In order to reach the 10,000 Megawatt peak (MWp) objective for solar plants and to support the local economy, the government is expected to exempt solar equipment from all taxes.
Ministry of Industries and Production (MoI&P) has drafted a “Solar Panel and Allied Equipment Manufacturing Policy 2023” that would be presented to the Economic Coordination Committee (ECC) of the cabinet.
According to the policy, the energy crisis and trade restrictions have put pressure on the country’s balance of payment. As a result, the government has prioritised increasing the proportion of indigenous energy resources to 90.2% by 2031 as part of the Indicative Generation Capacity Expansion Plan (IGCEP), which will be primarily accomplished through renewable energy sources. To address energy difficulties, the prime minister has authorised the production of 10,000 MW of solar energy.
As investors demonstrate a desire to invest in solar PV panel and equipment production facilities in Pakistan, the anticipated demand is set to create a massive market for solar modules and related equipment. A government policy intervention is essential for the viability of local manufacturing.
The existing tax/tariff structure on solar equipment imports imposes a 17 percent sales tax on solar panel imports, while entire solar panel imports are duty/tax-free. To facilitate long-term investment, the new strategy provides a 10-year policy framework. In addition, the report urges exemption from duties and taxes on the import of inputs, as well as exemption from all customs and taxes on the import of plant, apparatus, and equipment used to produce solar panels.
The policy also recommends an impartial sales tax regime for manufacturers and importers, a 10-year tax holiday for existing/new solar manufacturing plants, provision of bank financing/loans at low-interest rates, supporting exports through adequate incentives, preference for locally made solar panels and allied equipment in government procurement, incentivizing establishment of international standards and accredited laboratories, and the establishment of ImpleTech.
The proposed policy is intended to assist the local economy. Overall, its implementation will aid the government in supplying inhabitants with clean and affordable energy, combat climate change, save foreign currency, and promote export growth through local and foreign investments.
Additionally, the suggested project will stimulate commercial activity in current industrial sectors such as aluminium, frame, cable, etc.