Warns against allocation disparities, fossil fuel dependence

The South Asian Network on Economic Modeling (SANEM) has urged the government to address critical allocation disparities and structural gaps in the newly proposed national budget for fiscal year FY2026-27, warning that certain provisions risk locking the country into long-term fossil fuel dependence despite ambitious green transition targets.

Sanem noted that although the government has identified energy security as one of its ten strategic priorities, the Ministry of Power, Energy and Mineral Resources received Tk17,345 crore, accounting for 1.85per cent of the total budget, down from 2.15per centin the revised FY2025-26 budget, according to a media release issued on Thursday.

To maintain countrywide energy stability and clear outstanding financial liabilities, the government has continued heavy funding, allocating its highest subsidies of Tk 36,000 crore to the Power Development Board (PDB) and Tk 31,016 crore for gas and other components.

Within the ministry, the Power Division secured Tk 14,996 crore, while the Energy and Mineral Resources Division (EMRD) was allotted Tk 2,349 crore.

The SANEM pointed out that although the EMRD’s allocation rose by 71.96 percent from the previous year’s revised budget, a massive 84.34 percent allocation gap remains between the two divisions, which needs to be bridged to ensure long-term energy resilience amidst global geopolitical tensions.

The think tank welcomed the introduction of a zero per cent tax rate for the solar sector until 2035, tax rebates for solar electricity consumers, and the removal of duties on key solar components until 2031.

It also praised substantial tax cuts on electric vehicles and the elimination of all duties on EV charging equipment, describing the measures as a significant shift toward cleaner transportation.

However, Sanem highlighted a gap between Bangladesh’s renewable energy targets and budget allocations.

While the country aims to generate 20per cent of its electricity from renewable sources by 2030, only 2.53per cent of the Power Division’s expenditure has been earmarked for renewable energy projects.

The Sustainable and Renewable Energy Development Authority (Sreda) received just 0.1per cent of the division’s development budget.

SANEM said that without increased investment in onshore and offshore gas exploration, the country risks remaining dependent on costly fuel imports.

The organisation also expressed concern that recent tax incentives largely benefit VAT-compliant self-consumption solar producers and projects operating under the RESCO model, leaving many importers, EPC firms and self-financed users outside the incentive framework.