Middle East crisis: solar imports in Pakistan could become costlier on increased freight

Business Recorder

9 hours ago

The cost of solar panel imports was feared to increase in Pakistan if Iran-Israel conflict continued for a longer period, importers told Business Recorder on Tuesday.
Israel's aggression in Gaza has continued for the last 18 months, but the Middle East crisis intensified after Israel began attacking Iran on June 13, saying its 'longtime enemy' was on the verge of developing nuclear weapons. Iran, which says its nuclear programme is only for peaceful purposes, retaliated with missile and drone strikes on Israel.
After two weeks' clashes, US President Donald Trump said a ceasefire between Iran and Israel was in force on Tuesday, urging both sides to 'not violate it' on the 12th day of the war between the two arch-foes. However, Gaza crisis still persists along with chances of renewal of Iran-Israel conflict.
'Shipping costs are around $2,500 per container in Pakistan, and if the Middle East conflict intensifies, this cost could reach up to $3,000 per container,' said Diwan International Pvt Ltd Director Muhammad Faaz Diwan told Business Recorder.
According to Diwan, the pre-container shipping cost (freight cost) rose more than 100% in the last two months, from $1,200 to now $2,500. Explaining the reasons behind the cost increase, he noted that the US had imposed duties on China, but the duties were suspended for 90 days.
'As a result, China received a surge of orders from the US, which led to increased freight costs.'
Diwan said the freight costs would increase further if Iran-Israeli clashes continued for a longer period.
He also mentioned that importers were paying an additional 3% advance tax on imports.
'If a 10% tax is imposed on solar panels, the total tax burden on importers would reach 13%, leading to higher solar panel prices.'
It may be noted that the government, in its budget proposals for FY2025-26, suggested 18% tax on imported solar panels, and later reduced it to 10%.
Diwan noted that the cost per watt of solar panel was approximately Rs28, and if the 13% tax was imposed, the cost would rise to Rs32 per watt for importers.
He remarked that Pakistani citizens were facing dual challenges: high electricity rates and load shedding, which is why many opt for solar panels, according to Diwan.
However, he emphasised that even with the tax, solar panels would remain within the consumer's budget if they calculated the long-term savings.
Meanwhile, regarding Finance Minister Muhammad Aurangzeb's statement accusing traders of hoarding and creating artificial shortages, Diwan rejected the claim, saying if traders were hoarding, solar panel prices would have skyrocketed — which has not happened.
On the question of local solar panel manufacturing, Diwan stated that approximately 98% of the solar panels used in Pakistan were imported.
'The remaining 2% are locally made but substandard, mainly used in rural areas or for small-scale needs. These panels have low durability.'
He stressed that until a top-tier 1 manufacturing facility was established in Pakistan, no kind of duty should be imposed on solar panels.
'Once a tier-1 factory is operational in Pakistan, the government can then impose GST [goods and services tax] and import duties to encourage local competition,' Diwan said.
'Imposing taxes on panels without local manufacturing is equivalent to blocking the entry of high-quality products into Pakistan.'
'Massive demand, lack of clarity on taxation'
Inverex CEO Muhammad Zakir Ali told Business Recorder Pakistan imported 17 gigawatts worth of solar panels in 2024, while in 2025, imports have already reached 8 gigawatts so far, according to Ali.
He explained that demand for solar panels in Pakistan was very high due to rising electricity rates and frequent load shedding, pushing people to shift towards alternative energy sources.
Speaking about alternative energy, Ali stressed the need for clarity in taxation policies, as the government's announcement of 18% tax, followed by a reduction to 10%, created confusion among people.
He also stated that setting up a solar panel industry in Pakistan had become inevitable.
'Currently, 95% of the solar panels used in the country are imported, and the remaining 5% are not up to international standards.'
Ali emphasised that establishing such an industry would create employment opportunities and enable Pakistan to meet its growing demand locally.
'Need for immediate local manufacturing and financing'
Fusion Tech chairman Salim Memon stressed that local manufacturing must begin at the earliest to meet the country's rising demand for solar panels.
He also urged the government to introduce bank financing schemes for solar panels to make green energy accessible to the common man.
He highlighted the need for complete local manufacturing—from solar panels to inverters, and criticised the current practice saying what was referred to as 'manufacturing' in Pakistan was 'merely assembling'.
Memon stressed that the time had come for Pakistan to initiate a true solar panel manufacturing industry.