The war in Iran has sent shockwaves through global oil markets and triggered a severe worldwide energy crisis, amid which Bangladesh’s vulnerabilities have been starkly exposed. One of the primary culprits exacerbating our acute local energy shortage is our fleets of archaic cars, buses, trucks, and other public transport.
We are still relying on vehicles from the 1990s and early 2000s. Decades-old unfit buses and CNG auto-rickshaws continue to dominate our roads. The fuel efficiency of these vehicles is disastrously poor. While these outdated petrol- or diesel-run (or CNG-converted) vehicles average 7-10 kilometres per litre, depending on road conditions and fuel type, modern electric vehicles (EVs) can travel 300 to 400 kilometres on a single charge. If we look at the energy equivalent, the mileage of a modern EV equals about 40 to 50 kilometres per litre of fuel.
If we could modernise these outdated vehicles, the energy demand in the transport sector would fall significantly. The fuel and foreign reserves saved could be redirected to secure our energy independence, allowing us to supply much-needed gas to homes and industrial sectors rather than burning it in traffic.
Furthermore, the running and maintenance costs of these antiquated vehicles are exceptionally high, while safety standards are practically non-existent. Bangladesh has one of the highest road traffic fatality rates in the world, and the contribution of these dilapidated vehicles to this grim statistic is undeniable. Modern vehicles are equipped with safety features, such as automatic braking and lane assist, which reduce accidents and fatalities. Older vehicles are also environmental hazards, and their lack of modern features deprives consumers of standard services.
Yet, the prices for these outdated metal traps are astronomical because of three primary reasons. Firstly due to staggering import duties. When Bangladesh embraced the free-market economy in the 1990s and began slashing import duties on various goods, vehicles were left out. Total import duties on cars in Bangladesh, based on engine capacity (CC), type, and age, range from 150 percent to 500 percent or more. This means if you buy a standard reconditioned car for $5,000 (approximately Tk 6 lakh) you might have to pay up to $15,000 in taxes alone (assuming a 300-percent duty), bringing the total cost to an absurd $20,000 (approximately Tk 24 lakh)
Second is the “golden goose” syndrome. A major reason behind keeping these duties high is the government’s limited avenues for direct tax collection. The revenue department is extremely reluctant to reduce taxes in sectors that provide an easy and guaranteed income stream. Vehicle imports are thus treated as a convenient cash cow.
Third is a lack of strategic vision. There is a glaring absence of strategic policymaking on the government’s part. What little awareness exists is limited to enacting laws, issuing fines, or filing cases against unfit vehicles. Basic economics dictates that fines alone cannot solve systemic issues. A sustainable solution requires a balanced application of both the “carrot” (incentives) and the “stick” (penalties).
To buffer our economy against future external shocks like the Iran crisis, the government must reduce import duties on all modern electric or hybrid vehicles (under five years old) to between five and 15 percent. While this might cause a slight initial dip in direct revenue, collecting only $750 on a $5,000 car at a 15-percent rate, the macroeconomic benefits will exponentially outweigh this loss. Environmental degradation will decrease, public safety will improve, and consumer satisfaction will rise. Most importantly, it will drive massive fuel savings. If a car operates for 15 years and burns an average of 1,500 litres of fuel annually, switching to a modern hybrid or EV reduces that demand to just 450-600 litres based on 30-40 percent fuel efficiency (or its electric equivalent) per year. Over 15 years, a single vehicle saves 13,000 to 15,000 litres of fuel, equivalent to about $19,000 to $22,000 as per the current average international gasoline price. Multiplied across hundreds of thousands of vehicles, this localised energy saving acts as a shield against global oil price spikes, significantly reducing our import dependency.
As for penalties, the BRTA must impose high renewal fees or surcharges on all vehicles over 15 years old, with the second-highest tier of fees applied to vehicles over 10 years old. However, timing is critical. This “stick” must only be enforced at least one year after the “carrot” (that is, reduced duties on new cars) is introduced. Otherwise, it will simply become an unjustifiable burden on the public. A one-year grace period allows citizens to prepare and transition accordingly.
However, it is crucial that the government prevents syndicates from monopolising car imports. The licensing process must be simplified and kept open so that anyone can participate in this business fairly.
If these measures are adopted, modern vehicles will rapidly replace the clunkers currently plying our roads. The dilapidated buses and trucks we see in Bangladesh are practically extinct in other developing nations. Countries like China, Vietnam, Malaysia, Indonesia, and even our neighbours Sri Lanka and India now boast public transport systems that are vastly more modern and efficient. Fifty percent of all cars in China are EVs, while in neighbouring Nepal, the number is 70 percent. EVs are helping many economies withstand gasoline price increases.
For many years, Bangladesh spent billions on roads, highways, and megaprojects. But we never spent or let the private sector spend on public transport. This needs to change. Bangladesh needs to revolutionise public transport. And for doing so, the high tax on modern vehicles needs to be rationalised as well. This transition is vital for the people, the economy, the environment, and for our future energy sufficiency. The upcoming budget would be a good opportunity for this to be taken into consideration.
Mahtab Uddin is assistant professor of economics at the University of Dhaka, and research director at the South Asian Network on Economic Modelling (SANEM). He can be reached at [email protected].
Views expressed in this article are the author's own.
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