Bangladesh’s FY2026-27 budget promotes electric vehicles and renewable energy through major tax cuts, while increasing duties on fossil fuel vehicles to accelerate a cleaner, low-carbon and energy-secure future.
The proposed national budget of Bangladesh for FY2026-27 has outlined a major policy shift to accelerate the country’s transition towards electric mobility and renewable energy while increasing fiscal pressure on fossil fuel-powered transport.
The government has significantly reduced the tax burden on electric vehicles (EVs) and related infrastructure while raising duties on internal combustion (IC) engine vehicles to discourage the use of diesel, octane and petrol-run transport.
Under the proposal placed in Parliament, the overall tax incidence on EV imports has been reduced from 93 percent. For vehicles valued at up to $25,000, the rate has been set at 64 percent, while for those valued at up to $50,000, it has been fixed at 80 percent.
In contrast, the tax burden on imported 1200-1600cc IC engine vehicles has been increased from 132.36 percent to 155.88 percent, reinforcing the move towards cleaner transport systems.
To support infrastructure development, the government has proposed zero import duty on EV chargers and charging stations, down from the existing 39.75 percent, in a bid to expand a nationwide charging network.
For public transport electrification, the full tax exemption on electric buses used for student transport by educational institutions, as well as other EV buses and trucks excluding VAT, has been extended until June 30, 2030.
Officials said the measures are intended to reduce environmental pollution, improve energy security and support sustainable mobility across the country.
Alongside transport reforms, the budget places strong emphasis on renewable energy expansion, particularly solar power. Import duties, regulatory duties, supplementary duties and advance taxes on key solar equipment have been reduced to zero, with the facility proposed to remain effective until June 30, 2031.
Experts estimate that the move could reduce solar power generation costs by 25 to 30 percent and lower overall tariff burdens by 30 to 70 percent, potentially encouraging new investment and strengthening energy diversification.
The government has set a target of generating 10,000 megawatts of electricity from renewable sources within the next five years, a goal expected to create significant employment opportunities in the sector.
However, exemptions on certain components, including mounting structures, lithium cells, battery packs and battery energy storage systems, are proposed to be withdrawn after June 30, 2028, to encourage the development of domestic manufacturing capacity.
At the same time, import duty exemptions have been proposed for raw materials used in lithium-ion and sodium-ion battery and battery pack production, with the facility extended until June 2030 to support the growth of a local green industry.
The budget also continues support for local EV assembly, EV parts manufacturing and vendor-level production of components through targeted fiscal incentives.
Reacting to the announcement, JETNET BD Coordinator and ActionAid Bangladesh’s Just Energy Transition Manager Md Abul Kalam Azad termed the proposal a landmark moment in Bangladesh’s energy policy, saying, “This marks the beginning of a structured transition towards renewable energy. It will reduce climate vulnerability and strengthen energy security while reducing dependence on fossil fuels.”
He added, “Strong regulatory oversight and quality control will be essential to ensure effective implementation.”
Sohanur Rahman, Executive Coordinator of YouthNet Global, said, “This budget signals an important shift towards a cleaner transport and energy future. However, the transition must be just, inclusive and ensure that vulnerable communities are not left behind in the process.”
Mustafa Mahmud, President of the Bangladesh Sustainable and Renewable Energy Association, said, “This reflects a clear government commitment to a clean energy transition. It will encourage both industrial and household-level adoption of renewable technologies.”
He, however, cautioned, “Excessive conditions should not hinder implementation or slow down investment.”
Meanwhile, Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), said, “The shift away from fossil fuel incentives is a positive step towards sustainable development.”
He added, “However, the premature withdrawal of support for key renewable energy components could discourage investment. Such support should continue until domestic manufacturing capacity is sufficiently developed.”
The budget outlines a long-term strategy to reduce fossil fuel dependence, expand renewable energy and strengthen local green manufacturing, positioning Bangladesh on a pathway towards a low-carbon and climate-resilient economy.
