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.
In a press release analyzing the national budget presented before parliament on June 11, 2026, the think tank noted that while energy security has been declared as one of the ten strategic priorities, the Ministry of Power, Energy and Mineral Resources received an allocation of only Tk 17,345 crore. This accounts for about 1.85 percent of the total budget, down from 2.15 percent in the revised budget of FY2025-26.
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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.
SANEM welcomed the government's milestone fiscal measures aimed at supporting its clean energy targets—generating 20 percent of electricity from renewables by 2030 and 30–50 percent by 2050—driven by rising liquefied natural gas (LNG) import costs and supply disruptions from the Israel-US-Iran conflict. For the first time ever, the budget introduced a zero percent tax rate on the solar sector until 2035, a 5 percent tax rebate on consumer solar electricity bills, and a total duty waiver on essential solar components until June 2031.
The budget also aggressively incentivizes electric vehicles (EVs) by lowering import duties from 93 percent to 64 percent for vehicles priced under US$ 25,000, cutting plug-in hybrid taxes, eliminating duties on EV charging infrastructure, and slapping advance income taxes on EVs.
Concurrently, taxes on conventional internal combustion engine (ICE) vehicles (1200cc to 1600cc) were raised from 132 percent to 156 percent, indicating a clear policy pivot.
Key Structural Concerns Raised
Despite praising these pro-solar signals, SANEM voiced strong reservations over implementation frameworks and conflicting fossil fuel investments:
Underfunded Green Agencies: The Sustainable and Renewable Energy Development Authority (SREDA) was allotted a meager 0.1 percent of the Power Division’s total development budget, while overall renewable energy projects represent just 2.53 percent of the division’s total expenditure.
Restricted Fiscal Benefits: A recent National Board of Revenue (NBR) order largely restricts solar tax benefits to VAT-compliant self-consumption producers and Renewable Energy Service Company (RESCO) models, effectively leaving out distributors, EPC firms, and self-financed residential or commercial users.
Policy Omissions: The budget lacks targeted fiscal or policy support for wind-based electricity generation, solar irrigation (to replace 17 lakh diesel pumps), and solar street lighting.
Premature Incentive Withdrawal: The planned withdrawal of input incentives for domestic lithium cell, battery pack, and battery energy storage system manufacturing after June 2028 could undermine the long-term investment needed to scale a competitive domestic industry.
Fossil Fuel Lock-in: The budget simultaneously rolls out plans that deepen fossil fuel reliance, such as setting a 6 lakh metric ton coal extraction target, launching 74 new coal projects in Barapukuria and Dighipara, extending preferential coal import tariffs until 2030, and investing in the Second Eastern Refinery to add 30 lakh metric tons of annual oil refining capacity.
SANEM's Core Recommendations
To effectively transition toward a sustainable energy ecosystem, SANEM recommended a rapid, controlled reversal of the historical underfunding of the energy sector, urging active onshore and offshore gas exploration to utilize cleaner domestic natural gas as a transitional fuel.
The think tank further recommended translating renewable energy goals into reality by approving more green projects under the Annual Development Programme (ADP), redirecting a portion of fossil fuel subsidies directly to renewables, and restructuring SREDA into a functional "single-window hub". Finally, SANEM called on the government to open zero-percent tax and duty facilities to the entire solar value chain, extend battery manufacturing duty exemptions to at least ten years, and introduce dedicated planning and policy support for wind energy.