Blunders vis-a-vis solar energy.

Policy changes and uncertainties in Pakistan have been a major bane for consumers and businesses alike. With frequently changing governments, important policies are made, changed, and scrapped just as rapidly. Solar energy, unfortunately, has not been an exception.

Championed as one of the greatest assets for this country, solar energy has not been fully exploited to our benefit, nor has its progress been sustained. Instead, its progress has been hampered due to these constant policy changes.

Three such policies, which (un)surprisingly have all occurred within this year, are highlighted in this article:

The SBP has yet to disburse any funds under its solar financing policy to banks for onward disbursal to customers

1) Imposition and then (partial) removal of GST

At the start of the year, the previous government imposed a general sales tax (GST) of 17 per cent on all solar equipment, causing a substantial price increase and resulting in a reduction in demand. Reduced demand and deployment of solar power inadvertently mean that our import bill for fossil fuels continues to increase instead of reducing.

Realising this costly mistake, the new government announced in May that the GST decision was being reversed. After a constant back and forth from the prime minister and the then finance minister, the reversal eventually came into effect months later in July - but GST on solar inverters remained.

The imposition and then removal of GST caused a significant dip in demand and deployment of solar installations for the first half of this year. This not only hurt solar businesses because of reduced demand but, more importantly, consumers who have had to stomach record-high electricity bills from the grid. Thankfully the removal of GST on solar panels (accounting for up to 70pc cost of the solar system) has contributed to a reduction in cost.

2) Approval of LCs

However, just five days after partially removing the GST, the State Bank of Pakistan (SBP) imposed a defacto restriction on the import of solar panels and inverters, requiring its approval before any Letter of Credits (LCs) could be issued.

With this sudden policy change, many suppliers who had shipments at the port or in transit found it very hard for their import payments to get approved. Containers were stuck at port beyond their agreed timelines attracting huge demurrage charges from shipping lines. Since the approval requirement, new LCs have yet to...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT