Big push for solar expansion, domestic energy exploration

Finance Minister Amir Khosru Mahmud Chowdhury has proposed a Tk17,345 crore allocation for the power and energy sector in the FY2026-27 budget, combining lower power subsidies with a sharp increase in gas sector support as the government seeks to balance fiscal pressures, energy security and a transition toward cleaner energy.

The proposed allocation for development and operating expenditures is slightly higher than the revised allocation of Tk16,952 crore for the outgoing fiscal year.

Of the total allocation, the Power Division will receive Tk14,996 crore, while the Energy and Mineral Resources Division will get Tk2,349 crore.

Budget backs solar expansion

While attempting to contain subsidy pressures, the government is simultaneously betting on renewable energy to lower long-term generation costs.

The budget proposes a sweeping incentive package for the solar sector, including complete withdrawal of tax on solar power generation projects until 2035, a 5% tax rebate on payments for solar electricity bills and duty exemptions on major solar equipment imports until 30 June 2031.

The proposed complete waiver covers customs duty, regulatory duty, supplementary duty and advance tax on key solar components.

The move is particularly significant because renewable energy technologies currently face substantial import taxes. Industry data show that assembled solar photovoltaic modules and solar inverters face a total tax incidence of 28.7%, non-assembled solar panels 27.5%, while some supporting equipment such as direct current cables face tax burdens as high as 61.8%.

"Previous attempts to accelerate renewable energy systems, particularly distributed ones like rooftop solar, remained largely fragmented due to high import duties," said Shafiqul Alam, lead analyst for the Institute for Energy Economics and Financial Analysis (IEEFA) South Asian regional office.

"The current government's attempt to waive these disproportionate duties on distributed systems will reduce overall import costs by 20% to 30%. This will significantly bring down the Levelised Cost of Energy from distributed renewable systems, enhancing interest across industries, commercial buildings and households," he added.

Bapex gets major exploration push

The budget also signals a renewed focus on domestic energy resource development as a long-term solution to Bangladesh's growing import dependence.

Over the next three years, Bangladesh Petroleum Exploration and Production Company Limited (Bapex) will conduct 270 kilometres of geological surveys, 700 line-kilometres of 2D seismic surveys and 700 square kilometres of 3D seismic surveys. The programme also includes drilling 69 exploration wells and carrying out 31 workover operations.

Welcoming the initiative, energy expert Dr Badrul Imam described the policy shift as a long-awaited correction.

"The decision to aggressively deploy Bapex for oil and gas exploration is expected, long overdue and a very wise move," said the honorary professor of geology at the University of Dhaka.

He argued that Bangladesh had historically relied excessively on international oil companies despite BAPEX possessing the technical capability to undertake exploration work.

"If we leave BAPEX's resources and rigs idle, we will never build national capacity. This initiative will provide exactly the field exposure needed to strengthen institutional capability," he said.

The budget suggests a strategic shift away from costly subsidy-driven energy expansion toward efficiency, domestic resource development and accelerated renewable energy adoption, even as the country grapples with a mounting LNG import bill.