Govt plans to phase out exemptions on ARET import

KARACHI: The government plans to phase out exemptions on import of alternate and renewable energy technology (ARET) products to level the playing field between local and foreign manufacturers, the ARE Policy 2020 has suggested.

An industry official on Friday said a significant number of ARET-based consumer items were imported free of duties, which served local demand, but harmed the nascent local industry.

In this regard, the Alternate Energy Development Board (AEDB) would move the Federal Board of Revenue (FBR) and Engineering Development Board (EDB) to withdraw import duty exemptions on ARET-based consumer items, which were manufactured locally.

According to ARE Policy 2020, local industry in collaboration with foreign manufacturers has the capacity to respond swiftly to such incentives. “A successful example is declaring LED lights as locally manufactured items in 2017, which led to some foreign manufacturers setting up manufacturing of LEDs in Pakistan in a short timeframe,” the official said.

In January 2019, the government decided to eliminate taxes associated with manufacturing of solar and wind energy equipment in the country in an effort to boost the production and use of renewable power and overcome power shortages.

Subsequently, renewable energy manufacturers and assemblers in the country were given a five-year exemption from taxes. Local manufacturers said such breaks were good news, but Pakistani manufacturers would still struggle to compete with tax-free, low-priced imports of foreign-built solar panels and other renewable energy equipment.

Since the notification of net-metering rules in 2018, domestic and captive installations of renewable energy, particularly solar, are on the rise. By introducing net-metering system, approximately 2,000MW of clean solar energy can be added to the system without any investment by the government.

Anwar Kamal, dealing in imported solar panels said withdrawal of tax exemptions would push prices higher, thus slowing down adoption of solar systems by households and small businesses. “Locally manufactured items are available in the market, but buyers prefer imported goods, not because of the price but because of quality. People are still not sure about the quality of locally manufactured solar panels etc.”

Only about seven to eight percent of power currently comes from renewable energy sources to the national electrical grid. Government has issued ARE Policy 2020 setting requisite processes in place so that ARE is fully mainstreamed and integrated within energy planning. Pakistan intends to have at least 20 percent of its generation capacity based on ARE technologies by 2025, and 30 percent by 2030.

The government intends to address anomalies to help local industry march in lock-step with the clean energy revolution the country and the world is experiencing.