The BNP government is set to propose a full waiver of import duty, regulatory duty, supplementary duty and advance tax on key solar energy equipment and components through 30 June 2031, as part of its FY2026-27 budget announcement today — a move aimed at accelerating the expansion of renewable energy use.
The relief applies to the distribution scale; utility-scale projects already carry broad duty and tax exemptions on various levels.
Allocation drops, subsidy shrinks
At the same time, the overall energy sector allocation tells a starkly different story.
Spending on the Energy and Mineral Resources Division and the Power Division combined is set to fall by about 23 per cent, to Tk 17,345 crore from Tk 22,520 crore proposed in the previous year’s budget — amounting to just 0.03 percent of the provisional GDP of Tk 61,202,094 million published on Wednesday by the BBS for FY2025-26.
The EMRD will Tk 2,349 crore — including Tk 2,254 crore in development expenditures — while the Power Division will get Tk 14,996 crore, with Tk 14,939 crore as development spending.
Power subsidies have also been cut sharply. The FY27 budget will set aside Tk 37,000 crore for the power sector, down from Tk 40,000 crore in the last fiscal year and Tk 62,000 crore in the revised budget of the previous fiscal year.
That drop largely reflects the fact that the interim government cleared the bulk of arrears left behind by the Awami League led administration, ousted on 5 August 2024 through a student-led mass uprising.
However, the instability in global energy markets — particularly given tensions involving Iran and the USA-Israel alliance — could force additional subsidy allocations.
Waiver with a deadline
On the duty relief, the government plans to pull preferential treatment for selected products — mounting structures, lithium cells, battery packs and battery energy storage systems — after June 30, 2028, with the aim of encouraging domestic manufacturing.
Energy expert Shafiqul Alam said a complete waiver could cut the import-stage cost of distributed renewable energy systems, such as rooftop solar, by roughly 25 to 30 per cent, given the country’s near-total dependence on imported equipment.
Lower upfront costs would reduce the levelised cost of electricity from rooftop systems, improving the economic case for solar particularly for households and businesses with relatively high electricity consumption.
Mineral gap clouds manufacturing push
On the manufacturing ambition, however, Alam was less optimistic. Bangladesh lacks the critical minerals needed to produce solar equipment and batteries, while global supply chains for those materials remain overwhelmingly concentrated in China.
“Most of the raw materials would still need to be imported. To compete internationally, manufacturers would have to operate at a very large scale and eventually export, which would be challenging given Bangladesh’s energy constraints and limited market size,” he said.
Gas wells, LNG imports on the cards
On the supply side, the government plans to drill 26 exploration, development and workover wells to lift domestic gas output, while importing 7.18 million tonnes of liquefied natural gas to cover growing demand.
It also intends to expand electricity production under the Merchant Power Policy 2025, extend transmission lines, reduce transmission losses, and conduct feasibility studies on alternative renewable sources including waste, wind and tidal energy.
A shift in priorities
Alam said a reduction in power-sector development spending would not necessarily be alarming, as Bangladesh is no longer under pressure to build large numbers of new power plants.
He stressed, however, that greater emphasis should be given on gas exploration, energy efficiency and modernising transmission infrastructure to strengthen domestic energy security.
He said that the proposals would suggest a shift in priorities from capacity expansion toward efficiency improvements, renewable energy deployment and domestic resource development — though questions remain over whether the planned spending will be sufficient to meet the country’s long-term energy security goals.
