Economists want rational subsidies

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Economic professionals have asked the government to overhaul the current subsidy and incentive policy that is heavily tilted towards the energy and export-oriented apparel sectors because they enjoyed a staggering 52.13 % of the budgetary allocation of Tk 48,577 crore in the outgoing fiscal.

They told MODERN on Saturday that it had been a proper amount of time in the COVID-19 crisis to rationalise the subsidy allocations in the upcoming budget and transfer the un-rational funds to the priority sectors of health, food safety, and small and medium enterprises for producing jobs

Former Bangladesh Bank governor Salehuddin Ahmed said that the upcoming budget shouldn't be a business-as-usual one but an action intend to overcome the COVID-19- induced consequences.  

The un-rational allocations to the energy and readymade garment sectors ought to be rationalised, he said.

Finance minister AHM Mustafa Kamal is scheduled to announce the new fiscal measures in his budget speech in parliament on June 11 against the backdrop of the COVID-19 financial slump.

According to finance ministry officials, Tk 18,500 crore was allocated for the energy and energy sector as subsidy in the outgoing fiscal year.

Of the total amount, Tk 9,500 crore was meant for power subsidy and Tk 9,000 crore for importing liquefied gas.

A large amount of the power subsidy was spent for a lot more than two dozen rental power plants as ‘capacity charge’, a controversial clause regarding the purchase of power from the rental power plants by the government since 2009, although most of these plants remained unused across the year.

Consumers Association Bangladesh energy adviser Shamsul Alam said that the tenure of the plants, awarded to the firms on political consideration, was likely to be short-lived.

But the government has extended the tenure of almost all of the plants, on several occasions, and they would exist till 2024.

Zahid Hussain, former lead economist of the World Bank Dhaka Office, said that the federal government should resort to the ‘force majeure’ provision to free the country from the burden of the controversial rental power plants.

The force majeure provision is a common clause in contracts that essentially frees both parties from liabilities or obligations arising from the occurrence of an extraordinary event or circumstance beyond human control.

As the World Health Organisation has announced the COVID-19 as a pandemic, Bangladesh like other countries is facing this calamity not seen and heard before, said Zahid Hussain.

The government also needs to review and reallocate, he emphasised, the incentives provided to export products in a way in order that other potential products can enter the narrow export basket now dominated by the RMG items.

In the outgoing fiscal year, Tk 6,825 crore was earmarked for dishing out incentives to export products, over 80 per cent of which may have gone to the apparel sector.

Finance ministry officials said that they allocated Tk 48,577 crore as subsidy and incentives in the outgoing fiscal year instead of the projected Tk 47,433 crore.

Of the amount, Tk 8,000 crore was given to the agricultural sector, Tk 4,692 crore as food subsidy, Tk 500 crore to the jute sector, Tk 3,060 crore to the remittance sector and Tk 6,000 crore as cash subsidy.

Former caretaker government adviser Mirza Azizul Islam said that the subsidy ought to be aimed at making employment as the virus outbreak rendered some 80 % of the informal staff jobless.

He said that the government should also place focus on job-oriented education as a Bangladesh Institute of Development Studies survey released in December 2019 showed that the rate of unemployment among the educated youth was 33.2 %.
Source: https://www.newagebd.net

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