GST for de-solarisation

Solar panels are a visible sign in the villages of Sindh, thanks to SRSO and TRDP

Dr Pervez Tahir January 07, 2022
The writer is a senior political economist


The mini-budget measure that has received scant attention is the imposition of GST on the import of solar panels from zero to 17%. The GST on inverters and other necessary equipment, plus import duties are in addition. Over 95% of the panels are imported. This is a serious setback to solarisation, a zero-emission source of power. Solar contributes 1.07% to the total energy mix. Tax on solar panels will take it further down. Was anyone thinking about the plain stupidity of it. FBR can never be accused of any kind of thinking. It focuses on revenue and this one is sure revenue as it is not refundable. No significant gain is expected in terms of documentation. The only concern of Finance Ministry is the IMF conditionality. But it is doubtful whether the IMF went into the itemised details. Otherwise it would not have lectured, in the staff-level agreement reached in November, thus: “Pakistan ranks both among the top 10 countries with the largest damages from climate-related disasters and top 20 countries with the largest greenhouse gas emissions. Critical next climate policy steps are: (i) accelerating the finalization of the authorities’ National Adaptation Plan; and (ii) implementing an adequate set of measures to meet the COP26 Nationally Determined Contribution targets and securing sufficient financing, including from international partners.” The agreement signed with the World Bank on last Monday in the presence of the Prime Minister is an example.

Alternate and Renewable Energy Policy approved in 2019 called for incentives to increase its share in total energy mix. Annual Plan 2021-22 prepared by the Planning Commission mentions the objective and then moves on to the dominant components in the energy mix. In the entire chapter, the word solar is conspicuous by its absence. The annex to the chapter indicates a target to increase the share of solar in the energy mix to 1.7%, now an impossibility. In the PSDP, there is not a single solar project. By implication, the target was to be achieved by the private sector. Four projects achieved financial close in February 2021. After the GST imposition, their completion may be delayed.

The poor and the vulnerable in rural areas are likely to be the most affected. Solar is the only solution for the remote, off-grid areas. In Balochistan, 22.72% of the rural households use solar panels for lighting, followed by 13.2% in K-P, 9.4% in Sindh and 3.3% in Punjab. It may be said that most of these households used locally produced one-light, one-fan DC panels that have not been taxed. On the ground, however, there is always a sympathetic price increase in such cases, besides some demand shift. That’s not all. Imported panels are an increasing source to power tubewells and water pumps. In November, a community meeting at Kamar Mashani, Mianwali, demanded solar panels for farmers on low or zero markup basis. This writer met a farmer in Sial Morh, Sargodha, who borrowed Rs2 lakh from NRSP and other sources and installed a solar panel and motor pump. Within 18 months he would be able to repay from the resulting saving of costly diesel and sale of excess water to neighbouring farms. Discussion with nearby farms revealed a strong demonstration effect. Similarly, in two villages of Bara Tehsil in K-P, the Sarhad Rural Support Programme has facilitated solarised tubewells to supply water to 171 households. Solar panels are a visible sign in the villages of Sindh, thanks to SRSO and TRDP. These, together with net-metering in urban areas, have been disincentivised. The measure is patently anti-poor, anti-rural and anti-environment.

Published in The Express Tribune, January 7th, 2022.

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