Budget sparks renewable hopes, leaves fossil fuel expansion intact

The new budget has outlined a strategy for the power and energy sector that appears to have pleased both renewable energy campaigners and fossil fuel businesses in a rare convergence of interests.

‘Considering the importance of the power and energy sector, I propose a total  allocation of Tk 17,345 crore for the ministry in the fiscal year 2026–27,’ finance minister Amir Khosru Mahmud Chowdhury said in his budget speech on Thursday.

 In the outgoing financial year, the allocation for the sector was Tk 16,952 crore.

The new allocation is 1.8 per cent of the overall budget of Tk 9.38 lakh crore.

Green activists have welcomed the announcement of import tax, VAT and corporate tax waivers in the solar energy sector as well as reduced import duties on electric vehicles and other incentives aimed at promoting renewable energy.

‘We finally have a plan capable of triggering a boom in the renewable energy sector,’ said Shafiqul Alam, an energy analyst at the Institute for Energy Economics and Financial Analysis.

All solar PV (photovoltaic) components will enjoy zero customs, regulatory, sales duties, VAT, and advance tax until June 2031, while solar cells, mounting brackets and battery packs will have a duty waiver until June 2028, as per the budget speech.

Consumers using solar electricity will get a 5 per cent tax rebate on their electricity bills, and the solar sector will enjoy a corporate income tax exemption until 2035.

The government also announced to reduce income tax and registration cost of EV vehicles, while electric buses, trucks and charging stations will have zero tax on them, according to the budget statement.

‘While the budget’s renewable energy commitments are encouraging, it also leaves room for further expansion of fossil fuels,’ observed Hasan Mehedi, member secretary of the Bangladesh Working Group on Ecology and Development.

On the fossil fuel side, the budget unveiled initiatives to build two new LNG terminals and enhance coal exploration.

Plans have been announced to allocate funds for expanding onshore and offshore gas exploration, optimising fuel pipeline usage, establishing a new crude oil refinery, and increasing fossil fuel storage capacities to create what the speech describes as strategic energy reserves. 

The energy road map also seeks to reduce excessive dependence on the Middle East by expanding fossil fuel import network with other regions such as Asia, Africa and Europe.

The budget speech, while shedding light on high capacity charge and electricity production costs owed to flawed policy, irregularities and corruption, shies away from elaborating any plan to bring them down with utmost urgency.

The subsidy requirement in the sector was set to exceed Tk 40,000 crore in the new financial year, the minister told the parliament.

The government also announces the plan to increase the installed power generation capacity to 35,000MW by 2030, with plans to increase the renewable capacity to 2,000MW by June 2027.

Plans for gas exploration have also been announced, but experts described the budget allocated for the energy sector inadequate.

‘The installed capacity is expected to reach 38,000MW within the next four years, largely driven by fossil fuel-based ongoing projects,’ said Mehedi.

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