Solar expansion in Pakistan persists as government advocates for a 18% tax levy
In a significant move, Cherat Cement Company Limited (CHCC) has increased its renewable energy capacity yet again, commissioning a 2.935 MW solar power plant at its facility in Khyber Pakhtunkhwa. This announcement was made in a notice to the Pakistan Stock Exchange (PSX) on June 11, 2025. With the addition of this project, CHCC's total captive solar power generation capacity will be approximately 23 MW.
The cement giant had previously boosted its renewable capacity by 6.065 MW back in April. The surge in renewable energy adoption in Pakistan, despite facing economic and social challenges, is remarkable. As per the Global Electricity Review 2025 by Ember, an energy think tank in the UK, the country imported 17 gigawatts (GW) of solar panels in 2024, placing it among the world's leading solar nations.
However, the federal government's budget for the financial year 2025-26, unveiled on Tuesday, aims to impose an 18% sales tax on imported solar panels. This move is intended to stimulate domestic solar panel manufacturing, providing a more level playing field for local industry growth.
Yet, this policy shift raises numerous questions and concerns. For instance, the increased cost of imported solar panels may lead to a decrease in demand among residential and commercial consumers due to the higher prices. On the other hand, the tax is expected to promote the growth of local manufacturing, with complementary measures such as import duty removal on manufacturing equipment and materials to further encourage local production.
The potential slowdown in solar capacity growth could impact renewable energy targets, adding pressure to meet ambitious climate goals. Balancing local industry and energy security will be essential to ensure the continued improvement in energy security that Pakistan has experienced in recent years.
In summary, the tax on imported solar panels serves as a balancing act: fostering local solar manufacturing growth while curtailing the rapid solarization that has contributed to Pakistan's energy security and reduction in fossil fuel dependence.
Here's a brief summary table:
| Aspect | Impact of 18% Sales Tax on Imported Solar Panels ||---------------------------------|-----------------------------------------------------------|| Solar Panel Prices | Expected to rise, reducing affordability || Local Manufacturing | Likely to grow due to reduced import competition || Consumer Demand | May decrease, slowing adoption || Net Metering & Grid Support | Growth could slow, affecting grid resilience || Renewable Energy Targets | Could become harder to achieve |
- The 18% sales tax on imported solar panels might impact CHCC's portfolio, as it could influence the pricing of solar power solutions in the future.
- The increase in solar panel prices could potentially affect the energy industry as a whole, leading to a decrease in indexed investments focused on renewable energy, such as finance in the technology sector.
- Despite the government's intention to stimulate domestic solar panel manufacturing, concerns arise about how the growth of the local industry might affect the overall energy capacity in the broader context of the country's industry and finance sector, particularly with regards to meeting ambitious renewable energy targets and maintaining energy security.
