Budget 2016-17: incentives on LED lights and solar panels likely

The government is likely to announce incentives on LED lights and solar panels in the federal budget 2016-17 aimed at saving electricity and increasing dependence on alternative energy, well-informed sources told Business Recorder. Worldwide, the LED (9405.1090) lighting market is anticipated to grow 45 percent every year through 2020, by producing LED lights to reach $63.1 billion from existing $13.6 billion.
Markets appear to be moving toward 100 percent LED replacement of existing technology including incandescent bulbs. The reason is the declining price points, the increased interest by marketing channels in pushing LEDs to consumers. LEDs provide the best lighting solution. The Pakistan LED Lights market is also growing rapidly. In financial year 2014-2015, more that $100 million worth of LED Lights were imported. There are at least 100 million energy savers still installed in Pakistan. These will ultimately be replaced by LED Lights within the next 5 years. This replacement will result in the saving of around 1000 MW of electricity as the average energy saver consumes 20W and the replacement LED Light consumes only 10W. Replacement of all existing incandescent street lights in Pakistan with LED street lights will save another 1,000 MW at least.
The LED lights are subject to 20 percent customs duty and 17 percent GST whereas the same are exempted from payment of duties & taxes under Fifth Schedule to the Customs Act 1969. Local industry (4 manufacturers) is manufacturing LED Products from 0.5W to 500W for supply of LED Street light, LED Tube light, LED Down light, LED Panel light, LED Bulbs, LED X-Ray illuminators, Flood light, Projection light etc and have installed a fully automated Siemens SMT/LED assembly line to manufacture millions of LED light bulbs and down-lights, and hundreds of thousands of street lights annually.
However, despite immense potential this industry has not grown as required because there is an anomalous situation with reverse cascaded tariff structure as raw materials and inputs have higher taxation than finished products, ie, custom duty: 20 percent, Sales Tax: 17 percent, regulatory duty: 15 percent, Income Tax: 5.5 percent, which need to be addressed for the development of local industry. Following is the list of inputs required for LED light.
In order to facilitate and develop the local industry it is proposed to allow the following inputs under Fifth Schedule @ 5 percent for the local manufacturing of LED Lightings: aluminium housing/shell for LED (LED light fixture, metal clad printed circuit boards MCPCB for LED, LED of all wattage and power (SMD, COB, 3528, 5050, 3014 and others), constant current power supply for All wattage of LED lights, lenses for LED lights, aluminium sheet for LED fixtures and aluminium alloy and Teflon wire for power supply.
The sources said, the government has been allowing solar panels and modules along with related equipment except VRLA/Gel batteries considering electricity crises and capacity constraints of local industry. The same is extended to June 30, 2016. In addition, CGO No 03/2015 was issued on June 30th, 2015 allowing exemption to power plants of 25 MW and higher capacity from the condition of Locally Manufactured Goods. The importer has approached EDB pointing out that such distinction is arbitrary and discriminates against the smaller developers in obtaining similar benefits. Further, any fiscal impact of providing such exemption to the smaller power plants is marginal compared to the larger power plants already availing this facility.
Accordingly, in order to facilitate the development of renewable energy in the country, FBR is considering the following: (i) solar panels and modules with or without related components including inverters, charge controllers and related equipment (excluding VRLA/Gel batteries) may be considered as not manufactured locally at least for three year and ;(ii) CGO 03/2015 may be revised to refer to capacity of 5 MW instead of 25 MW to allow similar exclusion for smaller developers and the reference order may be amended as condition of local manufacturing appearing in Part-I of Fifth Schedule to the Customs Act, 1969 and Sixth Schedule to the Sales Act, 1990 shall not apply on machinery, equipment and other capital goods imported as plant and equipment for setting up a new power plant of 5 MW and above duly certified by the Engineering Development Board in respect of those projects which are on IPP mode for supply of electricity to the national grid.