The commitment to transitioning towards renewable energy by those in power is not adequately reflected in the proposed budget for the fiscal year 2026-27. The budget seems to favor specific segments of the renewable energy sector, leading to concerns about the inclusivity and effectiveness of the country’s transition strategy.
The government has announced a reduction in import duty, regulatory duty, supplementary duty, and advance tax on essential solar power components to zero percent until June 30, 2031. While this move is commendable, there are disparities in how the benefits are distributed across the solar industry. For a holistic sectoral development, all stakeholders should receive fair support.
The proposed budget primarily benefits solar power producers and entities operating under the Renewable Energy Service Company (RESCO) and CAPEX models, which use Power Purchase Agreements (PPAs) to install and finance solar power projects in Bangladesh. However, this excludes a significant portion of the industry, such as importers, distributors, retailers, and self-financed solar users, who play a vital role in expanding solar energy in the country. This selective approach may hinder a smooth and inclusive transition to renewable energy.
Furthermore, the budget does not provide incentives for solar irrigation, solar street lighting, or Battery Energy Storage Systems (BESS). Given Bangladesh’s heavy reliance on diesel-powered irrigation pumps, incentivizing farmers to adopt solar irrigation systems could significantly reduce fuel imports, save foreign exchange, and bolster the country’s reserves.
The lengthy process for testing renewable energy components and the weight-based customs assessment system for imports of renewable energy equipment pose challenges to project implementation and increase costs. Stakeholders have called for expedited testing procedures and a shift to the transaction-value method for assessing imports, but no concrete steps have been taken in this regard.
Additionally, while the budget exempts imports of raw materials for battery production from duties and taxes until June 30, 2028, the three-year incentive period may not be sufficient to establish a competitive domestic battery manufacturing industry. Extending these incentives for a longer duration could foster industry growth and technological advancements.
To support large-scale renewable energy investments, the government should allocate additional resources and expand financial mechanisms. Ensuring broader access to green financing, simplifying lending procedures, and enhancing transparency in loan disbursement processes are crucial steps towards achieving a successful and inclusive renewable energy transition in Bangladesh.
