Fiscal Incentives For Renewable Energy To Benefit Govt

We often discuss renewable energy, but policy-making and government support remain stagnant.

- Subail Bin Alam

The private sector has largely driven the expansion of the renewable energy sector in this country. Had the government provided minimal support, it could have become a role model in this field.

Solar Power:

Everyone in Bangladesh knows that the duty on solar generators is 1%. However, the term “solar generator” is misleading because, unlike other power sources, solar power doesn't operate through a single generator. Its core components include the solar panel, inverter, battery, charge controller, DC cables, and panel structure, among others. Different companies manufacture each of these items. Since most components are sourced from China, some importers have appointed agents to collect and ship all products in one consignment. As a result, although legally lower duties and taxes are applicable, extra charges go abroad as agency fees.

What happens when imported separately? If an end-user imports solar panels as capital machinery, they can do so at just 1% duty. However, if a supplier imports them, the cost rises to around 11% due to added VAT, AIT, and duties. Inverters face around 37% charges, and energy storage batteries can go up to 89%. Since high-quality DC cables and aluminum structures are not produced locally, these must also be imported according to customer demand. A 10% VAT is added upon sale if a construction supplier imports these items. On average, the government collects at least 35% from all duties and taxes combined. To reduce this cost, many users are now importing the equipment themselves. This negatively affects local suppliers, reduces government revenue, and benefits foreign companies only.

There is another customs valuation method: by weight. In this method, while panel duties increase, duties on storage systems decrease significantly. Such variations in duty structures disadvantage rule-abiding businesses and the government while benefiting foreign agencies and a few corrupt officials.