Fossil fuel bias persists in FY27 budget despite green energy incentives: CPD

The proposed national budget for fiscal 2026-27 takes a step forward for green energy but ultimately fails to mobilise the funding needed for a meaningful transition, said the Centre for Policy Dialogue.

The independent think tank noted that 2% of the proposed allocation for power generation has been earmarked for renewable energy, while the remaining 98% continues to favour fossil fuel-based generation.

The observations were presented at a media briefing event titled "Proposed National Budget FY2026-27: What Did the Power and Energy Sector Receive?" held at the CPD office in Dhaka today (17 June).

Speaking at the briefing, CPD Research Director Khandaker Golam Moazzem said, "On the surface, they are offering incentives, but deep down, fossil fuels remain the preferred choice and the government's 2030 energy transition target is impossible with such a meagre allocation relative to the massive budget."

The think tank said the proposed budget reflects a persistent fossil fuel-oriented policy mindset within the government and the power, energy and mineral resources ministry, despite recent incentives aimed at promoting clean energy.

According to CPD, the proposed budget allocates Tk17,345 crore for the power and energy sector, a 2.3% increase from the revised allocation of the outgoing fiscal year.

However, the sector's share in the overall national budget has fallen to 1.85% from 2.15%.

In contrast, the Energy and Mineral Resources Division received a nearly 72% higher allocation, largely driven by increased spending on gas exploration and production initiatives.

CPD welcomed several renewable energy-focused fiscal measures, including a zero percent tax rate for solar power generation until 2035, a 5% tax rebate for consumers paying solar electricity bills, and significant reductions in duties on solar equipment and components.

The proposed budget seeks to reduce the tax burden on aluminium and steel structures, electrical conductors, lithium-ion batteries, solar inverters and solar panels.

Taxes on electric vehicle charging stations have also been withdrawn, while registration fees have been lowered.

Despite these measures, CPD argued that the overall fiscal structure remains heavily tilted towards fossil fuels.

The organisation noted that VAT exemptions on LNG imports remain unchanged, keeping LNG among the least-taxed energy sources.

It also criticised the government's decision to extend customs duty benefits for coal imports used in power generation until 2030 and to target domestic production of 6 lakh tonnes of coal in FY27.

"At a time when policymakers are saying expensive LNG imports will be avoided, it is difficult to understand why LNG continues to receive preferential fiscal treatment," CPD said.

The think tank further argued that expanding coal exploration and extending incentives for coal-fired power plants are inconsistent with Bangladesh's long-term energy transition goals.