Budget for Next Fiscal Year: Bigger subsidy on food likely

The government is getting ready to further increase its fiscal outlay on food dole in the 2017-18 fiscal year.

On June 1, the new budget will show food subsidies going up to Tk 4,500 crore from Tk 2,821 crore of initial allocations for 2016-17, now being revised to Tk 3,721 crore.  

Sources in the finance ministry told The Daily Star that the government was keeping aside a hefty sum to pay for the imports of six to eight lakh tonnes of rice as well.

The government intends to procure the rice from international market to recoup domestic production loss caused by devastating flash floods in the haors of seven districts and fungi attacks in 19 districts. 

Even though it would be taxing for the state coffer to pay for all these, yet the government has decided not to backtrack on newer initiatives of food charities on an election year, sources told The Daily Star.

The next general elections would be at the end of 2018 calendar year. 

The government introduced a programme last year to distribute rice among the poor at Tk 10 a kg, which is now creating pressure on subsidies, a food ministry official said.

Amidst the high rice prices and substantial crop loss, the government is planning to increase in 2017-18 the number of beneficiaries of Tk 10 per kg rice and would allocate 8.5 lakh tonnes of rice, one lakh tonne more than the revised allocation for 2016-17.

Rice distribution through Open Market Sales (OMS) would also be increased, which would contribute to the increase in food subsidies, sources said.

The government wants, as a preliminary budget projections show, to increase the total disbursement to 27.40 lakh tonnes of rice and wheat in 2017-18, about a four-lakh tonne rise from the outgoing fiscal year's revised allocation of 23.50 lakh tonnes.

A constant rise in rice prices, at home and abroad, necessitated the enhanced food subsidy since the government was selling rice for Tk 10 a kg to the poor but it has to buy the rice at a much higher price.

In the new budget, the government is, however, lowering its domestic rice procurement target to 16 lakh tonnes for 2017-18 fiscal year. It had procured 18.50 lakh tonnes in 2016-17.

This development comes at a time when the government-offered Tk 34 a kg fell much short of current market price and millers and traders were declining to sell rice to public granaries.

Following the crop loss, the government for the first time in five years decided to buy rice from the international market. 

After about 10 lakh tonnes of boro lost to floods and more losses due to fungi attack (rice blast), the government floated first two of a series of international import tenders on May 8 and 14, seeking to buy one lakh tonnes of rice. 

The government took the import decision when the prices of the staple showed an upward trend with allegations that a section of millers and middlemen were deliberately supplying the market less rice to put pressure on the government to lift the 25 percent import duty.

Public granaries now have about 2.4 lakh tonnes of rice and 3.15 lakh tonnes of wheat, which is a six year low. The granaries have the capacity to hold 20 lakh tonnes.