Boro-season irrigation cost typically hovers at Tk 3,500 to Tk 4,000 a bigha. But during the recent days of fuel shortages in Chuadanga the cost hit a high of Tk 6,000. That wiped out the profit margin of the farmers. Solar energy could be a good solution. But the related policy channels its benefits toward large industrial users first and leaves farmers and small businesses in a disadvantageous position. There's plenty of sunlight, a renewable-energy strategy is already there and the budget this year has trimmed solar equipment-related taxes -- every ingredient for an easy fix seems to be in place. But a gap between the policy and reality keeps the farmers at bay.
Tax breaks-mostly for big players
Back in May 2025 Bangladesh adopted a new Renewable Energy Policy. Now it is overseen by the Sustainable and Renewable Energy Development Authority (SREDA). It sets a target to meet 20 per cent of the country's electricity demand from renewable energy by 2030. In line with that strategy the FY2026-27 budget has withdrawn import duty, regulatory duty, supplementary duty and advance tax on the import of key equipment used in the solar power sector. To encourage production of eco-friendly sodium-ion batteries and lithium-ion battery packs, alongside lithium-ion batteries, within the country it has proposed duty and tax exemptions on the import of materials required for manufacturing such products until June 30 2030. On the other hand, solar-power companies now enjoy an income-tax holiday until 2035. But households feeding solar power back into the grid earn a 5.0 per cent rebate on their bill.
CPD's FY2026-27 budget review finds the tax benefits tied to conditions that mostly favour VAT-registered renewable energy service companies (RESCOs) working under long-term power-purchase agreements: typically firms leasing or building solar systems for large industrial clients. That structure excludes roughly 63 per cent of the country's electricity consumers, including residential users, small businesses and rural solar-irrigation operators. The Bangladesh Sustainable and Renewable Energy Association has welcomed the incentives, while separately flagging that households and irrigation operators remain largely outside their scope. It seems it was never designed with the people at the centre of this story in mind.
The budget loses sight of irrigation pumps
This gap is sharply visible in the fields. Bangladesh has well over a million diesel-powered irrigation pumps -- roughly four-fifths of the country's estimated 1.6 million irrigation pumps overall. They run on diesel worth well over a billion dollars a year, the Asian Development Bank's 2023 road map on solar power irrigation estimates. Of them, the Bangladesh Agricultural Development Corporation (BADC) estimated the solar power-run irrigation pumps at just over 5,000 nationwide as of June 2026, generating roughly 73 megawatts combined. IDCOL, the state-owned agency that has led most donor-funded pilot schemes since 2010, has installed only a few thousand pumps in more than a decade of trying, and has repeatedly scaled back its own targets -- most recently to converting 10,000 diesel-fired pumps to solar power by 2030, down from an original goal of nearly 19,000 by 2016.
This year's budget does little to change that trajectory: A CPD review suggests the FY2026-27 budget funds just 98 new solar power-run irrigation pumps and 27 solar wells nationwide. But we should keep in mind that solar power-based irrigation does not require a battery. Because most fieldwork takes place in daylight and engineers typically install water tanks on raised platforms -- supplying water while the sun is out and thus keeping the fields wet for the rest of the day.
What actually keeps the farmers away from solar energy is the upfront cost, not the running cost. Solar pumps are cheaper to operate but far more expensive to buy, and payback periods vary widely based on pump sizes and sites. A farmer feels the pinch of purchase price first, the savings come later -- and this year's budget also offers no dedicated loan or subsidy scheme specifically for solar power-based irrigation. Though gas- and oil-fired plants get paid simply for standing ready, regardless of whether they generate electricity or not. Energy economists and the Finance Division have flagged this "capacity payment" arrangement as a leading cause of BPDB's mounting losses. BERC put the annual subsidy bill at close to Tk 560 billion (56,000 crore).
Installing the pump is the easy part. But maintaining it is where things get complicated -- a diesel engine can be fixed by almost any local mechanic, but an inverter often needs a specialist technician or a hard-to-find spare part, turning a routine breakdown into weeks without irrigation instead of hours. Then there's certification: no laboratory in Bangladesh is dedicated to testing solar hardware, and clearing the resulting paperwork can take three to four months. That needs to be addressed.
Cheap loans nobody can actually get
Bangladesh Bank's green refinancing scheme sets rates as low as 3.0 per cent for solar power-based irrigation. It is capped at 5.0 per cent for most other green products, a steep discount against the 10-15 per cent the commercial banks typically charge. In practice, hardly any small developer or farmer can qualify for those rates. The main lending windows were built with industrial-scale projects in mind, not a single tubewell, and the collateral demanded still runs close to the full loan value.
Recommendations
The sunlight is there. The technology is there. Whether that adds up to anything next season depends on whether the financing and relief currently reserved for RESCOs finally reach the farmers standing beside their diesel pumps and deciding if this is the year to switch to renewable energy for irrigation. Policy will only matter to him once it changes the economics he's actually facing. To achieve that end, some recommendations are given below;
• Expand tax relief beyond RESCOs to households, small workshops and irrigation pump operators directly.
• Reduce the testing and certification timeline for solar equipment from months to weeks.
• Reform loan and collateral requirements to reflect what a farmer or small business can realistically afford.
• Upgrade the grid in line with the new solar power capacity so that connection delays do not offset the value of the tax savings.
• Develop a domestic supply chain for panels, batteries and spare parts, reducing exposure to foreign-currency pressure.
The writer is an alumnus of The Fletcher School of Law and Diplomacy, Tufts University, USA, and works at WAVE Foundation. The article reflects the views of his own, not of the organisation he works for.
toufique @wavefoundationbd.org
