Energy budget still fossil fuel heavy: CPD

The government’s stated position that it will avoid importing liquefied natural gas (LNG) at high prices appears at odds with several provisions in the proposed FY2026–27 budget, according to a new review by the Centre for Policy Dialogue (CPD).

Despite the declared stance, the budget continues to exempt LNG imports from value-added tax (VAT), extends customs concessions on coal until 2030, and sets a new domestic coal extraction target of 600,000 tonnes for the upcoming fiscal year.

The findings were presented in a CPD review released on Wednesday, which raised concerns over what it described as persistent policy inconsistency in the country’s energy sector.

CPD research director Khandaker Golam Moazzem said the budget reflects a continued preference for fossil fuels despite public commitments towards energy transition.

“They are providing one type of incentive outwardly, but internally they still prefer fossil fuels,” he said at a media briefing at CPD’s Dhanmondi office titled “Proposed National Budget for FY2026–27: What has the power and energy sector received?”

According to the analysis, only 2 per cent of total allocation for the power generation sector has been earmarked for renewable energy, while the remaining 98 per cent continues to support fossil fuel-based generation. CPD said this distribution reflects an entrenched fossil fuel-centric approach within the Ministry of Power, Energy and Mineral Resources.

The proposed budget allocates Tk 173.45 billion to the ministry, a 2.3 per cent increase compared to the revised allocation for the current fiscal year. However, its share of the total national budget has declined from 2.15 per cent to 1.85 per cent.

Within the ministry, allocations show divergent trends. Funding for the Power Division has declined by 3.9 per cent to Tk 149.96 billion, while the Energy and Mineral Resources Division has increased by around 72 per cent. CPD senior research associate Helen Mashiyat Priyoti, who presented the keynote findings, said this shift signals a growing emphasis on domestic extraction and fossil fuel supply.

The report noted some positive developments in renewable energy policy. For the first time, solar power projects have been given special fiscal incentives, including zero tax on solar generation projects until 2035 and a 5 per cent tax rebate for consumers of solar electricity.

Import duties on aluminium and steel structures for power plants, previously ranging between 62 and 93 per cent, are proposed to be reduced to 26 to 38 per cent. Taxes on lithium-ion batteries, solar inverters and solar panels would also be significantly lowered, while duties on electric vehicle charging stations have been withdrawn.

However, CPD said these measures are outweighed by continued fiscal support for fossil fuels. LNG imports remain exempt from VAT, making it the least-taxed energy source in the country. Coal imports for power plants will continue to benefit from customs concessions until 2030, while the government has also set a target for domestic coal extraction in the coming fiscal year.

“Why does the government continue to provide increasing incentives for LNG when it says it will not import LNG at high prices?” CPD questioned in its report, describing the continued support for coal as inconsistent with a credible energy transition pathway.

Moazzem urged policymakers to reduce preferential treatment for fossil fuels and address structural imbalances in energy taxation and incentives.

Speakers at the briefing, including Mostafa Al Mahmud of the Bangladesh Sustainable and Renewable Energy Association, Monowar Mostafa of the Democratic Budget Movement, and Mohammad Javed Imran of Infrastructure Development Company Limited, echoed concerns over the pace and direction of the transition.

While acknowledging incremental support for renewables, CPD concluded that the scale of incentives remains limited compared to continued fiscal and policy backing for fossil fuels. It warned that a renewable energy share of 2 per cent in power allocation falls far short of a meaningful energy transition.