A Change Initiative report warns Bangladesh’s new solar tariff policy may discourage investment, exclude small producers and consumers, and create bureaucratic barriers that could slow progress toward renewable energy targets.
A new government notification offering tax and duty exemptions for renewable solar power projects could unintentionally slow Bangladesh’s drive to achieve its ambitious 10,000-megawatt renewable energy target, according to a position paper released by Change Initiative.
The analysis examines S.R.O. No. 159-Law/2026/14/Customs, recently issued by the Internal Resources Division under the Ministry of Finance. While the measure grants exemptions from customs duty, regulatory duty, supplementary duty and advance tax on imports used for renewable solar power generation and supply, the paper argues that several conditions attached to the policy could discourage investment and limit participation in the sector.
According to the report, the notification appears to support the country’s solar energy expansion goals at first glance. However, a closer assessment suggests that the policy may create barriers for both large-scale renewable energy projects and smaller community-based initiatives, potentially undermining progress toward the government’s renewable energy roadmap.
The paper also criticises the timing of the notification, saying it was issued ahead of the national budget presentation despite the existence of an elected government and a functioning parliament. It argues that introducing an SRO on tariff determination before parliamentary discussion creates policy inconsistency and bypasses legislative scrutiny. The report claims this approach could systematically exclude small producers, importers and residential consumers from accessing the benefits of the policy, weakening the momentum of Bangladesh’s growing renewable energy sector.
Large utility-scale solar projects are expected to contribute the majority of the planned 10,000 MW renewable energy capacity. However, the report identifies several provisions that could increase costs and create uncertainty for investors.
One concern is that while tariff benefits for products such as solar panels and inverters remain valid until 2031, incentives for key components including mounting structures, solar DC cables and lithium battery packs or Battery Energy Storage Systems (BESS) will expire on June 30, 2028. Since large solar projects often require two to three years to complete, the report warns that the expiration of these benefits could significantly increase capital expenditure.
The position paper also notes that a 2 percent Advance Income Tax (AIT) remains in place despite the waiver of other duties. According to the authors, this additional tax could substantially raise initial investment costs and discourage domestic investors from entering the sector.
Further concerns relate to implementation requirements. The SRO requires imported equipment to be installed and commissioned within six months. Although the Customs Commissioner or a member of the National Board of Revenue may grant extensions, the report argues that investors could become trapped in repeated bureaucratic procedures, slowing project execution and increasing opportunities for administrative complications.
The paper also highlights strict certification requirements for imported lithium batteries and energy storage systems. Certificates from international laboratories demonstrating compliance with IEC-62619:2022 and IEC-62933:2017 standards must be presented during customs clearance. The report says meeting these requirements for every shipment could be time-consuming and create delays at ports.
In addition, customs clearance requires approval at both the assessing officer and supervising deputy or assistant commissioner levels. The report argues that this dual approval process could lengthen clearance times and increase port demurrage charges.
The analysis further warns that the policy may disproportionately favour large corporations while excluding small and medium enterprises, rural initiatives and household solar users.
Under the SRO, tariff benefits are reserved for large commercial producers and industries, leaving small-scale producers, SMEs and residential consumers outside the incentive framework. Imported goods benefiting from the tariff exemptions must be used only for the importer’s own solar power generation or supply and cannot be resold or transferred. As a result, solar equipment resellers cannot import products under the scheme and sell them at lower prices in the domestic market. The report says this could leave most consumers exposed to higher prices and market volatility.
The paper argues that such restrictions could have serious consequences for off-grid and community solar projects, which are considered essential for ensuring an inclusive transition to renewable energy in rural and remote areas.
It notes that only institutions registered under the Value Added Tax and Supplementary Duty Act, 2012 and compliant with VAT invoicing and return requirements are eligible under the scheme. According to the report, this effectively excludes rural cooperatives, residential buildings, educational institutions and other non-commercial entities from contributing electricity to the national grid through rooftop solar net-metering.
The report also raises concerns over financial requirements imposed on Renewable Energy Service Companies (RESCOs). These entities must finance imports using their own resources, a condition that the authors say makes it difficult for rural SMEs to participate because they often lack the capacity to provide a 100 percent cash margin for international purchases.
Another issue identified is the ban on importing used, refurbished or secondary equipment. The report argues that high-quality refurbished batteries could have provided a cost-effective solution for rural and off-grid renewable energy projects, but the current rules prohibit their use.
Community-based projects may face additional obstacles because RESCOs are required to submit a certified copy of a Power Purchase Agreement (PPA) during customs clearance. The report notes that grassroots projects frequently establish infrastructure before entering into formal agreements with local consumers, making the requirement impractical.
The paper also questions the feasibility of obtaining onsite inspection certificates from the Sustainable and Renewable Energy Development Authority (SREDA) within the required timeframe, particularly in remote regions where staffing capacity is limited.
Despite acknowledging that the notification creates opportunities for Bangladesh’s solar power industry, the report concludes that its provisions largely favour major corporations while offering limited support to smaller entrepreneurs and ordinary consumers.
To make the policy more inclusive and compatible with the government’s renewable energy ambitions, Change Initiative recommends extending tariff benefits for battery storage and other essential components until 2031, removing the 2 percent Advance Income Tax, introducing tax rebates for locally purchased solar equipment, allowing resellers to access benefits under specific conditions and relaxing VAT and net-metering requirements for SMEs, residential users and non-commercial institutions.
The organisation also calls for revisions to the six-month implementation deadline and mandatory PPA requirement, along with the creation of a one-stop customs service to reduce administrative burdens.
Unless these bureaucratic and discriminatory barriers are addressed, the report warns, the notification could stall rather than accelerate the current growth of Bangladesh’s renewable energy sector and jeopardise progress toward the country’s 10,000 MW renewable energy target.
