Policy to give 10-year incentives to solar panel manufacturers in Pakistan – Business & Economy

The federal government has finalized the draft ‘Solar Panel Local Manufacturing and Allied Equipment’ policy under which manufacturers will be given certain incentives for 10 years, including imposition of tariffs on imports of finished goods to promote localization. is also included.

Informed sources told the Business Recorder that the Special Investment Facilitation Council (SIFC) has approved the “Solar Panel Local Manufacturing Policy” through consultations in the working group meetings of its 5th Apex Committee meeting to be held on September 8 and 9, 2023. Directed to make.

In this regard, several meetings of the Working Group on “Solar Panel Local Manufacturing Policy” were held.

After detailed consultation with relevant stakeholders, on investment proposal from potential foreign investors for installation of manufacturing capacity of solar panels required for local consumption and export within the country “Solar Panel and Allied Equipment Manufacturing” Policy 2024” has been prepared.

Earlier, a summary titled “Solar Panel and Allied Equipment Manufacturing 2023” was presented three times by the Industries and Production Division to the Economic Coordination Committee (ECC) of the Cabinet.

The last summary was submitted on July 5, 2023 regarding duty and tax exemption on import of solar inverters, lithium-ion batteries, and solar assembly, related machinery, equipment parts and components for manufacturing industry, but the matter was deferred. .

As per further instructions given by SIFC on October 18, 2023, four meetings of the working group were also held at the Ministry of Industries and Production on November 8, 2023, January 1, 2024, February 26, 2024 and February 27, 2024 to further refine the policy. A proposal of a potential foreign investor to set up a solar manufacturing plant in Pakistan can be considered.

Sources said that the draft policy now formulated not only envisages exemptions from tariffs and taxes on raw materials and machinery used in local manufacturing of solar panels and related equipment, but also aims to promote the production of solar panels and its Tariffs on imports of related equipment are to be increased. So as to discourage dependence on imports.

Furthermore, the draft policy also provides for a long-term, i.e. 10-year continuous plan which includes the valuable features of increasing the targets of “investment volume, productivity, exports and localization”. which will be backed by a bank guarantee equivalent to the amount of tariff and tax exemption from potential investors.

The proposed policy has suggested the following road map to be followed by any investor to get the desired exemption on duties and taxes.

• Manufacturing companies will have to increase their capacity from 1 GW to 10 GW in the sixth year and therefollowing, while the ratio of export sales to domestic sales will be 50:50 percent from the first year, 60:40 percent in the second year, and 70:30 in the third year. percentage, 80:20 percent in the fourth year, 90:10 percent in the fifth year and so on for the next ten years.
• Localization is proposed to be zero during the first year, but increase to 30 per cent in the second year, 40 per cent in the third year and 50 per cent in the fourth year and so on till the tenth year.
• The investment amount should be increased by 10 million dollars in the first year, 20 million dollars in the second year, 30 million dollars in the third year, 40 million dollars in the fourth year, 50 million dollars in the fifth year, 60 million dollars in the sixth year and the same proportion should be increased till the tenth year.
• The government has planned to impose a tariff of 5 percent on the import of manufactured goods in the first year, 10 percent in the second year and 15 percent by the tenth year.
• The bank guarantee paid by the investor should be equal to the tariff and tax exemption amount.

Sources said that the exemption proposed in the policy would be available upon submission and approval of the business plan by the manufacturer as per the localization and export roadmaps specified in the policy.

The proposed concessions will be subject to the achievement of localization and export targets. If localization and export targets are not achieved, concessions on duties and taxes will be withdrawn and levied.

However, withdrawal or recovery of incentives will be applicable if non-attainment is more than 20% of target value.

The incentives provided in the policy will be extended to manufacturing firms through the fifth schedule of the Customs Act, 1969, which the EDB has proposed during the policy period on the amount of investment, plant capacity, localization and roadmap for exports etc. Based on the evaluation of the business plan.

The annual quota will be determined by the Input Output Coefficient Organization (IOCO) of FBR.

As soon as comments from stakeholders are received, the summary will be placed before the ECC, sources said.