The Centre for Policy Dialogue on Sunday urged the government to end what it termed ‘fiscal discrimination’ in favour of fossil fuels and adopt a comprehensive green fiscal policy to facilitate Bangladesh’s transition to renewable energy and address the ongoing energy crisis.
Speaking at a press briefing held at the CPD office in the capital, CPD research director Khondaker Golam Moazzem presented a study titled ‘Fiscal Discrimination between Fossil Fuel and Renewable Energy: Alternate Solutions to Address the Energy Crisis.’
The study argued that the existing fiscal framework has made renewable energy technologies artificially less competitive compared to fossil fuel-based energy sources.
Moazzem said that fossil fuel-based power generation projects had received more than 95 per cent of the annual development budget over the years, while renewable energy projects had been allocated less than five per cent.
He noted that such disparities had discouraged investment in clean energy and slowed the country’s progress toward a sustainable energy future.
According to the study, liquefied natural gas imports enjoy the lowest fiscal burden, with a total tax incidence or TTI of only 9.5 per cent due to zero value-added tax and minimal advance income tax or AIT.
In contrast, key technologies required for a low-carbon energy system, including lithium-ion batteries, grid infrastructure and electric vehicles, face tax burdens ranging from 61 per cent to more than 93 per cent.
‘The current tax structure appears to prioritize short-term revenue generation over long-term energy transition objectives,’ Moazzem said.
The study estimated that the National Board of Revenue was foregoing between Tk 1,059 crore to Tk 1,293 crore in potential revenue by providing favourable treatment to LNG businesses compared to solar and wind energy sectors.
It also found that LNG importers received an additional discriminatory financial benefit of around Tk 1,672 crore through complete VAT exemptions that are not extended to renewable energy industries.
The CPD study further highlighted the substantial subsidy burden associated with fossil fuel-based power generation.
It showed that the average subsidy for fossil fuel-generated electricity stands at Tk 7.5 per kilowatt-hour, while oil-fired power plants receive subsidies as high as Tk 20.18 per kilowatt-hour.
Renewable energy plants, however, do not receive capacity payments despite facing significant upfront investment costs due to the prevailing taxation structure.
To create a level playing field, the study recommended removing the 7.5 per cent advance tax on solar and wind energy equipment, reducing customs duties on lithium-ion batteries and grid infrastructure from 25 per cent to 5 per cent, restoring a 15 per cent VAT on LNG imports by withdrawing the current zero-VAT facility, and eliminating the 20 per cent supplementary duty imposed on energy storage and electric mobility technologies.
The report also called for an end to discriminatory capacity payments for fossil fuel-based power producers, arguing that such measures would help reduce losses incurred by the Bangladesh Power Development Board.
Moazzem urged the government to introduce green subsidies and grants in the upcoming FY2026-27 national budget to support the development of smart grids and accelerate the adoption of electric vehicles across the country.
Members of the CPD study team, including Helen Mashiyat Preoty and Atikuzzaman Shazeed, were also present at the briefing.
