In the upcoming 2022-23 financial year, the government will yet again have to increase the subsidy amount for the state-owned companies (SOE) and organisations as they are failing to operate with it amid recurrent losses.
In the next fiscal’s budget, the subsidy for these entities will rise twofold from the current fiscal’s amount, say Finance Ministry projections. In FY2022-23, the projected size of subsidy will be Tk 22,716.13 crore.
The amount was Tk 10,535.74 crore and Tk 10,511 crore in FY2021-22 and FY2020-21, respectively. However, the revised subsidy amount in FY22 ended up being Tk 24,877.18 crore while it was Tk 11,860 crore in FY21.
According to ministry sources, these public enterprises’ need for funding rises every year and they are taking out long-term loans — both of which force the government to increase capital and subsidies.
In the last five fiscals (from 2017-18 to 2021-22), subsidies for these companies rose by Tk 23,615.64 crore. Only in FY21, Tk 11,860 crore was given as subsidy.
The net profit of the 48 state-owned entities in the last fiscal was Tk 15,159.61 crore. Of them, nine corporations — which incurred Tk 2,454.47 crore losses in total — did not make any profit in the last fiscal despite receiving hiked up subsidies year after year.
A Finance Ministry official said the government has no choice but to keep subsidising these enterprises, even though many of them are incurring losses every year since they serve the general population and maintain employment of a large number of people.
In the outgoing fiscal, the government ended up under a lot of pressure since the revised subsidy amount has been raised by over Tk 14,000 crore, to Tk 24,877.18 crore, because of the fuel and fertiliser price hikes in the international market, officials said.
Anticipating the needs under these circumstances next fiscal, the government will continue to increase subsidies for the state-owned enterprises.
According to the previous national budgets, in FY2019-20, the subsidy amount was Tk 7,454 crore; Tk 7,978 crore in FY2018-19; Tk 1,261.54 crore in FY2017-18; Tk 2,186 crore in FY2016-17; Tk 1,707 crore in FY2015-16; Tk 1,329 crore in FY2014-15; and Tk 1,299 crore in FY2013-14.
In FY2013-14, the size of the budget was Tk 2,22,491 crore. After a decade, in the upcoming FY23, the budget size will increase 3.04 times to Tk 6,77,864 crore.
Compared to the same period, the amount of subsidy in state-owned companies will go up 17.49 times, an analysis of the previous budgets and the next budget shows.
‘Major reforms have become a must’
Economist Dr Mohammad Abdur Razzaque, the chairman of Research and Policy Integration for Development, said the state-owned companies have been operating in the red despite receiving subsidies and grants for years.
“There won’t be any change if these organisations are not held accountable and their efficiency is not improved,” he said.
He said all these entities need to undergo BMRE (balancing, modernization, rehabilitation, and expansion) as required. Industrial enterprises need to be rationalized as well. “Only then, the losses and the subsidies will reduce.”
The Centre for Policy Dialogue (CPD), a non-governmental research organization, in a review report on state-owned enterprises, recommended that these entities need major reforms to offset the losses.
Without resolving the problems in them, it will not be possible to overcome the current weaknesses of the macro-economy. If the subsidisation continues, it will only deepen the problem. These entities need to be audited first and the reforms will follow, said the recommendations.
The government — in vain — has taken many initiatives for the past decade to increase the capacity of the state-owned enterprises and cut their losses. Particularly, steps were taken to list these companies in the stock market but that has not been possible yet. Due to these failures, the government is forced to increase subsidies year after year to maintain the operating expenses.
