KARACHI: Demanding the government to revoke imposition of general sales tax (GST) on solar panels and electric vehicles, a group striving to promote renewable energy, has asked the International Monetary Fund (IMF) to play a responsible part in developing socially just and environmentally-friendly financing solutions in Pakistan.
Demands to this effect were raised by Alliance for Climate Justice and Clean Energy (ACJCE) in a letter written to the IMF Board ahead of its meeting for sixth review of its loan programme, following the recent imposition of 20 percent GST on solar panels in Pakistan.
ACJCE shared details of the letter during a media briefing, where speakers assailed the tax imposition and discussed its repercussions.
Speaking at the briefing, Zain Moulvi, Associate at Alternative Law Collective, said the hastily passed minibudget was a grim reminder of how IMF’s policies and lending practices could sabotage Pakistan’s social and environmental planning.
“The new IMF-backed fiscal reforms include heavy taxes on solar panels, wind turbines, and electric vehicles, which are likely to cripple the renewable energy market.”
Moulvi emphasised renewables were Pakistan’s biggest hope for cheap electricity, adding that these taxes were inconsistent with Pakistan’s Alternative and Renewable Energy and National Electric Vehicle policies.
Haneea Isaad, Research Associate at Institute for Energy Economics and Financial Analysis, said at present, the latest tariffs given out by NEPRA (National Electric Power Regulatory Authority) for utility scale solar/wind power indicated a levelised cost of generation of Rs6-7/KWh.
“This range holds true for residential/commercial rooftop photovoltaic installations too. Imposing the added tax can significantly raise the costs for these projects,” she said.
Isaad feared that such decisions would hurt investor confidence, while small and mid-sized enterprises and off-grid and lower-income households would be the most affected as the added taxes were set to increase costs.
Waqas Moosa, Member Executive Committee of Pakistan Solar Association (PSA), said solar deployments in Pakistan were expected to fall by at least 20 percent in 2022 as the cost would increase by around 20 percent due to the added taxes.
“Consumers who are unable to shift to solar due to higher cost will end up paying an extra Rs175 billion in electricity costs over 20 years,” the PSA representative said.
He questioned whether making solar panels expensive was worth it as the expected revenue from one year of GST was only about Rs16-20 billion.
“For each solar solution not deployed, fossil-fuel based power sources will instead be used over the next 20 years, which is the average life of solar equipment,” he said.
Mustafa Amjad, Research Analyst at Renewables First, pointed out the government was contradicting its own mantra of a green Pakistan by taxing these technologies.
“Presently, local development for solar panel and renewable energy technologies is negligible in Pakistan. At such a crucial stage, where both these industries require fiscal support, such taxation will damage the development of renewable energy, as well as Pakistan’s electric vehicle market,” he said.
The government, Amjad said, was jeopardising the take-off promised for these technologies.
“These increased costs will ultimately be transferred to the consumer and result in higher tariff rates,” he added.