Speedy localisation of solar panels: MoC asks Chinese firm to consider forming JV

ISLAMABAD: The Commerce Ministry has advised a Chinese company, M/s Sinotec Solar (Pvt) Ltd, to consider forming a joint venture (JV) with M/s Ghani Glass for speedy localisation of solar panel-related items, official sources told Business Recorder.

This proposal was floated at a recent inter-ministerial meeting, presided over by the Additional Secretary Incharge Ministry of Industries and Production, Rashid Mahmood Langrial.

Langrial asked about the progress on the decisions of the last (3rd) meeting held on February 26, 2024. He further queried about the use of items planned to be imported by Sinotec in other industries. He supported removal of the tariff and tax anomaly faced by the local solar industry.

Incentives to PV solar sector: SIFC set to finalise recommendations for TPB

However, he suggested to avoid putting higher duties and taxes on the import of finished solar panels because it will make them expensive for the general public. He further emphasised that without a concrete indigenisation plan of five to seven years by the Sinotec Solar Company, the government cannot offer them zero- rated duties and taxes on the import of their raw materials and machinery. The chair also directed the Ministry of Commerce (MoC) to make projections for the next 10 years based on the last 5-6 years trajectory related to tariff, taxes, imports, exports, and local sales etc.

The JS (Tariff) Ministry of Commerce, Muhammad Ashfaq, explained that items imported by Sinotec will be used as raw materials/ intermediate goods through the import quota determined by the Input/ Output Co-efficient Organisation (IOCO) of the FBR according to the utilisation capacity of the companies. If the companies under-utilised their capacity, then this may be verified through a post-audit assessment which is conducted on an annual basis. In this regard, all sectors are facing the same treatment from the FBR. He further presented the projected import data for FY 2023-24 of raw materials and machinery with zero-rated duties and taxes (CD, ACD, RD and ST) resulting in an estimated revenue forgone worth Rs20 billion in comparison to projected total revenue collection of Rs31.9 billion resulting in net projected higher revenue collection of Rs11.9 billion.

The Secretary (Tariff) FBR, Aftab Ullah Shah, endorsed the analysis and informed that the companies are bound to give details about their existing inventory, new imports, items used in local manufacturing, local sales, and exports.

The General Manager (Tariff) EDB, KB Ali, apprised that import of solar cell is zero rated for sales tax, whereas, sales tax is applicable on other parts of solar panels

The Director of Port Qasim Authority (PQA) joined the meeting via Zoom link.

He apprised the participants that they had submitted a summary for their Board meeting for the change of category of the Sinotec plant site from warehouse to industry.

He further informed that Sinotec Solar Company has still not provided the signed agreement with their tenant.

The representative of Sinotec Solar (Pvt) Ltd presented a conditional indigenisation plan of only six items involved in the local manufacturing of solar panels. He said that their company will localise the solar cell, having a cost share of almost 60 per cent in the production cost of solar panel, in the next five years from the start of their operations in Pakistan provided that their self-manufacturing reaches 3GW and local manufacturing industry reach to 10GW power producing capacity of solar.

Similarly, he presented the localisation plan of the other five items in the same way with the condition that the local manufacturing industry will reach 20GW in the next three years. He further stated that the value of their imports will be 88 per cent of their total production value with a two per cent share of depreciation and only 10 per cent share of value addition.

The chair did not support the conditional indigenisation plan of Sinotec Solar (Pvt) Ltd Co on the grounds that their conditions of local market volume of 10GW and 20GW power producing capacity from solar is not logical and practical because they should not consider only Pakistani market as they have a huge potential to export to the USA market along with rest of the world.

The JS (Tariff) MoC suggested to the Sinotec Solar (Pvt) Co Ltd to have a meeting and make a JV with the M/s Ghani Glass Ltd Co for speedy localisation of these items. This will lead to transfer of technology and promote local manufacturing/ value addition in real sense.

After detailed discussions, the meeting took the following unanimous decisions; (i) EDB to prepare the matrix of responsibilities of the government department with the categories of tasks, sub-tasks along with timelines to finalise the matter; (ii) Ministry of Commerce to prepare the tariff and tax analysis containing projections for next l0 years based on the last 5-6 years trajectory in a summary form; (iii) the Sinotec Solar Co (Pvt) Ltd to provide a complete and unconditional indigenisation plan of five to seven years from the list of imported raw materials parts, inputs, plant and machinery on which duties and tax exemption will be provided by the Government of Pakistan to the Sinotec company with the written agreement backed by a proper bank guarantee after having consultation with M/s Ghani Glass Co (Pvt) Ltd. The EDB will provide the technical evaluation report of the complete indigenisation plan of Sinotec Solar Co (Pvt) Ltd.

Copyright Business Recorder, 2024