Government Briefs IMF on New Solar Power Policy Initiatives

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Islamabad: Government officials attended a meeting on Tuesday with the International Monetary Fund (IMF). In this meeting, IMF about solar policy Pakistan address changes to the government solar power policy. Also, they emphasize the effect of taxes on electricity bills. They disclosed that customers pay taxes on power bills of Rs 800 billion a year. As a result, rates increase by Rs8 per unit. 

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Officials told the IMF about solar policy Pakistan. Also, they said that if these taxes were removed, electricity rates might drop by Rs8 per unit. However, it is not possible to completely eliminate taxes. Their proposal was to cut rates by Rs1-2 per unit by reducing the tax burden by Rs 100-200 billion per year. Targeting retailers, real estate, and the agriculture industry, they also highlighted the necessity of expanding the tax base.

 17% General Sales Tax (GST) is charged on power bills. The Federal Bureau of Revenue (FBR) receives Rs 600 billion from it. Hence, this tax cannot be removed. However, it is possible to eliminate an additional 100-200 billion in taxes. 

The impact of high electricity user taxes on rates has been explained to Prime Minister Shehbaz Sharif. Affordably priced electricity is urgently needed. Also, officials stressed how unsustainable, unstable, and expensive the current power system is. 

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Various Taxes and Surcharges on Consumers

Customers are subject to several taxes. They include: 

  • Electricity Duty (ED): 1.0% to 1.5% of variable costs as a province duty. 
  • GST: The Sales Tax Act of 1990 imposed a 17 percent sales tax on electricity bills. 
  • PTV Licence Cost: Domestic users pay Rs. 35. On the other hand, business consumers pay Rs. 60. 
  • Financing Cost Surcharge: All users, with the exception of lifeline home consumers, pay Rs 0.43 per kWh. 
  • Extra Tax: For business and industrial customers who are not listed on the FBR’s active taxpayer list, the rates range from 5% to 17%. 
  • Further Tax: 3% for all customers (except from domestic, agricultural, bulk, and street lights) who do not have a Sales Tax Return Number (STRN). 
  • Income Tax: varies based on the tariff and total amount of the bill. 

The government is taking initiatives to restructure the system. As a result, they want to increase efficiency and lower tariffs. One of the plans is to convert power facilities from imported coal to native Thar coal. 

Changes in Government Solar Policy

In addition to updating solar policy Pakistan to IMF, the IMF was also notified that the net metering system had added 1938 MW of electricity to the system through rooftop solar panels. For consumers without solar panels, this has meant a pricing hike of Rs 1.90 per unit due to a loss of revenue of Rs 100 billion. 

Launch of Gross Metering System and New Government Solar Policy

The government intends to convert the current net metering system to a gross metering. Under this plan, the buyback price for solar-generated electricity will drop from the present Rs21 per unit to Rs7.5–11 per unit. When using the national grid to get power at night or during peak hours, consumers would be charged Rs60 per unit. 

Hence, the government is introducing a new solar policy in Pakistan. The gross metering system will calculate the total amount of solar energy produced and exported to the grid using a unidirectional meter. Consumers will pay the retail supply tariff for electricity that they use from the grid. With this adjustment, the cost of storing solar energy for use at night will be addressed, as will the drop in the price of solar panels. 

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Syed Sadat Hussain Shah

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