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.
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