ISLAMABAD: The federal government has finalised a draft of 10 years ‘Solar Panel Local Manufacturing and Allied Equipment’ policy envisaging incentives to the manufactures, including imposition of tariff on import of finished goods for the period to promote localisation, well-informed sources told Business Recorder.
Sharing the details, sources said, the Special Investment Facilitation Council (SIFC) in its 5th Apex Committee meeting held on 8th-9th September 2023 directed to formulate “Solar Panel Local Manufacturing Policy” through consultations in Working Group (WG) meetings. In this regard, several meetings of WG on “Solar Panel Local Manufacturing Policy” were held.
After detailed consultations with the relevant stakeholders, the investment proposal from potential foreign investors for investing in installing requisite solar panels manufacturing capacity within the country for local consumption as well as exports, the “Solar Panel and Allied Equipment Manufacturing Policy 2024” has been formulated.
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Summary for Economic Coordination Committee (ECC) of the Cabinet titled “Solar Panel & Allied Equipment Manufacturing 2023” was earlier moved by the Industries and Production Division thrice.
The last Summary was moved on 5th July 2023 regarding the exemption of duty and taxes on the import of parts/components of Solar Inverters, Lithium Ion Batteries, and allied Machinery/Equipment for the Solar assembly/manufacturing industry. However, the matter was deferred.
In pursuance of the SIFC’s further directions of October 18, 2023 four meetings of the Working Group were also held in the Ministry of Industries and Production on 8th November 2023, 1st January 2024, 26th February 2024 and 27th February 2024 to deliberate upon proposal of a potential foreign investor for establishing a solar manufacturing plant in Pakistan to further refine the subject policy.
The sources said the draft policy now formulated not only envisages exemptions of tariffs and taxes on raw materials and machinery used in the local manufacturing of solar panels and allied equipment but also aims to raise the tariffs on the imports of finished solar panels and allied equipment to discourage the dependency on imports.
Furthermore, the draft policy also provides a long-term, ie, 10-year consistent and continuous plan by including the valuable features of raising the targets of “amount of investment, production capacity, exports and localisation” backed by bank guarantee to be submitted by the potential investors equal to the amount of tariff and tax exemptions.
The following roadmap has been suggested in the proposed Policy to be followed by any investor to avail the requisite exemptions on duties and taxes: (i) manufacturing companies will have to enhance their capacity from 01 GW to 10 GW from sixth year and onward whereas export sales and local sales ratio will be 50:50 per cent from first year, 60:40 per cent second year, 70:30 per cent third year: 80:20 per cent fourth year: 90:10 per cent fifth year and onward for ten years; (ii) localization is proposed to be zero during the first year, but it will be 30 per cent in second year, 40 per cent in third year and 50 per cent fourth year and onward till tenth year; and (iii) amount of investment will be $ 10 million in first year, $ 20 million second year, $ 30 million third year, $ 40 million, $ 50 million in fifth year and $ 60 million in sixth year till tenth year.
The government has planned to impose tariff on imports of finished goods by 5 per cent in first year, 10 per cent in second year and 15 per cent till tenth year. Bank guarantee to be paid by the investor is to be equal to the amount of tariff and tax exemptions.
The sources said exemptions proposed in the Policy shall be available on submission to and approval of a business plan by the manufacturer as per roadmap for localisation and exports indicated in the Policy.
The proposed incentives shall be subject to the achievement of targets of localisation and exports. In case of non-achievement of the targets of localisation and export the incentives on duties and taxes shall be withdrawn and shall be recovered. However, withdrawal/recovery of incentives, shall apply, if non-achievement exceeds 20% of the value of the targets.
The incentives provided in the policy shall be extended through Fifth Schedule of Customs Act’ 1969 to the manufacturer firms, recommended by EDB on evaluation of Business Plan containing amount of Investment during the policy period, plant capacity, roadmap for localization and exports, etc.
The annual quota allocation shall be determined by Input Output Coefficient Organization (IOCO) of the FBR.
The sources said, as comments from stakeholders are received, summary will be placed before the ECC.
