Fossil Fuels Capture 98% of Power Sector Budget

In Bangladesh's proposed national budget for fiscal year 2026-27, only 2 percent of the allocation for the power generation sector has been earmarked for renewable or green energy, while the remaining 98 percent continues to be dominated by traditional fossil fuels.

Although the government has signaled certain incentives for environmentally friendly energy and solar power, a clear bias toward fossil fuels remains embedded in its policies and revenue structure.

The private research organization, the Centre for Policy Dialogue (CPD), made this observation after reviewing the proposed national budget of Bangladesh for fiscal year 2026-27.

CPD disclosed the findings at a media briefing titled ‘Proposed National Budget 2026-27: What Did the Power and Energy Sector Receive?’ held Wednesday morning at its office in Dhanmondi, Dhaka. CPD Senior Research Associate Helen Mashiat Priyoti presented the keynote paper at the event.

Allocation Overview

According to CPD’s review, the proposed budget allocates a total of Tk 17,345 crore to the Ministry of Power and Energy, representing a 2.3 percent increase from the revised budget of the current fiscal year. However, the sector’s share of the overall national budget has declined from 2.15 percent to 1.85 percent.

The allocation for the Power Division has decreased by nearly 3.9 percent to Tk 14,996 crore. In contrast, the allocation for the Energy and Mineral Resources Division has increased by around 72 percent, reflecting the government's priority on domestic gas exploration and extraction projects.

Positive Momentum Through Tax Relief for Solar Power and EVs

CPD welcomed the proposed budget’s decision to provide special tax incentives to the solar power sector for the first time. The budget proposes a zero percent tax rate, or tax holiday, for the sector through 2035. It also significantly reduces high import duties on solar panels, inverters, and lithium-ion batteries. Consumers will receive a 5 percent tax rebate on solar electricity bills. In addition, the government has completely withdrawn taxes on charging stations and reduced registration fees to encourage the use of environmentally friendly electric vehicles (EVs).

Coal and LNG Continue to Enjoy Strong Support

While the budget offers incentives for solar power, it continues to provide substantial financial benefits to polluting fuels such as LNG and coal. LNG remains the least-taxed fuel due to the continuation of VAT exemptions on imports. At the same time, the duty benefits on coal imports for power plants have been extended through 2030. The government has also set a target of extracting 600,000 metric tons of domestic coal from Barapukuria and Dighipara in the next fiscal year.

CPD Research Director Khandaker Golam Moazzem said, “A fossil fuel-centric mindset still persists within the government machinery and ministries. One type of incentive is being offered externally, but internally; fossil fuels remain the preferred choice. This proposed budget has failed to overcome revenue disparities.”

Grid Modernization and Solar Irrigation Overlooked

The organization believes that the primary challenge facing the power sector is no longer generation, but transmission and distribution. Renewable energy cannot be integrated into the national grid without grid modernization. However, high tax burdens ranging from 60 to 93 percent remain in place on grid equipment such as transformers, conductors, and meters, which could slow the pace of reform.

Similarly, CPD believes that solar irrigation has largely been overlooked in the agricultural sector, as the budget speech mentioned only 98 solar irrigation pumps and 27 solar-powered wells. The sector cannot expand significantly without dedicated incentives for marginal farmers.

The media briefing also featured remarks from Mostafa Al Mahmud, President of the Bangladesh Sustainable and Renewable Energy Association (BSREA); Monowar Mostafa, General Secretary of the Democratic Budget Movement; and Mohammad Javed Imran, Chief Risk Officer of IDCOL.