Bangladesh's fertiliser subsidy has become a fiscal risk and mostly benefits larger farms, and it should be reformed step by step rather than scrapped, argues a policy note published by the International Maize and Wheat Improvement Center (CIMMYT). Its authors are CIMMYT policy and food systems economist Dr Ravi Nandi and Dr Wais Kabir, former executive chairman of the Bangladesh Agricultural Research Council (BARC).
The note says Bangladesh imports about 75-80% of its fertiliser, including urea, DAP, TSP and MOP, and that domestic urea output is limited mainly by gas supply. Because retail prices are fixed by gazette before each Boro and T. Aman season, any jump in world prices after that is paid almost entirely by the government. After the Strait of Hormuz disruption this year, urea rose from around $400-490 a tonne to more than $850 by April 2026, while five of the country's six urea factories were shut for lack of gas. In FY2021-22, during the Russia-Ukraine war, the budget set aside Tk 9,500 crore for the subsidy against a requirement the ministry put at Tk 28,000 crore.
Citing a World Bank assessment of June 2026, the authors say fertiliser subsidies absorb nearly 80% of the Ministry of Agriculture's budget and are highly rice-centred. The largest 20% of farms by land size receive nearly half the benefit, and the smallest 40% only about 15%. Only about 5% of farmers apply nitrogen, phosphorus, potassium and sulphur within recommended ranges: about two-thirds over-apply phosphorus and nearly 90% under-apply sulphur. Balanced use, the note says, could raise yields by around 33% for Boro rice, 65% for T. Aman and 87% for potato without using more fertiliser in total.
The note also compares returns. The crop sector takes 85-90% of direct farm subsidies but has grown about 2.5% a year, against roughly 3.5-5% for fisheries, livestock and poultry, which account for around 39% of agricultural GDP and rely mostly on indirect support. Diets are shifting towards vegetables, fruit, fish, meat and dairy, and diversified farming can cut synthetic input use by up to 40% compared with monocropping.
Lessons from the region point to caution. Sri Lanka's sudden switch to all-organic fertiliser in 2021 cut harvests for 44% of farmers and pushed food inflation above 50%. India's direct benefit transfer shows that technology-enabled targeting can reduce leakage without removing the subsidy, the authors write, while price changes alone rarely change how farmers use fertiliser.
Their roadmap is gradual: diversify import sources and build buffer stocks, pilot Farmer Cards and e-vouchers that target support by land size, crop and soil, making sure tenant farmers and sharecroppers are included, and back soil testing with stronger extension services and crop diversification, while protecting food security and farm incomes.
Photo: Press Information Department / Wikimedia Commons (public domain)
Source: CIMMYT
Comments
(0)