LEDs more expensive in Pak markets despite better energy efficiency

An edited version of this article was first published in The Express Tribune on Mar 18, 2013.

Islamabad – At Rawalpindi’s College Road market, Malik Zafar sells LEDs for lighting purposes. There is some demand for the LED bulbs and lights, but it is lowered by price.

“People are not buying these lights as much as they would if they were cheaper,” Zafar said.

LEDs, or light emitting diodes, are semiconductor light sources. They are energy efficient: LEDs only consume around 20 per cent of the energy burnt by incandescent light bulbs — the old and most commonly used bulbs.

LEDs also use just around 3 to 4 Watts (W) to produce the same level of light a 35W incandescent light bulb or a 10W compact fluorescent lamp “energy saver” produces.

“The LED bulbs are energy efficient, they give a constant light and have a working life of up to 22 years,” Naveed Hassan Bokhari, director (solar) at the Alternative Energy Development Board (AEDB), said. “Unlike the energy saver bulbs which risk mercury poisoning if they break, the LED bulbs are not a health hazard.”

But at the wholesale markets of College Road and City Saddar Road, the cheapest variety of a 7-Watt (W) LED bulb costs Rs750.

That is around six times more expensive than the same quality energy saver.

It is also three times the cost of a best quality 7W Direct Current (DC) LED bulb. The reason: the DC LEDs are tax-exempt.

But the Alternating Current (AC) variety, that Malik sells, is not.

AC is the type of electric power that is delivered to homes worldwide. The DC LEDs work only with a battery-based system or a solar power solution. So if someone without a solar panel solution wants to buy energy-efficient LEDs, they would have to buy the AC variety.

Currently, a 35 per cent tax is levied on the import of the AC LEDs. Chinese companies are the major importers of these products for the Pakistani market.

Because DC LEDs work with solar panels, the AEDB got their sales tax, federal excise tax and customs duty waived off. But since the AC LED bulbs do not fall under the renewable energy domain, Bokhari said the AEDB could not exempt them from the duty.

Instead the AEDB urged the National Energy Conservation Center (ENERCON) to push the agenda.

At a December 27 meeting which was attended by Member Customs and Chairman Federal Board of Revenue (FBR), representatives of ENERCON took up the issue of tax exemption for the LED bulbs.

The FBR and customs officials were of the opinion that ENERCON should re-route the request through its parent ministry: The ministry of water and power.

So ENERCON wrote a letter to get the ministry’s approval. Two months later, the request has not been approved.

The recent change of the ministry’s secretary has become the latest hurdle in the way of LED duty exemption. On February 23, Sikandar Ahmed Rai replaced Nargis Sethi as the secretary, water and power. So ENERCON had to put in a new, updated letter.

Ministry officials did not respond to repeated requests for a comment on LED tax exemption.

Most of the LED bulbs are imported from China but some are also being assembled in Pakistan from imported parts. ENERCON has recommended the tax exemption for the LEDs should be with and without fitting and fixtures, so that it promotes local assembly and indigenous production of other parts.

While the cheapest variety is less than a thousand rupees, the more sophisticated LEDs can cost as much as Rs2000. The cheapest LEDs do not come with a guarantee for its circuitry.

An import duty exemption would also enable quality control. The importers will have to contact ENERCON to get the exemption (The DC LED importers contact AEDB) and the centre could impose energy certifications and quality restrictions.

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