The August 27 meeting at the finance ministry mulled a fresh increase of petroleum prices, creating concern in the Ministry of Agriculture (MoA) over increased cost of diesel as farmers largely depend on diesel-run pumps for irrigating rice fields.

The MoA has given up seeking subsidies for diesel-run irrigation pumps due to the finance ministry's persistent indifference to the issue, and fears this would affect rice production and result in a price surge.

Since August 2003, the MoA has been asking the finance ministry to release Tk 310 crore in subsidy for diesel-run irrigation pumps as farmers using electricity-run pumps are already enjoying subsidy.

It estimated that out of the 7,86,004 shallow pumps now in operation for irrigation across the country, 7,31,612 are diesel- run and the remaining 54,392 electricity- run. The difference of irrigation cost per acre in the two categories is as high as Tk 600. Farmers using diesel-run pumps incur 30 per cent more cost compared to those using electricity-run pumps.

Diesel now sells at Tk 26 per litre as against Tk 12.95 a litre in 2000. Since early 2003, price of diesel first rose to Tk 20 per litre from Tk 17 and then to Tk 26 from Tk 23 on May 24, hitting around 13 million farmers hard. An overwhelming majority of them grow rice on irrigated land.

Talking to The Daily Star yesterday, Agriculture Minister MK Anwar said, "We've told the finance (ministry) many a time about the need for giving subsidies to farmers to meet the ever-increasing irrigation costs due to repeated rise of diesel price. But there has been no step as yet."

The minister however said he would no more ask the finance ministry to consider diesel subsidy to farmers.

Earlier, in January last year, the finance ministry rejected the proposal for subsidy for diesel-run pumps saying that these pumps have multipurpose use and subsidy for this sector could be misused.

The MoA proposed the subsidy on August 11, 2003. The proposal was okayed by the Cabinet Committee on Agriculture and recommended by the Parliamentary Standing Committee on the ministry for approval.

"It is true that diesel-run engines have multipurpose use but that should not bar us from providing the much-needed subsidy to farmers," the agriculture minister had said at that time.

"In our proposal, we clearly mentioned that diesel-run pumps, against which the subsidies would be provided, would run 12 hours a day and 65 days in a season. We gave the monetary estimate accordingly. On an average, one of these pumps will consume 0.95 litre diesel an hour," Anwar said.

Irrigation cost accounts for 28 percent of production cost of rice in Bangladesh. The cost is 6 percent in Vietnam, 8 percent in Thailand and 13 percent in Punjab, the rice-bowl of India, according to the MoA records.

Bangladeshi farmers' production cost of rice is 62 percent higher than that in Thailand, said the ministry sources, attributing this to high irrigation and fertiliser costs.

Farm subsidies in Bangladesh stand at only 3.3 percent of the aggregate value of annual farm output while the World Trade Organisation's rules permit up to 10 percent subsidy.