidy by 10.34 percent in fiscal 2015-16 as it looks to capitalise on the depressed global oil prices and scale down its support to the local petroleum market.

Some Tk 24,572 crore has been allocated for subsidy in the upcoming budget, down from current year’s Tk 27,407 crore.

Since fiscal 2008-09, the government has spent a total of Tk 30,986 crore to keep the prices of petroleum products low in the local market. In fiscal 2012-13, the government set aside Tk 13,558 crore in fuel subsidy, which was the highest allocation in the nation’s history.

The subsidy for the power sector, another major beneficiary, will go up next year.

Economists said the government needs to formulate a national policy to stop doling out unnecessary subsidies, prevent leakages and make state interventions more targeted and efficient.

The government has also been giving a huge amount of subsidy to export and agriculture every year, but there are many questions regarding their proper utilisation.

“Time has come to devise a national subsidy policy to regulate the spending and give emphasis to subsidy management,” said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue. Had there been a national policy, the country would have been able to decide when the prices of rice or oil have to be subsidised, he said.

The economist also said there has to be a clear definition for subsidy to establish transparency in the spending of taxpayers’ money.

On many occasions in the past, subsidies were deemed to be pro-poor but that was not the ground reality. “We also need to see what the other countries are doing.”

Meanwhile, a finance ministry official said big changes will be brought in to the export subsidy structure in terms of the beneficiaries.

The ministry has already started a review and once completed, some new sectors may be included in the package and some old sectors taken off, he added.

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