Pakistan’s federal budget for 2025-26 has introduced an 18% sales tax on imported solar panels while simultaneously slashing duties on raw materials for local manufacturers—a strategy aimed at boosting domestic production but raising concerns about short-term price hikes and slowed adoption.
Finance Minister Muhammad Aurangzeb defended the tax, calling it a necessary step to nurture Pakistan’s solar manufacturing sector and reduce reliance on foreign imports. To offset the impact, the government announced sweeping incentives, including:
Zero duty on solar panel machinery and solar cells
Tax exemptions for aluminum, silver paste, and lithium battery components
Duty-free imports of lab testing equipment and inverter parts
Officials claim these measures will eventually lower prices by encouraging local production. “This will create jobs, cut import bills, and make Pakistan self-reliant in renewable energy,” said a government spokesperson.
However, the Pakistan Solar Association (PSA) slammed the move, warning it could derail the country’s solar boom. Net-metered capacity has nearly quadrupled since 2023, reaching 4.9 GW by March 2025, driven by cheap Chinese imports (13 GW in just six months in 2024). PSA Chairman Waqas Moosa argued, “Taxing imports when local factories can’t meet demand will only hurt consumers and climate goals.”
The debate highlights a deeper tension: while utilities fear grid instability from unchecked solar growth, experts say stifling adoption risks prolonging Pakistan’s dependence on costly fossil fuels. The budget, now under parliamentary debate, must balance industrial policy with energy affordability—a tightrope walk with major stakes for consumers and the planet.
Final approval is expected by late June.
Also read: Worried about solar panel installation in this rainy season? Follow these PDMA guidelines
