Commentary: Making solar panel duty free may save billions from fuel imports while reducing load-shedding

Today Bangladesh is spending an estimated $7–9 billion every year importing fuel just to generate electricity.

Roughly $3.8–4 billion goes toward LNG, while another $3–5 billion is spent on liquid fuels such as furnace oil and diesel, much of it used by Independent Power Producers (IPPs).

This is not a one-time investment in infrastructure; it is a recurring and permanent drain on the country’s remittance-powered foreign exchange reserves.

Importing fuel creates substantial financial flows and opportunities for institutions such as the Bangladesh Petroleum Corporation and fuel-based IPPs.

These entities operate within a system that involves large procurement contracts, capacity payments, and supply chain margins.

Power producers for example receive 9% service charge on fuel imports to augment their profitability beyond fixed capacity payments. However, the interim government reduced this figure to 5%.

Furthermore, injecting extremely costly imported LNG into a national gas pipeline network already burdened by corruption and significant system losses is difficult to justify—particularly in a context where gas prices are heavily subsidized.

While this structure may be financially profitable for power producers and fuel importers, the costs are ultimately borne by the public through higher electricity tariffs, increased subsidies, and sustained pressure on foreign exchange reserves.

What works for a limited number of large players has effectively become a luxury that the broader population cannot afford.

Efforts to reduce reliance on imported fuel, however, face significant resistance from vested groups that benefit from fuel imports.

Such environments often create space for inefficiencies, capital flight, and opaque financial flows, making reform politically difficult even when the economic case is clear.

Bangladesh’s energy model has evolved into fundamentally dependent on continuous fuel imports during the past AL regime.

Today prices fluctuate unpredictably in global markets, subsidies expand during periods of volatility, and foreign exchange reserves remain under strain.

Unlike investments in infrastructure, fuel expenditures create no lasting national asset.

Solar power offers a fundamentally different path—one that requires upfront investment but delivers near-zero marginal cost and long-term energy independence.

In Bangladesh, locally purchased Solar panels carry a combined tax burden of roughly 25–30 percent, and when the full system cost—including inverters, mounting structures, and financing—is considered, rooftop solar installations can effectively cost 40–50 percent more due to taxes and associated charges.

At the same time, large industrial users and utility-scale projects often enjoy duty-free or preferential treatment, leaving households and small businesses to bear the full burden.

This imbalance discourages adoption and encourages informal imports and revenue leakage.

What makes this policy stance even more puzzling is the global trend in solar economics.

Solar panel prices have been falling rapidly over the past decade, driven largely by massive manufacturing scale and technological advances in countries like China.

Today, solar is among the cheapest sources of electricity globally, and prices continue to rapidly decline.

This creates a rare opportunity for Bangladesh to import this low-cost technology and build long-term energy capacity at historically attractive prices.

Instead of taking advantage of this favorable global dynamic, current policies are effectively slowing adoption at precisely the wrong time.

Bangladesh does not need to look far for an example of how decentralized solar can transform an energy system.

Pakistan has experienced a surge in rooftop solar adoption, with estimates suggesting that 20–25 percent of daytime electricity demand in some areas is now met through solar generation.This growth did not come from large, state-led solar projects.

Utility-scale IPPs faced familiar challenges, including land constraints and payment delays. Instead, adoption was driven by households, industries, and agricultural users installing solar systems independently.

The result has been a meaningful reduction in fuel imports, lower pressure on the national grid, and improved energy resilience.

If Bangladesh can achieve the same percentage in solar-based power generation, we can save up to USD 3 billion annually.

Bangladesh already has a foundation to build upon.

The country introduced net metering policies several years ago, allowing consumers to offset their electricity bills by feeding excess solar power back into the grid.

While this is a positive step, the current framework primarily enables cost savings rather than creating a strong financial incentive for investment.

A more effective approach would be to expand this model into a feed-in tariff system, where individuals and businesses are compensated at attractive rates for the electricity they generate.

Such a policy would transform solar from a cost-saving measure into a profitable investment, unlocking large-scale private capital without burdening the government.

At the same time, Bangladesh should look beyond individual rooftop systems and consider solar-based community grids as a national strategy.

Shared solar installations—serving villages, agricultural zones, industrial clusters, and urban residential blocks—can dramatically accelerate adoption, particularly where individual investment is difficult.

This is where the Bangladesh Rural Electrification Board (REB) can play a pivotal role. With its extensive rural network, REB is uniquely positioned to design, deploy, and scale community solar grids across the country.

Instead of relying solely on centralized power generation, REB could establish decentralized solar mini-grids in areas with high diesel usage, weak grid reliability, or growing demand using government-owned land.

These systems could power irrigation pumps, rural households, and small industries and schools directly replacing imported fuel consumption.

By sharing infrastructure, community grids reduce costs for users, eliminate the need for large land acquisitions, and generate electricity exactly where it is consumed, minimizing transmission losses.

They can also be structured as financially sustainable systems, where users pay through metered or subscription-based models.

With supportive policies—such as virtual net metering, standardized tariffs, and access to financing—community grids could attract private investment while delivering immediate economic benefits.

They also offer speed and flexibility, avoiding many of the delays associated with large-scale IPP projects.

Large-scale solar projects in Bangladesh are likely to face the same structural challenges seen elsewhere, including land scarcity and payment risks associated with BPDB.

Rooftop solar and community grids, by contrast, bypass these constraints entirely. They are decentralized, scalable, and aligned with Bangladesh’s economic realities.

The implications for foreign exchange are profound. Every shipment of imported fuel adds pressure to Bangladesh’s reserves, while every rooftop solar installation and community grid reduces future import dependency.

A nationwide push toward solar could save billions of dollars annually, reduce exposure to global price volatility, and strengthen macroeconomic stability. This is not merely an energy transition; it is an economic necessity.

At present, Bangladesh is effectively subsidizing fuel consumption while placing barriers in front of solar adoption. This approach favors short-term continuity over long-term resilience.

It also protects a narrow set of interests while limiting opportunities for households and businesses to become energy producers.

As energy storage becomes affordable, down the road any excess solar capacity during the day can be stored for nighttime consumption. Government can also use feed-in tariff for this purpose.

Bangladesh now faces a clear strategic choice. It can continue committing billions of dollars each year to imported fuel, locking itself into a cycle of dependency and volatility.

Or it can embrace a decentralized energy future, leveraging falling global solar prices, private investment, net metering, feed-in tariffs, and community grids to build a more resilient and self-sufficient system.

The path forward is straightforward. Solar should be treated as essential infrastructure, not a taxable commodity. Policies should be designed to accelerate adoption, not restrict it.

With the right incentives—particularly a well-designed feed-in tariff and a national rollout of community solar through REB—Bangladesh can unlock a transformation that is economically sound, fiscally responsible, and strategically necessary.