Pakistan has a growing solar power industry that has been saving a lot of the populace from the horrors of government electricity and its shortages. Unfortunately, the finance ministry has gotten whiff of this and wants a chunk of the pie with the imposition of a Solar Tax. This is no minor tax and has been levied at 30%. The tax has caused about 70 containers of solar panels to be stranded at the port of Karachi. The tax for the imported containers has gone from zero, to as much as Rs 5.5 million in owed tax per container. This means that up to 50MW of free power is stuck in the Arabian Sea.

Last year, solar imports into Pakistan totaled 300MW and were expected to increase drastically. But the tax will cripple this nascent industry, as prices will rise by over 35%. This is a goldmine for the government that has acted like a bull in a solar panel shop. The import of solar power was not taxed before 1 July specifically because it could help combat the power crisis. The tax policy is immature and this short run gain destroys the long run survival of solar power. Especially at a time when Pakistan is in a power crisis and all current efforts by the government are wracked with debt, and projects for power generation wont mature until the next five to ten years.

Pakistan has only two domestic solar panel manufacturers with a combined capacity of 5MW a year but they lack international certifications use materials of substandard quality. To meet demand, domestic manufacturers would need rapid investment in capacity and machinery of international standards, which is now heavily taxed. The government policy contradicts its own plans as the Sharif government began with the scrapping of import duties for solar panels and inviting energy and infrastructure investment from China. This sends mixed messages to international investors. The timing of the tax is also ridiculous as plans to build the 1GW Quaid-e-Azam mega-solar park are being finalised and the government has been desperate to get international investors. This is a small example of how dysfunctional the “business friendly” government is and how it has dropped a hammer on its own foot. Rather than aiding its people to adopt cheap private energy that can remove the heat the government is getting for being unable to provide power, it has smacked the awam in the face again with a tax stamp.