Pakistan is attempting to accelerate investment in its burgeoning renewable energy industry by announcing this week that it is to exempt taxes on the import of solar panels into the country.
Currently, customs duty on solar panels imported stands at 5%, with an additional sales tax of 17% applied to complete solar panels brought into Pakistan.
However, as part of Prime Minister Nawaz Sharifs plan to promote clean and alternative energies in the country, local manufacturers will now be able to import solar panel components duty free, while there will also be no taxes applied to completed solar panels brought into the country for installation.
An anonymous senior official told local media that this decision was taken to "promote healthy competition in the market", bringing domestic manufacturers on a par with solar panel importers.
The duties were only imposed during last years budget, but had the immediate effect of hiking the price of solar throughout the country. The chairman of the Pakistan Solar Association (PSA), Faiz Bhutta, welcomed the tax cut, adding that it will help bring prices back down to attractive levels.
Bhutta calculated that the 5% and 17% tax exemption would translate to an overall price reduction of around 20%/W, but stressed that the PSA will also be pushing for the abolition of tax and duty on solar batteries, which are currently exposed to 20% customs duty and 17% general sales tax.
Pakistan’s solar industry has crept along at a snail’s pace, but there are signs this year that more and more developers both domestic and foreign are beginning to explore the countrys PV potential.
In the fiscal year 2013-14, around 400 MW of solar panels were imported. That figure is projected to reach 900 MW in this latest fiscal year, according to Bhutta, who is hopeful that the lower taxes will trigger a faster uptake in PV.
Domestic manufacturing ability will prove key to any sustained solar growth. To that end, the government has tasked Finance Minister Ishaq Dar with improving the standards of local solar companies, targeting June 30 2015 as the date by which leading domestic partners attain international quality certifications.
Local production capacity stands at around 10 MW currently, compared to the hundreds of MW that are imported every year.
In September, solar developer TBEA announced that it had begun construction on the 100 MW Quaid-e-Azam Solar Park in Punjab, with JA Solar this week confirming that it is to provide the modules for the project.