The government has declared 15 percent cash incentive for rice exports for the first time aiming to ensure fair price for farmers.
The Bangladesh Bank issued a circular in this regard on Thursday, saying the subsidy will be applicable for rice shipment from fiscal year 2019-20.
However, if duty drawback facility is taken on packaging, which is used for exported goods, the subsidy will not be available, said the circular.
Duty drawback facility is a refund that can be obtained when an import fee has already been paid for goods, but the goods are then subsequently exported.
Exporters will have to apply for the subsidy within 180 days of export proceed repatriations.
The respective bank will inform the applicant about any further requirement or any fault in the application.
Md Shah Alam, president of the Bangladesh Rice Exporters Association, told The Business Standard that the subsidy amount is enough for enabling exporters to compete others in the rice export market.
He said neighbouring India and Pakistan are the main competitors of Bangladesh.
The subsidy was necessary for surviving the contest and to create new markets, he added.
Currently, agricultural products receive 20 percent cash incentive, said a source at the commerce ministry.
The bumper Boro crop last season dragged down the price of paddy. Farmers had to sell their crops at less than the production cost. The government then approved the export of 2 lakh tonnes of rice to boost the price in the local market.
Last September, a commerce ministry meeting discussed the possibility of cash incentives for rice exports. The meeting asked the Tariff Commission for a report on rice production, subsidy, import prices and food security.
The commission has submitted the report to the commerce ministry recommending cash incentives against rice exports.
The report said, "Rice production is higher than the local demand. Therefore, there is no chance of an unusual increase in the price of rice in the local market. Rice export on a case-by-case basis can be encouraged so that farmers get a fair price."
As much as 3.38 crore tonnes of rice were produced in fiscal year 2016-17. The production rose to 3.62 crore tonnes in 2017-18, and to 3.73 crore tonnes in 2018-19.
The demand was 3.38 tonnes in fiscal year 2018-19. This means the country had a surplus of 35 lakh tonnes of rice. In such a scenario, the government permitted the export of 2 lakh tonnes of rice.