Import of solar equipment halves on LC curbs

Published July 8, 2023
Workers load solar panels onto a pickup for transportation to a site for installation.—White Star
Workers load solar panels onto a pickup for transportation to a site for installation.—White Star

KARACHI: The State Bank of Pakistan’s curbs on opening fresh letters of credit (LCs) has restricted imports of solar panels and inverters from China from $2.4 billion in FY22 to just $1bn in FY23.

This figure was last seen in FY17, which swelled to $1.8bn in FY19 after growing awareness among customers about alternative sources of energy.

The central bank had initiated steps to slow down the demand for imported items from July 2022 to control a dearth of foreign currency, which kept creating problems in the import of solar panels and inverters.

Traders and importers have been facing hardships for the last two months in opening new LCs, as well as clearing consignments stuck up in hundreds of containers at the ports, as commercial banks seem unwilling to facilitate the solar energy sector, according to industry leaders.

Association says costs will rise the longer panels and inverters remain stuck at ports

Pakistan Solar Association (PSA) Senior Vice Chairman Mohammad Zakir Ali said his members’ shipments, which were processed via prior approval from the commercial banks, are awaiting clearance from the ports.

As a result of restrictions on imports, commercial banks are holding and making profits from the cash margin taken from importers, while foreign shipping lines would charge detention charges as the containers are not returning on time. Ports would also charge demurrage on the stuck-up shipments for an extended period, he said.

As a result, Mr Ali said, the end users would be forced to pay high prices for panels and inverters.

He said the association has asked Finance Minister Ishaq Dar on July 6 to facilitate the import contracts for solar energy and allied equipment that are already in process to avoid huge financial losses in terms of detention and demurrage charges.

He said the solar energy sector is still on the list of non-essential items, as presented by the commercial banks, and asked Mr Dar to issue directions to commercial banks to facilitate imports needed to support the renewable energy industry in Pakistan.

He said the government has recently taken the right step to promote the local manufacturing of solar panels and inverters in the country but a favourable, long-term policy, fewer risks, secure and predictable environment would only bring foreign investors for joint ventures with international technology companies.

The government needs to ensure ease of doing business, streamlining bureaucratic procedures and simplifying administrative processes related to investment proposals, licenses and permits to lure foreign investors, he said.

Currently, no duties and taxes are charged on the import of solar panels, while there is up to 21 per cent general sales tax on inverters.

But Mr Ali said the bulk of solar panels and inverters are sold in the rural areas of Punjab, Sindh and Khyber Pakht­unkhwa, while urban areas hold a 25pc market share.

Published in Dawn, July 8th, 2023

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