In an unprecedented move, Bangladesh has upended its previous policy of heavily taxing electric vehicles (EVs) and promoting fossil-fuel-run transport.
While placing the tax and tariff proposals for the next fiscal year starting on July 1, finance minister Amir Khosru Mahmud Chowdhury, in his budget speech in the parliament on June 11, unveiled a set of coordinated tariff structures to promote EVs and solar energy to reduce carbon emissions and combat air pollution.
The minister offered zero tariffs for the import of electric buses and trucks, the setting up of vehicle charging stations, and the production of solar energy; hiked tariffs for fossil-fuel-powered transport; reduced registration fees for EVs; and introduced a set of incentives with the target of reducing pollution from the transport sector, which contributes 9 per cent of greenhouse gas emissions.
This is the first coordinated government initiative for transitioning Bangladesh’s long-overdue modernisation of the transport system, as pollutants from thousands of diesel-run buses and trucks aggravate the air pollution in mega-cities like Dhaka and Chattogram.
According to UN estimates, more than 235,000 people die from complications due to air pollution every year in Bangladesh, with hundreds of thousands of people suffering from asthma and other respiratory diseases.
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Bangladesh always prioritizes adaptation, but now we are going for mitigation as well. The tariff waiver for electric vehicles is a step in this regard.
Mirza Shawkat Ali, climate change cell director, Bangladesh Department of Environment
The tax waiver and concession
The government has decided to offer a “full exemption (except value-added tax)” on the import of electric buses and trucks, said the finance minister, adding, “I propose extending this facility until 30 June, 2030.”
“A nationwide charging network is essential for the smooth operation of electric vehicles. To support this, I propose reducing the total tax incidence on EV chargers and charging stations from 39.75 per cent to 0 per cent,” Chowdhury said.
He also announced a “0 per cent tax rate on the solar power sector until 2035,” while offering a 5 per cent tax rebate on payments made against solar electricity bills.
“I propose reducing supplementary duty depending on vehicle type, and fully withdrawing regulatory duty on brand new plug-in hybrid vehicles [with engine capacities] up to 1,800 cubic centimetres [1.8 litres],” Chowdhury said.
“At present, high tax burdens make electric vehicles unaffordable for most citizens,” he added, announcing a reduction of tax on electric private cars.
To discourage fossil-fuel-run transport, Chowdhury announced an increase in the tax incidence for environmentally harmful fuel-powered vehicles, such as those running on diesel, octane and petrol. According to the new tax structure, an owner must pay nearly 156 per cent tariff instead of the present 132 per cent for vehicles with an engine capacity of 1,200-1,600 cc (1.2-1.6 l).
The minister’s proposals are almost sure to be passed as the ruling party commands more than two-third of the majority in the unicameral legislature.
Laudable, but challenging
“This is a laudable move by the government because we, someday, must switch to zero-emission technology,” Provat Saha, a former teacher at the Bangladesh University of Engineering and Technology, told Mongabay.
He was sceptical, however, about whether the move was enough to improve air quality.
“But I think these measures would not suffice to curb air pollution in Bangladesh. As for the transport sector, large trucks and lorries are mainly responsible for transport sector pollution in Bangladesh. Such large trucks and lorries are not electricity-run,” Saha said.
A transport businessperson Mongabay spoke to also expressed cautious optimism about the planned transition of Bangladesh’s transport sector from fossil fuel to cleaner energy.
“We welcome the proposals, but their implementation involves a lot of critical issues, which the government must address for their success,” Saiful Islam, a leader of Bangladesh Bus-Truck Owners Association, told Mongabay.
For instance, he said, electric buses and trucks need a new infrastructure, skilled manpower, technological knowledge, spare parts and other relevant support.
“Manufacturers in Bangladesh do not produce electric buses and trucks. We must import these from other countries,” Islam said. “Before their operation, we must ensure adequate charging stations, technical manpower for repairs and maintenance, and the availability of adequate spare parts for such vehicles. It is not possible to just import and operate these buses and trucks without them.”
“These vehicles are costly — triple the price of diesel-powered ones. We have come to know that their economic life would be 10 years. In that case, we must do a cost-benefit analysis. Maybe the customers must pay a higher fare than they currently pay,” he said. “There are operational problems, too. Currently, a bus needs five minutes to refuel in a station. But if a bus takes 30 minutes for recharging, the passengers will not accept it.”
“Unless the government gives us policy support, we cannot go ahead with operating electric buses and trucks,” he said.
Anisur Rahman, a marketing professor at Dhaka University, told Mongabay that the government should have carried out a feasibility study before initiating the move to introduce electric buses and trucks.
“Higher prices will make the consumers unhappy and complain. But if the services are better, they will not complain. We have to ensure better service,” he said.
Besides, Rahman said, the consumers should be motivated that the government initiative was aimed at ensuring people’s welfare.
Mirza Shawkat Ali, director of the climate change cell at the government’s Department of Environment, told Mongabay that Bangladesh, in its Nationally Determined Contribution (NDC), has committed to reducing emissions without conditions and with conditions. He said the move to introduce EVs was in line with the country’s NDC.
“Bangladesh always prioritises adaptation, but now we are going for mitigation as well. The tariff waiver for electric vehicles is a step in this regard,” Ali said.
He said the previous government had imposed higher tariffs on EVs, making them out of reach for most people. The new initiative is the first step toward achieving the target of introducing 25 per cent electric buses and trucks and 30 per cent electric private cars by 2035, Ali said.
This story was published with permission from Mongabay.com.
