Government Imposes 32.5% Tax on Solar

According to Finance Act 2014, the federal government has amended SRO 575 2006-07 and imposed a tax of 32.5% on import of Solar Panels. It must be noted that Solar Panels were placed in a special category with no tax since 2006. This was done to encourage the adoption of this Alternate Energy in the country. The government instead of taking steps to promote Solar Energy has taken the worst possible decision, at a time when the country is facing an acute energy crisis. The only possible explanation for this action is that the government intends to encourage local production of Solar Panels, which at the moment is minimal. What is troubling is that the Alternate Energy Development Board (AEDB) which is tasked with increasing the Alternate Energy contribution in the country to about 5% by 2030 was not even consulted.

Solar Panel

The breakdown of the imposed tax is as follows.

General Sales Tax 17%

Import Duty 5%

Commercial Importer 3%

Income Tax on the Import 5.5%

Hardest hit are the importers who had imported Solar Panels in bulk and now have to pay taxes amounting in millions of rupees (5-6 million per container). According to sources there are about 60 to 70 containers at the port which are waiting for clearance by customs. Also suffering are Solar solution providers who do not have enough equipment now to fulfill their commitments. It must be noted that energy demand reaches its peak in summer months and this is the time when Solar businesses make their profits. Also to be hit is the agriculture sector where Solar Pumps have become quite popular in recent times.

The government has recently shown considerable interest in Solar technology with the launch of Quaid-e-Azam Solar Park in Bahawalpur. Previously, the Gillani government had also taken some steps to promote Alternate Energies in the country, such as starting Wind Energy projects in Jhimpir. It is hoped that better sense would prevail and the government would revisit the Fiance Act 2014 which has created this mess!

Note: Since this article was published on July 29, 2014 there has been another article that totally refutes the imposition of any additional taxes on solar equipment. According to this article titled Demystifying the Tax on Solar Panels "if an importer verified the import (through the Engineering Development Board) as a unique product not manufactured or available in Pakistan, the importer would not have to pay custom tax". The news item about imposition of tax may have been untrue but it did have some effect as the 60-70 containers stuck at Karachi were immediately released.

Alternate Energy Development Board (AEDB)

Alternate Energy Development Board is a Government of Pakistan controlled institution that is tasked with increasing the alternate energy contribution of the country to about 5% by 2030. According to the AEDB Act of 25th May 2010 following are the functions of the AEDB Board.

(a) To develop national strategy, policies and plans for utilization of alternate and renewable energy resources to achieve the targets approved by the Federal Government in consultation with the Board.

(b) To act as a forum for evaluating, monitoring and certification of alternate or renewable energy projects and products.

(c) To act as a coordinating agency for commercial application of alternate or renewable energy.

(d) To facilitate energy generation through alternate or renewable energy resources by:

(i) Acting as a one window facility for establishing, promoting and facilitating alternate or renewable energy projects based on wind, solar, micro-hydel, fuel cells, tidal, ocean, biogas, biomass etc.

(ii) Setting up alternate and renewable energy projects on it's own or through joint ventures or partnership with public or private entities in order to create awareness and motivation of the need to take such initiatives for the benefit of general public as well as by evaluating concept notes and technologies from technical and financial perspective.

(iii) Conducting feasibility studies and surveys to identify opportunities for power generation and other applications through alternate and renewable energy resources.

(iv) Undertaking technical, financial and economic evaluation of the alternate and renewable energy proposals as well as providing assistance in filing of required licensing applications and tariff petitions to NEPRA established under the Regulation of Generation Transmission and Distribution of Electric Power Act, 1997.

(v) Interacting and coordinating with national and international agencies for promotion and development of alternate energy.

(vi) Assisting the development and implementation of plans with concerned authorities and provincial governments and special areas for off grid electrification of rural areas.

(vii) Making legislative proposals to enforce use and installation of equipment utilizing renewable energy.

Pakistan Council of Renewable Energy Technologies (PCRET)

Pakistan did realize the potential of Alternate Energies quite early and National Institute of Silicon Technology (NIST) was formed in 1981 to conduct research in the area of Solar Energy. Later on Pakistan Council for Appropriate Technology (PCAT) was formed in 1985. These two organizations were merged together under the umbrella of Pakistan Council of Renewable Energy Technologies (PCRET) in 2001. The government of Pakistan also formed the Alternate Energy Development Board (AEDB) in 2003. Although these organizations have been working in the Alternate Energy sector for more than 30 years but there are not many achievements to be proud of. Some pilot projects have been initiated by PCRET and AEDB in remote parts of the country but there is no holistic approach to overcome the energy crisis besetting the country (one interesting initiative that has been taken by the Government of Pakistan in recent times is the Quaid-e-Azam Solar Park in Bahawalpur).

One interesting initiative undertaken by PCRET is indigenous development of 3rd Generation Solar Cells using Nanotechnology. However,the Solar Cells developed using this technique have very low efficiency (around 1%) as compared to international standards (around 10%). Nonetheless, this is an important step towards indigenous development and it is hoped that the efficiency of these Solar Cells can be improved with time so that they are of some practical use. Some of the products developed by PCRET in the area of Solar Thermal are Solar Desalination Plant, Solar Water Heater, Solar Cooker and Dehydrator.

As per PCRET website the total installed capacities of various Alternate Energy technologies in Pakistan are:

1. Installed 538 Microhydel Power Plants  (5-50 KW capacity) with total capacity of 7.8 MW, 70,000 houses electrified.

2. Installed 155 small wind turbines (0.5 KW to 10 KW) with total capacity of 161 KW in Sindh and Balochistan, electrifying 1560 houses and 9-coast guard check posts.

3. Installed 300 Solar PV systems with total capacity of 100 KW electrifying 500 houses, mosques, schools and street lights.

4. Installed 4000 Biogas Plants (size 3&5M3/day, producing 18000 M3/day).

5. Developed 6-models of efficient smokeless cook stoves for cooking and space heating.

6. 100,000 mud stoves have been built in rural houses; saving 36500 tons of fuel wood per year.

7. Installed 21 solar dryers with total capacity of processing 5230 Kg of fruit per day.

Cave Houses Around the World

It is well known that cave houses provide a noise free and weather proof environment (cool during the summer and warm during the winter). These structures also shield one from man-made Electromagnetic radiation that is present everywhere. Furthermore, since most of the materials used in construction are local, the environmental impact is minimal. Shown below are some cave houses from around the world. Some are simple dwellings with the most basic necessities, while other have running water, electricity and wireless access.

Cave Hotel

Cave Hotel

Cave House

Cave House

Cave House

Cave House

Cave House in Baluchistan

Cave House in Baluchistan

Cave House in Utah

Cave House in Utah