An energy lifeline: how solar power is cushioning Pakistan’s fuel shock

By Izzah Khan

A popular misconception persists that solar photovoltaics are a luxury, the domain of an urban elite insulated from the realities of rising tariffs and erratic supply. On the ground, however, the picture is starkly different.

The government’s decision to impose, and then partially roll back, sales tax on imported solar panels has brought Pakistan to a critical juncture in its energy transition. An 18 per cent tax introduced for FY2025–26 was reduced to 10pc after public backlash, yet even this revised rate has pushed solar installation out of reach for many households. As policymakers prepare the FY2026–27 budget, the question is no longer just fiscal, it is structural: can Pakistan afford to tax what has effectively become its most reliable energy safety net?

“Barra farq parta hai… aik baar ka kharcha, phir zindagi sukoon hojati (It makes a big difference… it’s a one-time expense, then life becomes peaceful),” says Ilyas, a farmer in Punjab, describing the transformation solar panels have brought to his village.

For household use, he explains, two panels are enough to run a small motor. “Bijli ka bill… adha kharcha kam hojata hai (The electricity bill… the expense is cut in half).” His monthly bill has dropped from Rs4,000–4,800 to roughly Rs1,700–2,200 — a saving that reshapes household economics.

Gas, meanwhile, is not even an option. “Hamara backward ilaqa hai, idhar gas nahin use hoti (Our area is underdeveloped, gas is not used here),” he says. In its absence, families rely on firewood, a process that demands time and labour, often from women and children. Solar power, in this context, is not simply about electricity; it reduces physical strain, frees up time, and quietly improves access to education and wellbeing.

From farm fields to fuel shocks

The significance of this shift becomes clearer when placed against the backdrop of Pakistan’s widening energy crisis, one shaped as much by global disruptions as domestic vulnerabilities.

The ongoing conflict involving Iran, the United States and Israel has disrupted shipping through the Strait of Hormuz, through which a substantial share of global oil and gas supplies passes. For Pakistan, heavily dependent on imported fuel, this has translated into immediate and severe price shocks.

Diesel prices have surged sharply in 2026, rising by Rs55 before Eid and by a further Rs184.49 soon after, pushing rates beyond Rs520 per litre. For an economy anchored in agriculture, the implications are profound.

High-speed diesel powers tractors, irrigation pumps and tube wells, the backbone of farm productivity. A diesel tube well consumes around five litres a day per acre. For small farmers, this means spiralling input costs, often at the expense of already narrow profit margins.

“Banday ki soch se bhi ziada… duniya ki jaan nikli hui hai (More than one can even imagine… it feels like the world’s life has been drained),” Ilyas Sahab says, reflecting on the price surge.

Solar power, however, is beginning to soften this blow. Farmers with solar tube wells not only reduce their own costs but also sell water to neighbours at lower rates, extending the benefits across communities. In this way, solar adoption is not isolated — it creates shared resilience.

Agriculture beyond scale

Pakistan’s agrarian economy has long been vulnerable to price volatility, but solar is beginning to introduce a measure of predictability. Unlike diesel, whose cost fluctuates with global markets, solar energy stabilises operational expenses once installed.

For smallholders, this stability is critical. It allows them to plan for a season without the constant risk that fuel costs will erase profits. At a time when erratic rainfall and climate shocks are already threatening yields, such predictability is invaluable.

Solar, in effect, is no longer supplementary, it is becoming integral to agricultural survival.

A buffer against crisis — and a policy crossroads

Pakistan’s reliance on imported fuel has historically exposed it to global shocks. The current crisis, exacerbated by disruptions in the Middle East, is a reminder of that vulnerability. Yet it has also highlighted the quiet gains made through distributed solar generation.

The country’s growing solar capacity has acted as a buffer, softening the impact of rising fuel prices and reducing pressure on the national grid. In countries without similar adoption, tariff hikes and supply disruptions have been far more severe.

This trajectory aligns with Pakistan’s broader energy planning goals, which emphasise diversification and resilience. In many ways, the current moment serves as a real-world validation of those strategies.

However, the introduction of taxes on solar imports risks undermining this progress. By raising the upfront cost of installation, such measures slow adoption at precisely the moment when expansion is most needed.

Research reflects what is at stake. A study by Renewables First estimates that Pakistan has saved over $12 billion in fuel imports since 2018 due to increased solar capacity, with projected savings of $6.3bn this year alone. Other analyses recommend reducing taxes, stabilising import duties, and even waiving GST on solar equipment to accelerate energy security gains.

Taxing solar, in contrast, risks deepening the very problems it seeks to address, increasing long-term energy costs and contributing to circular debt through continued reliance on imported fuels.

Beyond the ‘elite’ narrative

The argument that solar primarily benefits the wealthy overlooks its broader social impact. For lower-income households, the gains may be smaller in monetary terms but far more significant in lived reality.

Reduced energy costs translate into tangible improvements, from keeping children in school to enabling access to healthcare and easing daily labour burdens. In rural areas, where alternatives are limited, these changes are transformative.

Making solar less accessible through taxation risks reversing these gains, disproportionately affecting those who stand to benefit the most.

An energy lifeline at risk

Pakistan’s energy challenges are deeply structural, rooted in import dependence and exposure to external shocks. Solar photovoltaics have emerged as a rare counterbalance, a decentralised, resilient system that empowers households and communities alike.

Yet this lifeline remains fragile. Fiscal decisions in the upcoming budget will determine whether it is strengthened or constrained.

Encouraging solar adoption through tax relief and stable policy frameworks is not merely an environmental choice; it is an economic and social imperative. At a time when global uncertainty continues to shape domestic realities, Pakistan’s path forward may well depend on whether it chooses to enable or tax — its most accessible form of energy independence.

Izzah Khan is an Assistant Manager-Advocacy, Policy and Government Relations at Pakistan Solar Association.