Pakistan imposes stiff tax on imported solar equipment; move likely to hit nation’s solar growth

Clean energy is gaining popularity worldwide and governments are making all possible efforts to tap renewable energy, especially solar. However, many countries are yet to develop manufacturing capacities and have to rely heavily on imports from countries such as China, the US and Malaysia, to name a few. Hence, the renewable energy sector is witnessing policy flip flop between encouraging domestic manufacturing and importing solar panels to meet the rising demand.

Pakistan's new Financial Act 2014 which came into force on July 1 imposed 32.5 per cent tax on solar panel imports. They were previously exempt from the duties because of their importance in combating Pakistan’s energy crisis. The imposition of tax has hit imports hard. About 70 containers of solar panels were left at the port of Karachi as the solar panel importers wanted exemption as the equipment were ordered before the new levy came into force.

Asjad Imtiaz Ali, chief executive officer of the government’s Alternative Energy Development Board (AEDB), has been quoted saying that imposition of tax is an “inadvertent mistake” of the government. He expects Pakistan government to rectify it soon as otherwise it is bound to hamper the promotion of solar energy in the country.

Pakistan reportedly meets only 5 per cent of its demand for solar panels from domestic manufacturers—there are just two of them—and the rest of it is imported. In such a situation, imposing taxes on the import of solar panels is likely to increase the cost by 35 per cent. This additional cost is likely to hamper rapid uptake of solar energy in the country and provide energy to vast majority of the off-grid areas that are without power. As per International Energy Agency, 2011 report, 38 per cent of Pakistan's population lacks access to electricity. Procuring from local manufacturers poses major problems because of quality concerns.

India chooses not to impose anti-dumping duty

India was faced with a similar situation when the commerce ministry recommended imposition of anti-dumping duty on imported solar equipment  earlier this year. But the Union finance ministry decided not to act on the recommendations.
 

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