A dispute between local solar panel manufacturers and traders over the imposition of 10% import duty on imported solar panels in the upcoming fiscal year will likely push the thriving industry towards uncertainty.
The dispute may also contributing to reducing electricity production in off-grid areas and make consumers suffer as prices of solar panels are likely to rise as a consequence.
The manufacturers demand solar panels not be imported, but the traders who sell solar panels to buyers disagree with them on their demand.
Over 4.5 million solar home systems have been installed in rural areas, bringing energy at doorsteps of some 20 million people living in the off-grid areas.
Prior to the budget announcement, Solar Module Manufacturers Association of Bangladesh (SMMAB) had proposed that Finance Minister AMA Muhith impose a 10% duty on imports of solar panels.
The proposal was sent to the National Board of Revenue (NBR) and was taken into consideration in the national budget for the FY2017-18. Meanwhile, the state-run Sustainable and Renewable Energy Development Authority (Sreda), too, sent a letter to the NBR, urging it not to impose duty on imported panels. The Sreda also put forward several suggestions to protect the local manufacturers.
“…in the recent past we used to import equipment for solar panels, and there was no duty for importing the equipment. As such panels are now being manufactured locally by using photovoltaic cells, I propose not imposing duty for importing the cells. But, I propose increasing duty rates for importing finished solar panels by 5-10%,” Muhith said when delivering his budget speech in the House on June 1.
Asked, SMMAB President Munawar Misbah Moin told the Dhaka Tribune that there were nine panel manufacturing companies in the country that were all capable of meeting consumers’ demand, and duty should therefore be imposed on imported panels in order to save the local companies.
“Raw materials for solar modules are duty-free items. But how can a finished solar panel be duty-free? Instead of purchasing locally-manufactured panels, traders import them from China without paying duty. How is this acceptable? This is absurd,” he said, opposing the traders’ demand for not imposing import duty.
Moin, also managing director of local solar panel manufacturing company Rahimafrooz Renewable Energy Ltd, said: “We are spending a huge amount of money in taking the industry to a new height. What will happen to this sector if traders do not cooperate with us? Given this reality, we proposed imposing duty on imported panels.”
The local factories boosted production capacity to meet the growing demand, but they are being adversely affected due to the import of substandard solar panels, he said.
Moin expressed his concerns, saying that if the import of solar panels was not stopped or controlled immediately, the country would lose out its enormous potential for solar energy generation.
Singing the same tune, SMMAB General Secretary and Greenfinity Energy Ltd Managing Director Golam Baki Masud said: “Domestic investors are being severely affected while consumers are losing their trust in solar energy as the low-grade imported panels get cankered in a short time.
“We will supply panels to the local traders at much lower prices than those of Chinese panels. If they spend Tk60 per watt in importing panels from China, then they can buy from us at Tk42-45.”
However, DM Majibur Rahman, president of Solar Mini Grid Association of Bangladesh, said: “Renewable energy such as solar power is an effective tool for reducing carbon emissions and also for ensuring economic growth as well as sustainability of energy sources. So, we demand duty-free facilities for importing solar modules so the sector can flourish.”
Majibur, also managing director of Solar Electro Bangladesh Ltd, on Wednesday said if the 10% import duty came into effect, costs of importing would soar by 37.5%, which would in turn cause a hike in prices of the panels.
He also said: “The duty needs to be removed; or else we will be trapped by some manufacturing companies. Who will assure us that the prices will not rise?”
Asked if they would trade in domestically-manufactured products, Majibur replied imported panels were far better than the local ones in terms quality and durability, adding that local products were shoddy.
As the use of solar mini grid and irrigation pumps in off-grid areas is on the rise, the increased demand cannot be fulfilled by local manufacturers alone, he claimed.
SMMAB President Moin held opposing views and said “at present the country’s demand for solar power is 60MW, while our production capacity is 100MW.”
Siddique Zobair, a member of the Sreda, said attention must be paid to both local manufacturers and traders.
“Local manufacturers can be kept out of corporate taxes’ purview. Besides, they can be provided with cash incentives. The government should make sure that all solar panels required for projects under Test Relief and Food for Work are bought from the local companies,” he suggested.
SMMAB General Secretary Masud said: “Whatever the amount was, there should be some import duty.
“It can be 5% or 2%, but it has to prevail. However, if the NBR gives any instruction after taking the Sreda’s proposal into its account, we will have no objection in this regard.”