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Power and agri sector trapped due to subsidies

Industry: Agriculture & Livestock, Agro, Energy & Power, Power

The government finds itself trapped in an ongoing cycle of accumulating subsidies in the agriculture and electricity sectors, as it struggles to settle the outstanding subsidy arrears from the previous fiscal year using the current year’s allocation. The power sector alone has a significant outstanding subsidy for this fiscal year, equivalent to the combined cost of constructing major infrastructure projects. Despite multiple price increases, a large portion of the generated subsidies in fertilisers and electricity remains unpaid.

Covering these outstanding subsidies poses a challenge, even with budget allocations, and the upcoming fiscal year’s allocation is unlikely to fully address the issue. The ongoing Ukraine war, devaluation of the local currency, and rising international market prices have exacerbated the subsidy situation. Delayed payments have caused financial crises, jeopardizing supply chains and risking disruptions in essential resources. Economists emphasize the need for timely payments, fiscal discipline, and enhanced revenue collection to maintain stability.

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