Govt to restore tax incentives for renewable energy power plants

A restoration action comes soon from the interim government to reinstate the fiscal package for renewable energy-based power plants to attract potential investors.

Renewable energy investors would enjoy tax breaks until 2030 on the income derived from power generation, officials said.

On June 26, 2023, the now-deposed government withdrew full tax exemptions in this sector and introduced a graduated tax package for ten years.

The interim government's move comes following a proposal of Power and Energy Adviser Dr Mohammad Fouzul Kabir Khan to Finance Adviser Dr Salehuddin Ahmed in a letter.

Already, Dr Salehuddin Ahmed has approved the summary of the National Board of Revenue (NBR) in this regard.

Talking to the FE on Saturday, Power and Energy adviser Mr Khan said the proposal had been made to attract investors as the government is going to float some tenders for a number of renewable-energy projects.

"Investors are making query as to what fiscal incentives we have in Bangladesh," he added.

Abdur Rahman Khan, NBR chairman, has said they are processing Statutory Regulatory Order or SRO offering the tax breaks once again.

The interim government, on August 27, 2024, scrapped a total of 42 power-plant projects, including 37 renewable plants, with a combined capacity of around 3,102 megawatts.

The deals were signed by the past government under the controversial '"Speedy Enhancement of Power and Energy Supply (Special Provision) Act 2010" without bidding as per its quick-fix answer to power shortages. The operation of the act has been suspended by the interim government.

A senior income-tax official says the tax exemption had been valid until June 30, 2024 for investment in renewable energy-based power plants other than coal.

There are two parts on tax-holiday provisions for investors in renewable energy-based power plants.

"One scheme is for the investors who had started commercial production from renewable energy-based power plants within June 30, 2024. Such investors are entitled to the tax exemption on their income until 2036," he mentions.

The existing scheme is for the power investors who would be able to start commercial production by June 2025. They are entitled to a separate 10-year tax package, 100-percent tax exemptions

 for first five consecutive years, 75-percent breaks for next three consecutive years and 25 per cent for subsequent two years.  

The NBR may have to extend the benefits following instructions of the government high-ups, he adds.

Shafiqul Alam, Lead Energy Analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis (IEEFA), says the utility-scale renewable energy investors will certainly benefit from the tax exemption, which may increase investment in the sector.

"However, it is also important to revisit the reasons that delay the utility-scale renewable- energy-project implementation in Bangladesh when other countries implement projects swiftly," he says.

The government may lease out public lands to selected renewable-energy projects and cover the transmission costs to quickly ramp up the capacity, he adds.

"This will help the government reduce tariffs of renewable -energy projects through reverse auctions."

With reduced tariffs, the average generation cost of  power will be within a reasonable limit, too, he adds.

Recently, the Centre for Policy Dialogue (CPD) suggested that the government float tenders immediately.

In the letter to the Finance Adviser, dated October 8, 2024, the Energy Adviser wrote power tariffs would come down if Bangladesh provides incentives to the investors to produce power from clean energy.

There were fiscal incentives and concessions tagged with conditions which should be continued and reinstated.

The energy ministry already moved to invite tenders under the Public Procurement Act 2006, Public Procurement Rules (PPR) 2008.    

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