In recent discussions with the International Monetary Fund (IMF), the Pakistani government revealed plans to move away from its current solar power policy. This policy update comes amidst ongoing talks for a potential $15.4 billion deal to restructure Pakistan’s energy debt with China.

Govt Updates IMF About Changes In solar Power Policy

ISLAMABAD: The Power Division’s officials Tuesday told visiting International Monetary Fund (IMF) mission about Changes In solar Power Policy and that power consumers pay Rs800 billion to government per annum through taxation on electricity bills causing Rs8 per unit hike in the bills. 

However, whole taxation cannot be allowed to end on electricity bills. It should be sliced down by Rs100-200 billion per annum, as it would help give relief to consumers by Rs1-2 per unit. The tax authorities should increase tax net at the maximum by roping in retailers, real estate and agriculture sectors.

Govt to introduce gross metering instead of net metering system

The 17% General Sales Tax (GST) cannot be eroded by the Federal Bureau of Revenue (FBR), and this only contributes Rs600 billion in government revenue from electricity bills. Other taxes of Rs100-200 billion can be eliminated from electricity bills.

The top management of Power Division has also sensitized Prime Minister Shahbaz Sharif about massive taxation on electric power Changes In solar Power Policy consumers and its impact on tariff.

“Right now country’s power sector is no longer sustainable, reliable and affordable, and we have to think over every option to make sure electricity at affordable”, official sources told The News.

Buy back tariff from consumers to reduced to Rs7.5-11 per unit

A power consumer pays Electricity Duty (ED), a provincial duty, levied to all consumers ranging from 1.0% to 1.5% of Variable Charges. He also pays 17% of electricity bill as GST imposed on all consumers under Sales Tax Act 1990. Domestic consumers pay Rs35, while commercial consumers pay Rs60 as PTV licence fee in their electricity bills.

Further tax is being charged at the rate of 3% to all consumers—having no Sales Tax Return Number (STRN) except domestic, agriculture, bulk consumers and street light connections. Commercial consumers also face a 5% Sales Tax on bills up to Rs20,000 and 7.5% tax on bills exceeding Rs20,000.

People using solar panels to be provided electricity at Rs60 per unit

The consumer pays financing cost surcharge of Rs0.43 per kWh. It applies to all consumer categories except lifeline domestic consumers. Extra Tax is being charged to industrial and commercial consumers (not registered in active tax payer list of FBR) at 5% to 17% on different bill amount slabs.

Income Tax is also being charged at varying rates depending on the applicable tariff and the electricity bill amount. However, the authorities are working on restructuring with focus on ensuring maximum efficiencies. They will also reduce tariff through efficiency gains. The power plants based on imported coal would be converted to local coal of Thar.

The IMF has been sensitized country’s national grid is currently providing service to rooftop solar consumers against the cost of storing electricity through batteries with huge impact to the system. If the consumer has roof solar system detached from the national grid, he would have to install huge batteries to store solar energy for consumption during night time. Per unit cost he would brave will stand at 20 cents or Rs60.

Changes in solar power policy

Pakistan currently uses a net metering system Changes In solar Power Policy for rooftop solar panels. This system allows domestic consumers who generate their own solar power to offset the electricity they use from the national grid. Essentially, homeowners with solar panels receive credits for the excess energy they produce and feed back into the grid.

The new policy, proposed by Pakistani authorities, is expected to transition to a gross metering system. Under gross metering, all the electricity generated by rooftop solar panels would be fed directly into the national grid. While consumers might receive some compensation for the power they contribute, it wouldn’t necessarily offset their entire grid consumption, making solar power potentially less financially attractive.

Under the new policy, buy back tariff from solar consumers would be brought down to Rs7.5-11 per unit keeping in view massive decline in solar panels prices. Electricity would be provided to them from national grid at Rs60 per unit during night time or peak hours.

Under the gross metering system, a consumer is compensated at a fixed feed-in-tariff for total units of solar energy generated and exported to the grid (as measured by a unidirectional gross meter). One must pay retail supply tariff to the power distribution company for power consumed from the grid. Total solar generation is measured by bi-directional meter, while total power import by unidirectional meter.

Reasons for the Shift (Speculated)

The exact reasons behind this policy change haven’t been officially disclosed by the government. However, experts suggest it could be linked to:

• Reducing strain on the national grid: Unaccounted for excess solar power feeding back into the grid can create management challenges.
• Financial considerations: The government might be looking to reduce subsidy costs associated with net metering.

Potential Impact:

This shift in policy has drawn mixed reactions. Here’s a breakdown of the potential impact:

• Discouraging domestic solar adoption: The financial benefits of rooftop solar might be reduced, discouraging people from investing in solar panels.
• Slower growth of renewable energy: A decline in domestic solar adoption could slow down Pakistan’s progress towards renewable energy goals.
• Increased reliance on the national grid: Consumers might become more reliant on grid-supplied electricity, which can be expensive and unreliable in some areas.