Subsidy allocation is set to be slashed by 19.5 percent in the upcoming budget, with the bulk of the cuts falling on fuel subsidy in keeping with the commitments made to the International Monetary Fund.
The total allocation for subsidy is likely to be around Tk 26,053 crore in fiscal 2014-15, in contrast to Tk 32,354 crore set aside this year.
Of the total allocation, subsidies for all sectors except for fuel and electricity would be Tk 16,653 crore, which was Tk 15,465 crore in the outgoing fiscal year.
In the budget documents, fuel and electricity subsidies, however, were shown as cash hand-outs to the Bangladesh Petroleum Corporation (BPC) and Bangladesh Power Development Board (PDB). The amount came to Tk 9,400 crore.
Power subsidy has been increased by around 15 percent to Tk 7,000 crore, while fuel subsidy has been slashed by 67.35 percent to Tk 2,400 crore, in keeping with the government's pledges to the IMF.
The government also committed to keep domestic average fuel prices within Tk 10 per litre of international prices, with the price to be adjusted as needed to keep to that target.
To enhance financial management at BPC, the sole agent for importing fuel, the government will hire professional staff by June, appoint a global firm to audit its financial statements and adopt automated financial reporting software by December.
To strengthen the transparency of subsidy policies, the required subsidy expenditure of BPC, PDB and Bangladesh Chemical Industries Corporation (BCIC) will be met through regular budgetary transfers, at least on a quarterly basis.
Agricultural subsidy will remain the same as this year, which is around Tk 9,000 crore.
Export subsidy has been upped by 10 percent from current year's to Tk 2,850 crore. Food subsidy too got a raise to Tk 1,806 crore from outgoing fiscal's revised budget figure of Tk 1,689 crore.
The government's expenditure on subsidy has gone up significantly in recent years mainly due to quick rental plants. In fiscal 2009-10, the amount of subsidy was Tk 9,534 crore, which rose to Tk 16,285 crore the following year, and to Tk 28,814 crore the year after. In fiscal 2012-13, subsidy allocation was Tk 37,399 crore.