Tax exemption for renewables paves way for more solar power plants

FE Team | Published: November 04, 2024 00:05:22

Not only 10 projects, now the Power Division is contemplating to set up many more solar power plants as it received the NBR's notification for reinstating the tax exemption on such private investment, reports UNB.
Power Division officials said it is now certain the number of solar projects is going to be increased from the existing 10 proposed plants.
Earlier, the Power Division had planned to set up 10 solar power plants in the private sector and sought the Finance Ministry's concurrence for National Board of Revenue (NBR) to reinstate the tax holiday on private investment.
Each of the proposed plant was supposed to be 50 MW with a total capacity of 500 MW.
"Finally, we have received the NBR notification in this regard and now the number of solar plants will be more than 10," said Energy and Power Adviser Dr Muhammad Fouzul Kabir Khan.
However, the total number of such proposed plants has not been settled as yet, he told UNB.
Power Division officials said the number of solar plants might be between 30-40.
As per the NBR circular, issued on October 27, the private investors in renewable energy will get a 10-year tax exemption on their investments.
The circular said that the companies which will start commercial operation of their renewable energy-based power generation project on the basis of Build-Own-Operate basis under the Private Sector Power Generation Policy of Bangladesh within a period between July 1, 2025 to June 30, 2035 will avail a tax holiday for 10 years.
"These companies will get 100 per cent tax exemption for the first 5 years, 50 per cent for the next 3 years and 25 per cent for the remaining 2 years", said the NBR notification.
The tax incentive to provide the benefits over a ten-year period was designed to support long-term growth and development of renewable energy projects, the circular added.
Earlier, the government had withdrawn these exemptions through a gazette notification issued on June 26, 2023, saying that companies which achieved their commercial operation date (COD) between January 1, 2023 and June 30, 2024, will get tax exemptions.
Under the terms of the previous gazette, private power generation companies-excluding coal-fired plants-are eligible for various tax exemptions.
As outlined in the previous NBR notification, private power generation companies will enjoy a 100 per cent income tax exemption until 30 June 2036, limited to income derived from power generation activities.
Additionally, foreign personnel employed by these companies will be exempt from income tax for three years following their arrival in Bangladesh.
Further exemptions include a 100 per cent income tax break for the first five years of operation starting from COD, a 50 per cent exemption for the next three years, and a 25 per cent exemption for the subsequent two years, said the previous notification.
Sources said that the interim government, after taking office, suspended the Speedy Increase of Power and Energy Supply (Special Provision) Act 2010 and cancelled 34 solar power projects that had been approved under this law.
These projects were originally selected without a tender process and on an unsolicited basis.
In place of this, the Power Division has opted to open a tender for the establishment of 10 solar power projects, with a total capacity of 500 MW-each project offering 50 MW.
However, many potential investors expressed reluctance to participate in the tender without the availability of tax exemption benefits.
As a result, state-owned Bangladesh Power Development Board (BPDB) was unable to issue the tender for the projects.
Following this, the Power Division requested the revival of the tax exemption benefits, sending a letter to the NBR.
A top official of the BPDB said that after reinstatement of the tax holiday, they are now expecting that more investors will be coming to participate in the bidding for the private solar power projects.
"Actually, there are a number of propositions-the total solar projects might be up to 40 with each capacity of 50 on an average," he said.
"But-from capacity to locations- everything of the new solar power project will be finalised within this week in a top level meeting," he said.
Bangladesh's clean energy transition
Bangladesh has set ambitious targets to meet 40% of its energy needs through renewable sources by 2041. Achieving this will require an estimated investment of $1.5 to $1.71 billion, according to Center for Policy Dialogue (CPD).
In alignment with its commitment to a low-carbon development path, Bangladesh is increasingly focusing on renewable energy and energy efficiency.
According to the Sustainable and Renewable Energy Development Authority (SREDA), Bangladesh currently produces 1,374.35 MW from renewable sources, with 230 MW from hydropower and 1,080.36 MW from solar energy.
According to a Power Cell document, projects totalling 3,963.5 MW are at different implementation stages. Specifically, 943.5 MW of projects are under construction, 609 MW have received letters of intent (LOI) or notifications of award (NOA), 228 MW are in the tendering process, and 2,183 MW remain in the planning stage.