Big farmers get half: WB

The biggest 20 percent of landholders in Bangladesh receive half of fertiliser subsidies, while the smallest 40 percent get just 13 percent, exposing serious flaws in the costly government programme, according to a recent World Bank report.

The subsidy favours larger farms because benefits rise with the quantity of fertiliser purchases. Most farms are small: 92 percent operate less than 2.5 acres, and four in 10 are marginal holdings of less than half an acre, operating only 11 percent of farmland.

Ranked by income, the poorest 40 percent of farm households receive just over a third of direct benefits, while the richest fifth capture “almost twice its share of recipients”, the World Bank said in its latest Bangladesh Development Update.

Indirect benefits through food prices and agricultural wages are also skewed towards better-off households, with the bottom 40 percent receiving about one-third.

Fertiliser subsidy has nearly quadrupled to Tk 28,000 crore in five years. The World Bank has urged the government to phase out price controls and move to market-based pricing, while recommending direct support for small and marginal farmers through electronic vouchers linked to the farmer cards introduced by the BNP government.

Bangladesh spent Tk 1,02,024 crore on agricultural subsidies from FY2021-22 to FY2025-26, more than triple the previous five-year total, finance ministry data show.

The International Monetary Fund has also urged subsidy rationalisation for several years and is expected to make fertiliser-subsidy reform a key condition of its upcoming loan programme.

The subsidy matters more to poorer households relative to income: combined direct and indirect benefits equal 1.04 percent of income for the poorest quintile, compared with 0.10 percent for the richest, the report said.

“These findings indicate that poorer households have less capacity to absorb the loss of support, even though richer households capture more benefits,” the World Bank said.

Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies (BIDS), said, “What matters is how subsidies on fertiliser and other farm inputs can be delivered effectively to small and marginal farmers.”

Mujeri said removing agricultural subsidies is not easy because they support food security and production. “Keeping fertiliser prices low for farmers is not enough; it is also essential that fertiliser reaches them when they need it,” he said, pointing to problems with availability and dealer distribution during the farming season.

The World Bank also cautioned that farm size is “an incomplete indicator of poverty”, noting that about three-quarters of marginal rice farmers consumed more rice than they produced, potentially exposing them to both higher input costs and higher food prices. It said more effective targeting should therefore consider household welfare alongside cultivated area and input needs.

Bangladesh uses about 66 lakh tonnes of fertiliser a year, with more than 85 percent of requirements met through imports. Domestic production is constrained by gas shortages, ageing plants, and operational disruptions, leaving the subsidy bill exposed to global supply disruptions, price volatility and exchange-rate depreciation.

The vulnerabilities became particularly evident after the Russia-Ukraine War in 2022 and the Middle East conflict in 2026, adding pressure to the budget and foreign exchange reserves, the World Bank said.

Agricultural subsidies have absorbed about 80 percent of the agriculture ministry’s budget since FY2022-23, up from 63 percent in FY2018-19.

Across the broader food and agriculture portfolio, subsidies accounted for 41.5 percent of spending, while agricultural research received just 4.2 percent -- nearly Tk 10 was spent on subsidies for every Tk 1 allocated to research.

The World Bank said redirecting part of the spending towards research, extension, soil health, and irrigation “could generate higher long-term returns than untargeted input subsidies”. Investments in storage and marketing could also support diversification, private investment, and rural jobs, it said.

“Paper-based, poorly monitored distribution gives authorities little real-time information on low levels of supply and rising prices,” the World Bank said.

Weak dealer oversight “allows diversion and unauthorised mark-ups”, while farmers “reportedly pay above official prices”. Higher costs and delays can be particularly difficult for cash-strapped farmers during critical stages of crop growth.

Only about 5 percent of farmers apply nutrients in the right balance, meaning part of the subsidy pays for fertiliser that does not raise yields, the report said. Small and marginal farmers also have less contact with government extension officials than larger farmers.

Administered fertiliser prices could be increased in small, preannounced steps over several cropping seasons, with changes communicated before farmers make planting and input-purchase decisions.

The World Bank warned that sudden increases could force cash-strapped smallholders to reduce fertiliser use or absorb higher costs, putting yields and food prices at risk.

In the near term, the World Bank said Bangladesh should secure fertiliser supplies for coming cropping seasons, maintain buffer stocks, and ensure timely distribution. Such measures “should complement, not delay” reforms to pricing and targeting.

The BNP government’s farmer card initiative and digital farmer registry could provide the foundation for shifting “from subsidising supply to supporting demand”, the bank said. The registry would identify actual cultivators, including tenants and sharecroppers, and record their land, crops and soil information, allowing support to be matched to holdings and input needs.