The sharp reduction in import taxes on solar equipment could cut household solar setup costs by around one-third and accelerate rooftop solar adoption, according to Bangladesh Sustainable and Renewable Energy Association (BSREA) President Mostafa Al Mahmud.
The government has introduced a fresh incentive package to expand solar power use, reducing taxes on solar equipment imports to 1 per cent for all importers for 180 days, alongside its move to create a Tk1,500 crore low-cost financing facility for households, businesses and industries.
Under the new tax facility announced on Wednesday, solar equipment imports will face only 1 per cent customs duty, while regulatory duty, supplementary duty, value-added tax (VAT), advance tax and advance income tax have been waived.
The facility, effective for 180 days from 15 September, extends the reduced tax benefit to commercial importers, who were previously excluded, subject to quality and purpose conditions.
Previously, the benefit was available mainly for independent solar power plants and industrial rooftop solar projects.
The total tax incidence for approved industrial engineering, procurement and construction projects was reduced to 17 per cent in July, while retail commercial imports faced more than 50 per cent tax burden on a weighted average basis, Al Mahmud told TIMES.
With the gazette notification, the tax burden has been reduced to 1 per cent for all importers under specified conditions.
The tax relief covers key solar equipment, including photovoltaic modules, photovoltaic generators, solar inverters, mounting structures, battery management systems and plant monitoring systems.
Importers must meet quality requirements and ensure that equipment, including lithium batteries, is used only for approved solar applications.
Al Mahmud said the lower import cost could significantly reduce retail prices. A rooftop solar setup currently costing around Tk1.5 lakh–Tk1.6 lakh after import, transport and related expenses could fall to Tk1.15 lakh–Tk1.2 lakh, he estimated.
However, he said the 180-day window would not be sufficient to achieve the government’s target of expanding retail solar capacity to 2,000 megawatts. Importers need time to arrange financing, place orders, receive equipment, clear customs and complete installations.
In six months, even two major consignments rolling out will not be possible, he added.
A longer policy period would encourage investment in supply chains, distribution networks and workforce capacity, he said.
Alongside the tax relief, the government is creating a Tk1,500 crore financing facility to make solar investment more affordable.
The fund will support rooftop solar systems, solar home systems, industrial solar projects, solar irrigation pumps and related storage solutions. It will be channelled through Infrastructure Development Company Limited, Bangladesh Infrastructure Finance Fund Limited and Palli Karma-Sahayak Foundation, with each institution receiving Tk500 crore.
The government will provide funds to these institutions at 0.50 per cent interest, while end-user loans, including fees and charges, will carry a maximum interest rate of 5 per cent. The loans will have a tenure of up to 10 years, including a one-year grace period.
The government has also fixed a Tk10.50 per unit tariff for surplus solar electricity supplied to the grid under the net metering system.
Al Mahmud said alongside the expected affordability, the financing support and guaranteed purchase of surplus power would improve the business case for rooftop solar.
He, however, called for a longer tax benefit period.
“If strong quality monitoring prevents low-grade equipment imports and the duty and financing benefits continue for a few years, the solar expansion drive will gain momentum by encouraging households and small businesses to adopt solar systems,” he said.
