The government informs the IMF about new solar energy policy initiatives

Islamabad: Government officials attended a meeting with the International Monetary Fund (IMF) on Tuesday. In this Pakistan Solar Policy Meeting, the IMF will address changes in the government’s solar policy. They also highlight the impact of taxes on electricity bills. They revealed that customers pay taxes on energy bills worth R800 billion annually. As a result, the rates will increase by Rs 8 per unit.

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Officials told the IMF about Pakistan’s solar policy. They also said that if these taxes are abolished, electricity rates may come down by Rs 8 per unit. However, it is not possible to completely eliminate taxes. Their proposal was to reduce rates by Rs 1-2 per unit by reducing the tax burden by Rs 100-200 billion annually. Focusing on retailers, real estate and the agricultural industry, they also stressed the need to expand the tax base.

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

The impact of high taxes on electricity users on rates was explained to Prime Minister Shehbaz Sharif. Cheap electricity is urgently needed. Officials also stressed how unsustainable, unstable and expensive the current electricity system is.

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Various taxes and subsidies for consumers

Customers are subject to several taxes. Contain:

• Electricity Charge (ED): 1.0% to 1.5% of variable costs as provincial duty.
• VAT: The Sales Tax Act of 1990 imposed a 17 percent sales tax on electricity bills.
• PTV license cost: Domestic users pay Rs. 35. On the other hand, business consumers pay Rs. 60.
• Financing cost subsidy: All users, except home emergency consumers, pay Rs 0.43 per kWh.
• Additional tax: For business and industrial customers who are not on the FBR active taxpayer list, rates range from 5% to 17%.
• Further tax: 3% for all customers (except household, agricultural, bulk and street lamps) who do not have a tax return number (STRN).
• Income tax: varies depending on tariff and total bill amount.

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

Changes to the government’s solar policy

In addition to Pakistan’s solar policy update provided to the IMF, the IMF was also notified that the net metering system had added 1,938 MW of electricity to the system through rooftop solar panels. For consumers without solar panels, this meant a price increase of Rs 1.90 per unit due to a loss of revenue of Rs 100 billion.

Launch of the Gross Metering System and the Government’s New Solar Policy

The government intends to transform the current net metering system into gross metering. Under this plan, the buyout price of solar-generated electricity will come down from the current Rs 21 per unit to Rs 7.5-11 per unit. If using the national grid to get power at night or during peak hours, consumers would have to pay Rs 60 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 one-way meter. Customers will pay the retail rate for the electricity they use from the grid. This adjustment will take into account the cost of storing solar energy for use at night, as well as the decline in the price of photovoltaic panels.