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Bangladesh's fiscal and budgetary policies continue to favour fossil fuels over renewable energy, creating a structural barrier to the country's clean energy transition, the Centre for Policy Dialogue (CPD) said on Sunday.
Urging the government to undertake sweeping fiscal reforms, the independent think tank called for the withdrawal of tax privileges on liquefied natural gas (LNG) imports and the introduction of dedicated green subsidies and incentives in the national budget for FY 2026-27.
The CPD placed several recommendations at a media briefing at its Dhanmondi office, where CPD Research Director Khondaker Golam Moazzem presented a study report titled "Fiscal discrimination between fossil fuel and renewable energy: Alternate solutions to address the energy crisis." The study was prepared by CPD's Power and Energy Study Team.
According to the study, Bangladesh's existing tax and tariff regime imposes significantly lower fiscal burdens on fossil fuel imports than on technologies needed to integrate renewable energy into the national power system, undermining the competitiveness of clean energy investments.
"This is not a neutral tax structure. It is discriminatory, and it is costing Bangladesh its energy future," Dr Moazzem said.
The study examined 50 products across seven technology categories using the National Board of Revenue's (NBR) tariff schedule for FY2025-26 to calculate the Total Tax Incidence (TTI).
The technology categories include solar, wind, energy storage systems, electric vehicles, grid and transmission infrastructure, fossil fuels and fossil-fuel-based power generation equipment.
The findings revealed a stark contrast in the fiscal burdens placed on fossil fuels versus the technologies essential for integrating renewable energy into the national grid.
According to the research, LNG imports receive the most favourable fiscal treatment, facing a tax burden of just 9.5 per cent due to a complete exemption from value-added tax (VAT) and a minimal 2 per cent Advance Income Tax.
In sharp contrast, lithium-ion batteries face a total tax incidence of 61.8 per cent, while electric vehicles and certain grid infrastructure components are subject to tax burdens exceeding 93 per cent.
The study found that solar and wind power generation equipment face TTIs ranging between 28 and 31 per cent, broadly similar to fossil-fuel-based generation equipment such as gas and steam turbines.
However, technologies critical for large-scale renewable energy deployment, including batteries, transformers, conductors, transmission towers and EVs, face substantially higher tax rates.
Grid and transmission equipment carry tax burdens ranging from 33.6 per cent to 93.2 per cent, while energy storage technologies are taxed between 61.8 per cent and 93.2 per cent. Three-wheeled electric vehicles are subject to a TTI of 93.16 per cent.
"Renewable generation equipment alone is not the primary challenge. The enabling technologies are," the report noted, identifying a 7.5 per cent Advance Tax and Customs Duties of up to 25 per cent as the principal contributors to the elevated fiscal burden on clean energy technologies.
CPD argued that the current tax regime prioritises short-term revenue collection over long-term energy transition objectives and creates a disconnect between Bangladesh's renewable energy ambitions and the incentives embedded in the fiscal system.
The report also highlighted the substantial financial benefits enjoyed by fossil fuel importers through tax exemptions and preferential treatment.
A revenue foregone analysis estimated that the National Board of Revenue is losing between Tk 1.06 billion and Tk 12.93 billion annually by maintaining lower tax rates on LNG imports than those applied to solar and wind technologies. Revenue foregone on coal imports was estimated at between Tk 2.41 billion and Tk 6.64 billion.
The study further estimated that LNG importers receive an additional financial benefit worth approximately Tk 16.72 billion due to complete VAT exemption, a privilege not available to solar and wind energy businesses.
CPD's analysis of electricity subsidies also suggested that fossil-fuel-based power generation receives significant financial support.
Based on Bangladesh Power Development Board (BPDB) plant-level electricity purchase data for FY2024-25, the study found that oil-fired power plants receive the highest average subsidy at Tk 20.18 per kilowatt-hour.
The average subsidy across all fossil-fuel-based power generation stood at Tk 7.48 per kilowatt-hour, compared with Tk 8.93 per kilowatt-hour for renewable energy projects.
However, CPD noted that renewable energy plants receive no capacity payments, unlike many fossil-fuel-based power producers, and continue to face high upfront investment costs due to elevated taxes on equipment and storage technologies.
Among individual power plants, the study found that some oil-based facilities receive subsidy support of up to Tk 39 per kilowatt-hour. The United-Anowara 300MW plant was identified as one of the highest subsidy recipients among oil-fired projects.
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