Profit statements

State Bank hits solar imports with new restrictions

CARACHI: He landed like a bomb. On July 5, the State Bank of Pakistan (SBP) updated its list of products for which “prior clearance” will be required and LCs can be opened for their import. Among the products added to the list – solar panels, inverters and batteries.

The requirement had been in place since May 20, but this new circular broadened coverage to all items under HS codes 84 and 85, which include “nuclear reactors, boilers, machinery and mechanical appliances and parts thereof. “, as well as “electrical machines”. and equipment and parts thereof. This last category includes solar panels, inverters and batteries among many other items.

“Import of solar equipment has been slowed down as no payment can be made without prior permission,” says Muhammad Farhan, former president of the Pakistan Solar Association. One of the hundreds of HS codes on the list of items that now require SBP pre-clearance is HS8504.4090, under which all inverters are ordered, but this code also includes other items like the emergency power equipment for hospitals, he adds.

“The tax on any equipment other than solar panels has not been removed,” he said. Profit, referring to the Prime Minister’s decision to exclude solar panels from sales tax. “Why haven’t grid-connected solar inverters been zeroed?” They have no other purpose!

What shocked players in the Pakistani solar market was the timing of the announcement. The SBP circular including all their equipment in the list of items requiring prior authorization was issued on July 5. The following day, Prime Minister Shehbaz Sharif tweeted a “solar package” announcement that his government is preparing to accelerate adoption of solar initiatives. Across the country.

This is not the first time that solar solution providers have faced restrictions. At least twice before, the noose has tightened around their necks, despite the country facing daunting power shortages and the skyrocketing cost of imported fuel. Rather than relieve the solar industry, the government seems determined to make life difficult for them.

In April, the State Bank required solar imports to show a 100% cash margin on all LCs, which weighed heavily on the cash flow of all companies operating in this sector. This was then followed on May 20 by a circular requiring “prior authorization” for the import of solar inverters, as mentioned earlier. And then we have the latest flyer released on July 5 which extended coverage to panels, batteries, solar lanterns, geysers and all other products.

“The government has recently shown strong interest in solar energy and has committed to expanding renewables in the energy mix by 20% by 2025 and 30% by 2030,” Reon Energy said in a statement. a statement sent to Profit review by e-mail.

On its website, Reon says it is the nation’s largest solar company, providing great solar solutions to the industry. They are currently engaged in the largest solar project in the industrial sector, for a cement plant in DI Khan, installing a project that will shut down the natural gas plant forever when completed. The COD for this project is due in November, but it has been affected by the new requirements.

“The Prime Minister also recently said via his Twitter account that the coalition government aims to introduce the country’s first comprehensive solar policy which will drastically reduce fuel imports, reduce the cost of electricity and provide clean energy,” continues the release, pointing out the irony behind the timing of the announcement.

“On the contrary, the SBP recently imposed required regulatory banking approval on inverters and batteries in accordance with the EPD circular letter of May 20, 2022, and on solar panels, in accordance with the EPD circular letter of July 5, 2022, to limit imports in accordance with recent policy-wide announcements.