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ISLAMABAD: The Pakistan Solar Association (PSA) has sought an annual limit of $ 800 million for import of solar panels/equipment, claiming that the issue of money laundering is largely eliminated.

The Association which recently held a meeting with the Minister for Power Khurram Dastgir Khan apprised him about their issues, and have now sent a letter to him with some recommendations.

PSA’s Secretary General, Mohsin Sahukat in his letter has requested the government to remove the solar energy sector from the list of non-essential items and consider it as an essential utility in the present times as recognised globally.

The import of solar panels in the previous fiscal was about 2.4 GW with an import value of solar panels and equipment of almost $ 1.2 billion in the last fiscal demand of around $ 1.8 billion during this year based on growth trends from previous years is predicted in the letter.

According to the letter given the adverse economic conditions, the PSA stands with the SBP and the government and understands the difficulty faced in financing imports.

At the same time, with the genuine need for solar energy in context of the Pakistan market and about 1-year payback of each dollar spent on solar equipment vis-a-vis saving in oil imports, it will be beneficial for the country to at least partially resume solar imports.

The PSA has requested Power minister to advise SBP and commercial banks to facilitate the imports of solar equipment by allowing an annual limit of $ 800 million i.e. $ 65 million per month for import of solar equipment, representing a reduction of around 56 per cent versus the estimated market equipment.

Import of solar panels: SBP asks govt to prepare list of ‘reputable’ suppliers

The PSA has proposed that the limit for import may be implemented within the industry, based on previous import history with the following limitations: (i) only companies that are members of the Pakistan Solar Association and have been AEDB-certified for at least 3 years to be allowed to import solar equipment; (ii) Companies that have past track record of import of Tier-1 Panels in the past 5 years; and (iii) import to be limited to Tier 1 solar panels (as defined by BNEF classification) with only the direct manufacturer of the solar equipment being the “beneficiary” of the LC / payment documents for the shipment.

The proposed conditions will ensure that import of solar panels is restricted to industry players, thereby significantly reducing, if not completely eliminating, the issues faced due to low-quality imports and chances of money laundering.

The PSA contends that it is evident from the report submitted by the PSA in 2016-2017 and subsequent meetings and correspondence with the SBP officials, the issue of money laundering under the HS Codes 84 and 85 was largely eliminated.

The same issue was highlighted at that time with Pakistan Customs and to date, an effective procedure of “Goods Ruling Value” is implemented due to which there is no possibility for any importer to adopt over/under invoicing of goods under the stated HS Codes.

At a recent meeting in Islamabad, Director SBP, Dr Asif Ali argued the SBP has already issued the necessary instructions to banks for one-time facilitation for release of shipping documents to ease congestion at ports due to stuck-up containers (i.e. demurrage-related cases).

In this regard banks have been advised to release the shipping documents for goods which have been shipped on or before January 18, 2023: (i) in case of deferment, on receipt of SWIFT message from the bank abroad that imports are on deferred payment basis for at least 180 days; or (ii) the funding arrangement has been made from abroad, on receipt of confirmation from suppliers’ banks.

The central bank maintains that it understands that with issuance of such instructions the matter of stuck up shipments including that of solar panels is being resolved to a great extent.

According to the SBP, it understands that as per current Customs Regulations, solar panels (HS code 8541.4300) have 0% customs duty; therefore, there is a possibility that import of solar panels could be misused by some unscrupulous elements to launder their illicit money abroad by over invoicing.

“In our assessments, some of the suppliers providing deferred payment terms turn out to be related to Pakistani importers or the local importers have established trade entities abroad, which carry risk of over invoicing,” said DrAsif Ali.

In this regard, the SBP has suggested that the relevant ministries may come up with a list of reputable suppliers from whom imports of solar panels could be allowed without any risk of money laundering/ over invoicing.

Copyright Business Recorder, 2023

Comments

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KhanRA Mar 26, 2023 04:57am
Importing oil is more expensive. Importing coal is more expensive. Solar offers the cheapest solution for electricity even if the upfront cost is higher. Over the long run, sunshine is free, but fossils fuels are not.
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KU Mar 26, 2023 12:08pm
If we are interested in saving agriculture and ensuring food security, farmers must have access to affordable solar energy. The same is true for smart fertilizers or slow-release fertilizers, most farmers are going bankrupt in the face of the high cost of production, while many have reduced their acreage cultivation.
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Waheed ud din Mar 26, 2023 12:25pm
Why dont pakistan goes for local manufacturing of solar pannels? What is the issue.? Do we just want trade and import? SAP should look in long horizon of time. Please think local manufacturing of solsr equipment and it should not be like چور Q Mobile phone manufacturing.
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Builder Mar 27, 2023 05:25am
I agree with @Waheed - We should focus on local manufacturing of panels and inverters. The importers usually play their own game and worries about pocketing margins on stocking and later price increase. Only local manufacturing can be fruitful in the long run.
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Mushtaq Mar 27, 2023 04:11pm
PSA and SBP should join hands to convict money launders and those local players who played double game by establishing so called firms abroad in the first place.
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Muhammad Ali Mar 28, 2023 09:33am
There should be no restriction on import of Solar equipment. Import of cars, women make materials & cooking oil should be banned for two years & resources should be given to Solar sector to make Pakistan a truly green energy country. At the same time, local manufacture should be promoted on emergency. World is moving very fast to replace fossil fuel with Green Hydrogen but here, the state is creating hurdles in getting the cheapest or almost free energy.
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