Solar power equipment: Work on projects comes to a halt due to withdrawal of ST exemption

LAHORE: “Work on thousands of industrial, agricultural and residential solar power projects has been halted across Pakistan following the withdrawal of 17 percent sales tax exemption and three percent additional sales tax on import of solar power equipment announced recently in mini-budget”.

This was stated by Pakistan Solar Association founder and former chairman Muhammad Farhan in a meeting with Pakistan Industrial and Traders Association Front (PIAF) vice chairman Javed Siddiqi held here on Friday. Endorsing the stance of PSA’s stance to condemn the imposition of 17 percent tax on the solar equipment, the PIAF vice chairman said the move will hit the objectives of the Alternate & Renewable Energy Policy.

Javed Siddiqi said that the cost of setting up solar power projects in Pakistan have been increased by almost 20 percent after the government withdrew tax exemptions on import of solar panels and related equipment through the mini-budget, leading to the stoppage of work on thousands of solar power projects in the country.

The PIAF vice chairman said that the solar and wind power plants are the only alternative solution against the rising prices of electricity, gas and petrol and the increasing environmental pollution in the country. He said that the fossil fuel-based power plants require costly imported diesel and oil while the installation of solar system is required one-time investment which provides continuous benefits for more than 25 years without additional expenses.

PSA former chairman Muhammad Farhan said that the imposition of 17 percent tax on the solar energy equipment will fragile the efforts for the promotion of alternative energy sources in the country.

He said at a time when the world is setting targets for a zero-carbon economy, supporting the trade of green products and imposing penalties on the high carbon sector, the government’s decision to impose tax on solar energy equipment does not prevail as a favorable idea for its own sustainability.

PSA former chairman said that the country needs to increase exports and earn foreign exchange. However, solar energy is becoming costly due to increased taxes, thus pushing up production cost to compete on the international market.

He said that there is a dire need of the promotion of alternative energy sources to control the high import bill. He said that the solar equipment are imported one time and generate energy for the life of the equipment while on the other hand, the import of oil has to be imported on a regular basis to produce electricity through thermal means.

The end of tax exemptions may appear as a major impediment in the way of implementing the government’s vision of “Clean and Green Pakistan”. Earlier, the government had set the target of increasing the share of renewable energy (solar and wind power) in total electricity generation to 30% (equivalent to 24,000MW) by 2030.

Copyright Business Recorder, 2022