The State Bank of Pakistan’s restrictions on opening new letters of credit (LCs) have significantly limited the import of solar panels and inverters from China.
Imports in FY23 dropped to $1 billion from $2.4 billion in FY22. The last time such a figure was seen was in FY17, but it had increased to $1.8 billion in FY19 due to increased awareness of alternative energy sources.
The central bank implemented measures to curb the demand for imports starting in July 2022 in order to address the foreign currency shortage that had been causing difficulties in importing solar panels and inverters.
Traders and importers have been facing challenges in opening new LCs and clearing consignments that have been stuck in containers at ports. Commercial banks have shown reluctance to facilitate the solar energy sector.
The Pakistan Solar Association (PSA) highlighted that shipments approved by commercial banks are awaiting clearance at ports. As a result, commercial banks are profiting from the cash margins taken from importers, while foreign shipping lines are imposing detention charges due to delays in returning containers.
Ports are also charging demurrage fees for the extended storage of shipments. Consequently, end users will have to bear higher costs for panels and inverters.
The PSA has appealed to Finance Minister Ishaq Dar to facilitate the import contracts for solar energy equipment that are already in process to avoid significant financial losses due to detention and demurrage charges.
The association emphasized that the solar energy sector is still classified as a non-essential item by commercial banks and requested Mr. Dar to instruct commercial banks to facilitate imports necessary for supporting the renewable energy industry in Pakistan.
Currently, no duties and taxes are imposed on the import of solar panels, while there is a general sales tax of up to 21% on inverters.