The proposed national budget for the fiscal year 2026-27 contains a number of significant fiscal incentives aimed at promoting renewable energy, electric vehicles, and green technologies, but fossil fuels continue to enjoy overwhelming budgetary and tax advantages, the Centre for Policy Dialogue (CPD) said on Wednesday.
It said such proposals could undermine Bangladesh's energy transition goals.
The findings were presented in a paper titled "Proposed National Budget for FY2026-27: What is there on the Power and Energy Sector?" at an event chaired by CPD Research Director Dr Khondaker Golam Moazzem.
The CPD observed that the proposed budget had, for the first time, introduced substantial fiscal support for solar power generation.
The government had proposed a zero tax rate for solar power projects until 2035 and a 5 per cent tax rebate for consumers paying solar electricity bills, it said.
The budget also proposed extensive reductions in duties and taxes on solar equipment and components.
Tax incidence on assembled solar panels would fall from 28.7 per cent to 22.2 per cent, while lithium-ion batteries, considered critical for energy storage, would see their tax burden reduced from 61.8 per cent to 26.3 per cent.
Similarly, taxes on solar inverters would decline from 28.7 per cent to 20.7 per cent.
Import duties, regulatory duties, supplementary duties, and advance taxes on a range of solar components would effectively be removed until June 2030, the CPD said.
It noted that aluminium and steel structures used in power plant installation, along with several categories of electrical conductors currently facing tax burdens ranging from 62 per cent to 93 per cent, would see those rates reduced to between 26 per cent and 38 per cent under the proposed budget.
The think tank also welcomed major incentives for electric vehicles (EVs).
Import duties on EV charging equipment were completely withdrawn, reducing the tax burden from 39.75 per cent to zero.
Import duties on EVs were also substantially lowered, while annual income taxes on EV ownership had been reduced from a uniform Tk 200,000 to between Tk 25,000 and Tk 100,000, depending on vehicle power capacity.
At the same time, taxes on internal combustion engine vehicles had been increased.
One category of reconditioned fossil fuel-powered vehicles would face a total tax incidence of nearly 160 per cent, a move CPD said could encourage a gradual shift towards cleaner transport options.
Preoty said several recommendations previously made by the CPD concerning renewable energy, battery storage systems, electric mobility, and grid modernisation had been reflected in the proposed budget, signalling a positive policy shift towards sustainable energy development.
However, she cautioned that the benefits remained subject to a restrictive set of eligibility conditions and were largely limited to selected solar power generation companies and firms operating under the Renewable Energy Service Company (RESCO) model.
"The proposed budget will encourage private sector investment in renewable energy transition, but fiscal measures need to be restructured to ensure that benefits reach end users as well," the paper noted.
Despite the renewable energy incentives, the CPD argued that the government's fiscal structure remained heavily tilted in favour of fossil fuels.
It pointed out that liquefied natural gas (LNG) imports continued to enjoy full value-added tax exemptions, making LNG one of the least-taxed energy sources in the country with a total tax incidence of only 9.5 per cent.
At the same time, customs concessions on coal imports for power generation had been extended until 2030, while the budget had emphasised domestic coal exploration and set a production target of 600,000 tonnes for FY2026-27.
The think tank expressed concern that no new solar or renewable energy projects had been included in the current Annual Development Programme (ADP).
Only five renewable energy-related projects received allocations, while 11 renewable energy projects remained unapproved, including seven solar projects with a combined capacity of 640 megawatts, three grid modernisation initiatives, and a 25 megawatt-hour battery energy storage pilot project.
According to the CPD, achieving the government's target of generating 20 per cent of electricity from renewable sources by 2030 would require the installation of approximately 1,662 megawatts of solar capacity annually between 2026 and 2030.
The organisation warned that current allocation patterns made the target increasingly difficult to achieve.
It further highlighted persistent challenges in grid modernisation.
Transmission and grid infrastructure equipment continued to face some of the highest tax burdens in the energy sector, ranging from 33.6 per cent to more than 93 per cent, it said.
Critical components such as transformers, conductors, towers, and electricity metres remained subject to multiple layers of customs duty, VAT, advance income tax, regulatory duty, and advance tax, it said.
The organisation recommended reducing import, customs, supplementary, and regulatory duties on all grid infrastructure components to zero to lower costs and accelerate renewable energy integration.
Solar irrigation also received limited attention in the proposed budget, according to the review.
The CPD warned against passing future subsidy reductions onto consumers through higher electricity tariffs and instead urged the government to phase out capacity payments to fossil fuel-based power plants.
Speaking at the discussion, Dr Moazzem said the proposed budget reflected contradictory signals.
"They are providing one type of incentive outwardly, but internally they still prefer fossil fuels," he said.
He also stressed the need to address disparities in fiscal treatment across different energy sources and reduce preferential incentives currently enjoyed by LNG, coal, and petroleum-based fuels.
Other speakers, including Bangladesh Sustainable and Renewable Energy Association President Mostafa Al Mahmud, Democratic Budget Movement General Secretary Monowar Mostafa, and Infrastructure Development Company Limited Chief Risk Officer Mohammad Javed Imran, underscored the importance of accelerating renewable energy investment, strengthening governance, improving transparency, and ensuring efficient use of public resources.
bdsmile@gmail.com