Monday May 20, 2024

ECC again defers solar equipment manufacturing policy

After postponing policy approval four times since March, committee leaves it for next budget

By Mehtab Haider
August 08, 2023
Workers washing 300 KWP solar PV system after its installation at Nishtar Medical University and Hospital in Multan, on December 4, 2022. — APP
Workers washing 300 KWP solar PV system after its installation at Nishtar Medical University and Hospital in Multan, on December 4, 2022. — APP

ISLAMABAD: The Economic Coordination Committee of the Cabinet (ECC) that had deferred the Solar Panel & Allied Equipment Manufacturing Policy 2023 four times since March 2023 has once again decided to leave the summary approval for the next budget of 2024-25.

Top official sources confirmed to The News on Monday that the draft policy envisaged electricity production of 5000 Megawatt (MW) till the financial year 2027-28 thus saving fuel import of $1.022 billion in the shape of import substitution. It was claimed in the draft policy that the solar system would generate electricity at a rate of Rs 4-6 per unit against the existing tariff of Rs 31 per unit without taxes. If the taxes are included the cost goes up to Rs 40 to 50 per unit depending upon usage/slabs.

The prime minister had constituted a high-powered committee for the evaluation of policy. The first time the ECC considered the summary for Solar Panel & Allied Equipment Manufacturing in its meeting on March 6, 2023 but, it was deferred with the direction to review the proposed policy in a holistic manner in consultation with all stakeholders.

The summary was again considered in the 47th meeting of the Tariff Policy Board held on April 19, 2023, whereby the CEO Engineering Development Board (EDB) proposed protection for local industry from the imported solar panels, parts and allied equipment through a year-wise Customs Duty/Regulatory Duty on the finished products, reduction in duties on import of inputs used in the manufacturing of solar panels, parts and allied equipment, exemption from duties on import of plant, machinery and equipment used for manufacturing of solar panel, parts and allied equipment. The Federal Board of Revenue (FBR) requested the list of parts and equipment on which duty reduction was requested for their impact analysis.

However, the FBR agreed in principle with the proposal of facilitating local manufacturing of solar panels. It was decided that no protection will be given on imported finished solar panels, inverters and batteries as it may haemorrhage the consumer benefit from the existing structure/regime making energy more expensive. It was decided that RD and ACD (Additional Customs Duty) may be reduced to zero and be placed under the 5th Schedule of the Customs Act 1969 subject to verification/confirmation of those specific items by the FBR.

Keeping in view these decisions, the Ministry of Industries again sent a summary to the ECC dated June 7, 2023 on updated/revised Solar Panel and Allied Equipment Policy 2023 for approval which was considered in the meeting on June 14, 2023 second time. However, the ECC of the Cabinet again decided to seek FBR’s comments on the equalization of Sales Tax on CKD and CBU by removal of Sales Tax on the import of inputs (raw material and parts) used in the manufacturing of solar panels, inverters and batteries. There was an anomaly that sales tax for importers of finished solar panels and allied equipment was exempted but the same was imposed on local manufacturers on imports of inputs. The FBR recommended removing this anomaly in the next week for the promotion of solar energy production in Pakistan.

The Ministry of Industries and Production again sent a summary dated July 5, 2023 for approval which was again deferred by the ECC in its meeting held on July 20, 2023 third time consecutively. Now another meeting of the ECC held during the last week of July decided to defer the equalization of sales tax, for both importers and local manufacturers of solar panels and allied equipment, for the next budget for 2024-25.