Soaring fuel and fertiliser prices are set to fuel government spending in farm subsidy to support agriculture, which acts as economic saviour amid the pandemic, officials say.
Although the government has earmarked Tk 95 billion as agricultural subsidy for the current financial year, FY'22, they say, the volume could overshoot the target amid the global as well as local price rises.
"Costs for subsidy might more than doubly this FY over that of last FY as different fertiliser prices increased by 80-230 per cent in a year, of which urea witnessed maximum surge," says an official at the agriculture ministry.
He says in the FY'21, the government spent above Tk 77 billion on fertiliser subsidy, electricity rebate and other incentives for farmers against an allocation of Tk 90 billion.
In FY'19 and FY'20 actual farm subsidies were Tk 76.9 and Tk 71.8 billion respectively against a Tk 90-billion allocation for each year.
"The allocation is Tk 95 billion for the purpose this FY but fertiliser- price hike by such margin is indicating a huge surge in import costs," the official tells the FE, as redoing the subsidy arithmetic gets underway by now.
In his reckoning prices of fertiliser urea, DAP (di-ammonium phosphate) and TSP (triple super phosphate) have more than doubled in last one year.
Additional secretary at the ministry Balai Krishna Hajra says it is too early to predict the actual spending before end of the year. But he guesses the cost might increase notably if the current global price trend continues for the rest of the fiscal.
He mentions that urea-import cost was Tk 35 a kg a year back which is minimum Tk 75 a kg now.
"But we will keep domestic prices of fertiliser static for farmers by giving necessary subsidies on the input to keep the production side sound during this pandemic," he told the FE.
"The peasantry will get urea at previous rate of Tk 16 a kg and DAP, TSP and MoP at same rate," he says about care for production of food which is the main basic necessity and billed a strategic item.
According to the Department of Agriculture Extension (DAE), Bangladesh has a demand for 6.0 million tonnes of fertilisers annually-urea accounting for nearly 2.8 million tonnes.
The country locally produces nearly 1.1 million tonnes of urea while Bangladesh Chemical Industries Corporation (BCIC) imports 1.4 to 1.7 million tonnes annually to meet the local demand.
Global commodity portals show urea price having crossed US $ 900 a tonne in December-January this FY in a steep rise from below $ 400 in June-July period. It was maximum $ 300 a tonne in January' FY 21, according to Index Mundi.
The price of DAP surged to $750 a tonne in January this year, which was below $ 430 a tonne a year back, while TSP price increased to above $700 a tonne from maximum $340 a tonne one year earlier.
Farm economist and value-chain expert Prof Golam Hafeez Kennedy says surge in natural gas prices in Europe resulted in a notably hike in the price of ammonia, the key input for nitrogen fertilisers.
Rising thermal coal prices in China also led to a squeeze in electricity use in some provinces and thus caused fertiliser factories to scale down production, he cites as another factor for the dearth.
Prof Kennedy says, "It is a very good initiative for the government to keep prices of fertilisers static at farm level, which could help maintain a sound production growth as well as could make a balance in commodity market during a time when global food prices are going through an eleven-year high."
He suggests the government should ensure that the farmers could get the full facility of the incentives.
Apart from fertiliser subsidy, he says, the government should also give a subsidy for farmers who are dependent on diesel-run pumps for irrigation during this Boro-cropping season.