DHAKA: Bangladesh is introducing a 10-year tax exemption package for renewable energy production — a move expected to help boost clean electricity generation, which is still hampered by high production costs.

The National Board of Revenue issued a notification earlier this week for projects that will begin commercial operations by mid-2030.

The policy grants 100 percent tax exemption for renewable energy plants in the first five years, 50 percent in the next three years, and 25 percent in the following two years.

“Companies whose commercial production will start between July 1, 2025 and June 30, 2030, are exempted from the tax,” NBR chairman Abdur Rahman Khan said in a statement specifying the waivers.

The policy backtracks on the previous government’s 2023 decision to withdraw full tax exemptions for the renewable energy sector, which discouraged local and foreign investors.

“It’s a very timely and good initiative ... it will create confidence among the investors,” Dr. S.M. Nasif Shams, director of the Institute of Energy at Dhaka University and secretary of the Bangladesh Solar Energy Society, told Arab News.

“It’s a good sign that within such a short span of time this interim government came up with this decision for boosting the renewable energy sector. It also complies with Prof. Yunus’ ‘three zero’ concept which he promotes around the world.”

Bangladesh’s caretaker government took office in August when ex-Prime Minister Sheikh Hasina quit and fled the country amid violent protests.

It is headed by Muhammad Yunus, Nobel Peace Prize laureate and economics professor who invented microcredit, who has been advocating work toward a world of zero poverty, zero unemployment and zero carbon emissions.

While Bangladesh aims to achieve its net-zero emissions goal by 2050, currently its clean electricity generation capacity is 1.38 GW or only about 5 percent of the total, which comes mostly from fossil fuels — mainly natural gas.

The country has been struggling for years with energy crises as demand grows about 7 percent a year amid increasing household and industry use, increasing Bangladesh’s dependence on imports as local production is insufficient, with the renewable energy output being among the lowest in the world.

Attracting investors with tax waivers could help with the high costs of building clean energy plants — currently one of the main obstacles to developing the renewable sector in the country.

“This decision will help the country’s economy a lot, as well as it will save the environment in a sustainable way,” Shams said.

“We have to go for renewable energy ... There is no alternative for us.”