Poor don’t get benefits of govt subsidies

Government subsidies in different sectors do not effectively reach to the poor segment of people or the end users rather people with political connection are often benefited from the public money, said experts at a seminar on Saturday.Local think tank Centre for Policy Dialogue organised the seminar ‘subsidy management in Bangladesh: efficiency and equality issues’ in a city hotel on the day.The keynote speaker, Kaniz Siddique, a visiting fellow of the CPD, said subsidy was not a good fiscal tool and it should be used on a temporary basis.She said the subsidies did not reach to the poor segment of the society who needed those most.‘Food takes up a fairly large portion of the subsidy where army and police have a big chunk that are not poor segment,’ she said.The share of subsidy to the GDP was only 0.41 per cent in the fiscal year 2010-11 that increased to 2.8 per cent in the FY2012-13 and again came down to 1.7 per cent in the FY2014-15, she said.‘Subsidy can be used for addressing market failure or improving equality or for both,’ she said.Kaniz said in case of agricultural subsidy, the richer farmers were getting more benefits from the subsidy than the poorer farmers.‘And in most of the cases, the subsidies actually help the richer among the segments. And in some cases those help the people with political links,’ she said.‘The subsidy on petroleum is also not pro-poor. The wealthier people use more petroleum and enjoy higher subsidy,’ she said.Former adviser to the immediate past interim government Mirza Azizul Islam said the goal of subsidy was not achieved in the country.‘The government can close down the state-owned entities which are in loss. The government also understate the amount of subsidy in the budget documents,’ he said.He said the subsidy in the power sector was also not effective.

‘And it’s often dubbed as “system loss” which is a theft outright,’ he said.State minister for finance MA Mannan, however, said that the government went for a quick solution for power problem and used subsidy as a tool.‘The people were crazy for power and our government decided to solve the problem instantly and we did it successfully. Subsidy may not be the finest tool but you cannot change a system overnight. We don’t want to allow black money but sometimes we don’t have any choice but to accept the reality,’ he said.Shamsul Alam, member of the General   Economics   Division   of   the Planning Commission, however, said that subsidy could be used effectively when it ensured better return.‘When the government subsidises industry like export and it’s ensure better return, then a subsidy is better than investment. We have to study the opportunity cost of subsidy to realise the effectiveness of such expenditure,’ he said.CPD distinguished fellow Debapriya Bhattacharya said that there was no clear definition of subsidy yet.‘And as we can define it in various ways so the subsidy calculation also becomes problematic. We need a separate policy for subsidy management,’ he said.Bangladesh Institute of Development Studies representative Bimal Saha said the subsidy was needed to be considered as a social tool rather than a financial instrument.‘If you don’t look at it from a social view of point, subsidy can also turn out to be a tool of oppression,’ he said.CPD executive director Mustafizur Rahman said as the country has limited resources, ensuring efficiency of the public money is crucial.‘And in that case, equality of subsidy becomes a very important issue where we often see the subsidy is not reaching to the end users,’ he said.

- See more at: http://newagebd.net/116398/poor-dont-get-benefits-of-govt-subsidies/#sthash.yOQigNv2.dpuf